Google hits back at MPs over low tax claims

Tax Return

Representatives from Google have defended the technology company's various subsidiaries in so-called tax havens in a hearing with the Public Accounts Committee (PAC), pointing out that the company paid corporation tax at an average rate of 19 per cent worldwide.

Matt Brittin, president of Google Europe, Middle East and Africa, remarked that having a branch in Bermuda, despite the company having no employees in the country, was a normal thing for many American companies to do.

Meanwhile, Tom Hutchinson, vice president at Google, argued that the technology company's presence in Bermuda did not affect the amount of tax it paid in the UK.

However, the Committee criticised the company for seemingly having no legitimate reason for operating in such countries, other than wanting to take advantage of tax loopholes dubbed things like the "double Irish Dutch sandwich".

Explaining why his company paid the amount in corporation tax it did, Brittin remarked: "We're paying the tax bill the tax man has told us to pay", pointing out that there was no mechanism for his company to pay anymore if it should want to.

Hutchinson also explained that the recent deal came about as a result of a disagreement between his company and HM Revenue & Customs (HMRC) over what measures should be used for benchmarking transactions between group companies, which was not uncommon for companies of Google's size.

Hutchinson said: "The tax rules are complicated, there's no doubt about that" when asked how this difference could have been allowed to stand for such a long time, despite him being a highly educated tax professional.

In a heated hearing, Meg Hillier, chair of the PAC, told Brittin that he was "taxing [her] patience" less than 20 minutes in.

Lin Homer, the outgoing chief executive of HMRC, Jim Harra, director general business tax at HMRC, and Edward Troup, tax assurance commissioner at HMRC, spoke before the Committee shortly after Google.

Harra explained that HMRC believed that the company had not paid enough tax in previous years, but said he felt it was not necessary to charge penalties as it was difficult to establish that they had taken "insufficient care", which the tax authority would need to do to justify levying a fine.

However, Google did pay interest on its unpaid tax at a statutory rate, the HMRC representatives said.

Although he could not peg a precise figure on how much HMRC's investigation into Google had cost, Harra did admit that such proceedings were very resource intensive.

Today's hearing stems from a deal between Google and HMRC for the technology company to pay £130m in unpaid corporation tax last month.

Full story: Google hits back at MPs over low tax claims: City A.M.