Google’s “Minor Tax Deal”

January 23, 2016

For once the headline says it all: Google Strikes Minor Tax Deal with UK Authorities.  Essentially it seems that Google has announced they’ve reached a settlement with HMRC (the timing is interesting: who decided to put it into the news cycle today?) They appear to have closed a six year enquiry covering ten years of activity by agreeing to pay an extra £130 million.

So roughly £13m a year?  (Are there any amounts in there for interest and penalties, I wonder?)

The point is, the amount is trivial in comparison with Google’s sales in the UK.  It’s one of the issues Margaret Hodge’s PAC did a lot of work on: remember this?

To avoid UK corporation tax, Google relies on the deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes place in the UK.

There are two changes that, in my view, need to be made.  First of all, if what the PAC found was in fact the case, then there was actual evasion rather than avoidance involved.  If there was “clear evidence” of evasion then we should have been looking at “perp walks” and prosecutions, not at a financial settlement.  Presumably there wasn’t, or there would have been, right?  I mean, right??  I assume Google weren’t guilty of evasion but HMRC need to be careful of the perception that evaders can get away with it if they’re big enough.  A way out of that perception would be for HMRC to be more ambitious about prosecutions: where are the large cases that involve direct tax, rather than the “quick wins” from smuggled fags?

Secondly, there are the usual calls for tax to be “simplified” so that people pay their “fair share”.  Quite.  Except this usually also falls into the mire of the citizen stakeholder asking for simplicity and fairness, and the tax professional saying it’s not so simple, and what is fairness anyway.

I have a suggestion how to get around that.  Episode two of the The Town that Took On The Tax Authorities.  Give me a budget, a camera crew and a bunch of engaged small traders like the people of Crickhowell.  And let’s see what happens…

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