Google's headquarters in London, U.K.
Photograph by Bloomberg via Getty Images

According to a public spending watchdog.

By Claire Zillman
February 24, 2016

The U.K. Parliament’s Committee of Public Accounts released its review of Google’s controversial tax settlement on Wednesday and sided with past criticism of the deal in finding that it is “disproportionately small.”

The committee, which serves as a public spending watchdog, said that because the settlement negotiations between the tech giant and the U.K. tax authority were veiled in secrecy, “we cannot judge whether it is fair to taxpayers.” But even without full transparency, when compared with the size of Google’s business in the U.K., Google’s bill for back taxes seems awfully small. The committee said that reinforces its concerns that “the rules governing where corporation tax is paid by multinational companies do not produce a fair outcome.”

Last month, the U.K. tax authority—which goes by HMRC—announced that Google would make a back tax payment of 130 million pounds based on the profits it generated in the U.K. over the last decade. As part of the deal, Google also said it would register more of the advertising sales it makes in the U.K. after previously booking the revenues in low-tax Ireland.

The agreement was the first notable breakthrough for the U.K. in its efforts to clamp down on multinational companies’ use of offshore tax havens and questionable intra-company pricing arrangements to depress their local tax liabilities.

U.K. treasury chief George Osborne had proposed a so-called Google Tax in his latest budget as a way to squeeze more taxes out of companies, including notable Silicon Valley giants. He touted the settlement with Google as “a really positive step.”

But the bill’s price tag immediately raised the eyebrows of politicians and tax experts, who called the settlement “derisory,” “lousy,” and “not transparent.” Scrutiny of the deal is understandable since Google generated estimated profits of 7.2 billion pounds in the U.K. over the last 10 years, but paid only 200 million pounds in corporate profit tax in that period, according to The Guardian. In the U.K., the standard rate of corporate profit tax is 20%.

Matt Brittin, the president of Google Europe, the Middle East, and Africa, didn’t do himself—or his company—any favors earlier this month when he appeared before the Public Account Committee to defend the deal. Committee chairwomen Meg Hiller asked Brittin if he understood why average U.K. citizens were so angry about the settlement. She also asked how much Brittin got paid.

The Google exec initially steered away from giving a figure and said, “I’ll happily disclose that if it’s a relevant matter for the committee.”

When Hiller insisted that the figure was relevant and asked for a base salary, Brittin effectively admitted that he didn’t know how much he earned. “It’s a salary,” he said. “I don’t have the figure, but I’ll happily provide the figure privately if it’s relevant to the committee.”

“My point is, out there, taxpayers, our constituents, are very angry,” Hiller said. “They live in a different world, clearly, from the world you live in if you can’t tell us what you’re actually paid.”

 

The committee said on Wednesday that “Google’s stated desire for greater tax simplicity and transparency is at odds with the complex operational structure it has created which appears to be directed at minimizing its tax liabilities.” It said that it expects the tax authority to monitor the outcomes of other tax authorities investigations into Google, and re-open its settlement with Google if relevant new evidence becomes available.

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