Last week Google reached a £130m settlement with HMRC. This covered 10 years’ worth of back taxes reported at £117m and included interest of £13m. But critics say, public accounts which show the multinational spent £562m on wages for its UK staff over an 18-month period, prove that Google is not telling the truth about its UK operations.
According to Margaret Hodge, the former chair of the public accounts committee, Google’s pro-rata average of £160,000 per employee, undermines Google’s claims that its UK employees mostly provide marketing and support to its offices in Dublin. Instead, says Hodge, it makes it clear that Google’s UK employees are adding value with advertising sales, deal acquisitions and product development.
For years, UK tax authorities have been criticised for allowing Google to go unchallenged, over its claim that its UK employees do not engage in business with British advertisers. Many say that this recent settlement shows that little has changed and makes a mockery of George Osbourne’s promise to thwart the efforts of technology companies to pay little or no tax.
Google is accused of routing billions of pounds of UK sales through Ireland and a range of companies in the Netherlands and Bermuda to avoid paying higher taxes in Britain. It is among hundreds of other multinational corporations choosing to do business in Ireland, where they consider the tax regime to be highly competitive. Others include Airbnb and Vodafone, which started operations in Ireland for the first time in 2015, despite the country’s declaration that it would stamp out tax evasion by 2020.
Reports are that Google’s offshore cash reserves have now reached US$43bn, thanks, in part, to a complex tax structure that means it pays little tax on its non-US earnings. However, accounts also show, that Google has bought property near King’s Cross station for £290m, where it intends to house 5000 workers in a luxury office block.
Although not a sign that it intends to set up headquarters in the UK, Google’s investment continues to make Britain more attractive to multinationals in search of competitive corporate tax rules.
One promise that the chancellor has made good on is using Ireland’s aggressive tax policy as a template, to acquire multinational investment. In the last 10 years, several multinationals have moved their European headquarters back to Britain, including advertising giant WPP, which moved back to London from Dublin in 2013.
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