Today on the BBC’s World at One, Margaret Hodge, the chair of the Public Accounts Committee, was asked repeatedly whether Google had misled Parliament about its UK corporation tax liability. Although Hodge had spent part of the morning interrogating Google’s north Europe chief, Matt Brittin, and had even gone so far as to say “I think that you do do evil”, she was not able to give a straight answer.
This is interesting because Hodge and the PAC are on a mission to prove that the corporation tax Google pays in the UK (just £3.4m last year) is far less than it should be, something Brittin denied at a previous appearance before the committee. So why couldn’t she call him a liar?
Presumably because she knew that, in strict legal terms, he was telling the truth.
We shouldn’t be surprised if Google, a company well endowed with big brains and clever lawyers, is ultimately found to have obeyed the letter of the law and the UK tax code as it currently stands. In fact it would be astonishing if it were otherwise. The trick seems to be that they do all the hard work of “marketing” advertising services in the UK, then at the last moment hand the phone, as it were, to a bloke in Ireland who books the business. The sale takes place in low-tax Ireland, therefore Google is not liable for UK corporation tax on the transaction. In all likelihood it is true that Google is paying the right amount of UK corporation tax.
And yet there are competing truths, are there not? The kinds of truths that rile the British Public and fire Ms Hodge with the kind of missionary zeal that leads her to label the behaviour of a major corporation as “devious, calculated and, in my view, unethical”. We all know that Google makes a great deal of money in the UK (£3.2bn last year), that it employs 300 UK staff (many of them earning hefty sales commissions, according to whistleblowers) to persuade UK advertisers to place adverts on Google UK to sell things to UK consumers. And it may not be a legal truth, but it is certainly a moral truth and a common sense truth that says that all that UK economic activity should be taxed in the UK.
Google is telling the truth, I’m almost certain. One of them, anyway.
Postscript: this legal truth is just a small part of a much larger set of truths Google has constructed to minimise tax worldwide, involving the Netherlands, Bermuda and some clever intellectual property ownership games. More from the Independent and Bloomberg. The truth is, Google is playing by the rules, such as they are, and in minimising its tax burden is meeting its fiduciary responsibilities to its shareholders. Another truth is, they — and many MNCs like them — are getting away with scandalously low tax remittances to the countries on whose infrastructure they depend.