Whilst some commentators have dismissed Google’s £130m tax settlement covering the past ten years as derisory, some members of the ICAEW and CIOT have taken a different view.
HMRC have refused to comment on any particulars of the agreement concluded after a six year investigation. “We do not do deals – we only resolve disputes by agreement if the taxpayer pays the full amount of tax” said a spokesman. Given that Google's 2013 UK sales amount to some £3.6 billion resulting in a tax bill of a mere £20.4 million for that year, this lack of transparency has also been criticised in many quarters.
Google's tax announcement has led to some angry exchanges in parliament, with Jeremy Corbyn asking David Cameron where “Geoff” can join a scheme paying the same 3% tax rate as Google.
The House of Commons Treasury Committee has announced that it will examine whether a radical shakeup of corporation tax is needed to combat tax laws which allow companies to legally pay too little tax, and the Public Accounts Committee will be asking HMRC and Google explain the arrangement.
However, members of the ICAEW and CIOT have defended the amount, described by George Osborne as a “major success”.
Glyn Fullelove, chairman of the International Taxes Committee of the Chartered Institute of Taxation (CIOT), said that the public is often mistaken when it comes to company’s tax payments: “There’s a little bit of misconception between paying tax on revenue and paying tax on profit. A lot of companies that have very large sales in the UK don’t actually have large profits in the UK.”
He referred to the tightening of UK tax laws with the recent introduction of the diverted profits tax to ensure that value created in the UK will be taxed here, adding that that "the bulk of the value produced by Google lies not in its British sales teams, but in its technology, which is developed in the United States".
Ian Young, Tax Faculty International Tax Manager in the Institute of Chartered Accountants (ICAEW), said that the corporation tax paid by Google represented only a small part of its tax bill, referring to the National Insurance contributions and business rates paid by the US Multinational.
Google’s parent company are set to announce its 2015 results next week along and are expected to confirm that company’s offshore funds collected from the profits of non US sales is now worth more than $43 billion. UK sales make up about 17% of those non US sales.
Google (like Apple) and no doubt other large corporations now have billions in cash in Bermuda. This five hundred billion question is what will these giants do with their cash?
Whatever your view, this story has the potential to run and run!