Exclusive: After Google tax clash “we didn’t hear the truth”

Today Google, which recently became the world’s most valuable tech company, was hauled into Parliament to face the Public Accounts Committee and answer a series of cutting questions around its £130m so-called “sweetheart deal” with the British taxman.

The investigation was spearheaded by Meg Hillier MP, chair of the Public Accounts Committee, known for her tireless campaigning on behalf of small businesses in her constituency of Hackney South and Shoreditch.

During the hearing Google fought its side of the story, arguing its £130m tax settlement was “the conclusion of a six-year rigorous, independent tax audit in which we are paying tax at 20% like every other UK company”. For his part Google’s European boss Matt Brittin laid much of the blame on the UK’s “over complicated tax systems”.

As far as the law is concerned, Google paid all of the required taxes in the UK and reached a settlement with the Government. But the public continues to demand answers about how the agreement came about.

“Google must be more transparent and lead the way for the ordinary taxpayer” Hillier told The Memo. “They could lead the way, like the cosmetics retailer Lush did, by choosing to conduct their tax affairs in a transparent manner”.

The Memo caught up with Hillier in an exclusive interview after the hearing.

Alex Wood: What’s your initial reaction to what you’ve heard from Google?

Meg Hillier MP: I came from away the committee feeling frustrated. Talking about tax can be endlessly frustrating, and today we didn’t get to hear enough of the truth.

Taxpayers are right to be angry because the situation isn’t clear enough. Instead of the clear facts, we saw Google stressing its commitment to transparency over and over, without actually revealing what we needed to hear.

“If I had £100 for each time Google mentioned transparency, I could buy a lovely holiday.”

Google also sent us information very late last night which only served to cloud our understanding of what’s really gone on.

Editor’s note: Meg Hillier MP has agreed to share this information with The Memo and we will publish it as soon as possible.

During today’s meeting they kept repeating that they pay 19% tax globally but offered nothing to back it up. They also claimed not to know how much Sundar Pichai, Google’s CEO was paid, despite it being plastered across the news earlier this week. Even more surprisingly, their Head of Finance claimed not to know how much profit they had made in the last 5 years.

That was why I asked Matt Brittin (Google’s Head of Europe) how much he was paid, which he failed to reveal despite being asked 5 times. Hearing this made me feel like they are detached from the real world.

AW: Why did you bring both Google and HMRC in for questioning?

MH: This committee previously brought Matt Brittin and Google in for questioning in 2012, and in 2013 following a whistleblower’s account.

We have history between us and Google as a committee and after the Chancellor announced news of Google’s latest settlement, we felt the public deserved answers and more clarity about how it came about.

Are UK tax rules too complicated? Is this a fair justification?

When it comes to internet companies it’s fair to say we have complex tax systems because it’s less precise where their business activities take place.

But Google chose to create its own structure that makes use of complicated things like the Double Irish and the Dutch Sandwich. For ordinary taxpayers it seems extraordinary.

Back in 2012, when Matt Brittin attending an earlier hearing he implied that if Google can have a tax haven in Bermuda, why wouldn’t they? But this is still their voluntary choice to have these structures.

It’s fair to say we have complex tax systems and internet companies are less precise when it comes to where the activity takes place. They chose a voluntary structure that is complicated.

Should we be pointing the finger at HMRC for their failure to get a better deal with Google?

HMRC also struggled to be transparent and couldn’t tell us how much the enquiry cost, which we hoped to find out more about today. Some estimate the 6 year enquiry cost £4m to investigate, which HMRC would say is good value as it has a 75 to 1 cost recovery ratio.

I think ordinary taxpayers have a right to be annoyed to hear that HMRC invested so much resource into this investigation. Especially when so many I hear so many taxpayers say the taxman struggles to answer to the phone to them.

It’s important to know that the figure agreed between Google and HMRC is not final and if new evidence comes to light, which may well happen with other investigations in Europe, HMRC may revise the settlement.

On a more positive note, if the result of this 6 year enquiry is that the findings can applied to other internet companies and more settlements take place, then HMRC’s actions may well have been worthwhile.

Are tech companies like Google being unfairly targeted?

In the modern world everybody is a tech company to a certain degree and there needs to be an adult discussion about internet-based companies and how they should be taxed.

There have been other examples of companies brought in for questioning including Starbucks, which resulted in the company rethinking its practices after a public outcry.

But today’s hearing doesn’t stop Google from changing their corporate structure and becoming more transparent.

How much power do you and the Public Accounts Committee have to make a difference?

On behalf of taxpayers we’re holding people to account in public. After today’s hearing we will make recommendations that have to be heard.

If the Government disagree with our recommendations it has to explain why. And if it agrees, we then have the right to check that the recommendations are acted upon. We also have the right to bring people back in if we need more information in the future.

What happens next?

Over the next couple of weeks we will compile our report to be published to Parliament and then various departments will have to respond.

The Public Accounts Committee is a cross-party group, so there’s already a consensus before our recommendations are published, which tends to lead to action.

We’ve already heard Chancellor George Osborne congratulating himself about the settlement with Google and then facing a public backlash. Now he will be keen to be seen to tackle the issue and we’ll wait for Google’s response.

In politics perception is reality.

Be the first to hear the latest updates on this story by subscribing to our Daily Memo newsletter.