Last weekend Chancellor George Osborne hailed a new tax deal between Britain and Google as “a major success”. By mid-week he had had to downgrade the arrangement, which will see the tech giant pay £130m in back taxes calculated over ten years, to a “positive step”.
The apparently generous settlement, which will see Google pay around £30m a year rather than the £20m it owed before, provoked widespread scepticism. It hardly helped that Italy, a much smaller market, appeared to wring more money out of Google in its own back-tax deal, or that Facebook made clear it was resisting UK efforts to reclaim taxes from it. Facebook paid £4,327 of corporation tax last year.
What the commentators said
When it comes to tax, most of us just work out what we owe and then pay it, said Simon Kelner in The Independent. Google, on the other hand, appears to come up with a sum it would like to contribute, tells HMRC how much that is, and expects that to be the end of it. This deal is “an outrage to those of us who play by the spirit, and not just the letter, of the law”. To put the sum in context, Google spends £8.4m a year on chicken for its staff canteens. Its annual revenues in the UK are around £4bn – £30m a year amounts to 3%.
The crux of the deal, continued Kelner, seems to have been Google’s successful argument that it has no “permanent establishment” in Britain, despite the £1bn headquarters it is building in London. This is not so much a loophole as “a socking great breach” the government encourages corporate giants “to drive a coach and horses” through.
The deal was also struck “wholly untransparently”, said the FT. HMRC hasn’t said what basis the liability is being calculated on, or justified the new rate it has come up with. Secret deals “only deepen public disquiet”, added Jonathan Guthrie in the same paper. “What weird discount might HMRC apply to Facebook’s liabilities, one wonders?” One based on how many “likes” CEO Mark Zuckerberg’s daughter’s pictures have triggered? In any case, with Google having agreed on just £130m, Zuckerberg “will hardly be quaking in his Adidas sandals”.
In the end, these multinationals are not going to pay taxes out of charity, said Matt Warman on Spectator.co.uk, no matter how much some politicians whinge about it. The only way to get them to pay a fair level of tax is international co-operation to tighten rules and close loopholes. It’s hard to fit big internet firms into “territorial tax systems”, said the FT, given their ability to shift intellectual property and money around the world. “But that is no excuse not to try.”