Confidence in HMRC has been weakened say MPs

Published on Thursday, 13 June 2013 10:20
Written by Scott Buckler

The Public Accounts Committee published it's 9th Report of this Session which, on the basis of evidence from Matt Brittin of Google and John Dixon of Ernst & Young, and from HM Revenue and Customs, examined tax avoidance by large companies

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"Google generates enormous profits in the UK. But despite an $18 billion turnover between 2006 and 2011 it paid the equivalent of just $16 million in taxes to the UK government.

"Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. It claimed that its advertising sales take place in Ireland, not in the UK.

"This argument is deeply unconvincing and has been undermined by information from whistleblowers, including ex-employees of Google, who told us that UK based staff are engaged in selling. The staff in Ireland simply process the bills. Google also conceded at this second hearing that its engineers in the UK are contributing to product development.

"The company's highly contrived tax arrangement has no purpose other than to enable the company to avoid UK corporation tax.

"Google's reputation has been damaged by these revelations of aggressive tax avoidance. That damage will not be repaired until the company arranges to pay its fair share of tax in the country where it earns the profits from the business it conducts.

"Confidence in HMRC has also been weakened. It is extraordinary that the department did not challenge Google over the complete mismatch between the company's supposed structure and the substance of its activities.

"This is not specially to single out Google or indeed Starbucks and Amazon who had previously given evidence to us. The tax avoidance activities of these multinational companies are illustrative of a much wider problem.

"The Government clearly needs to act to strengthen HMRC and to simplify the tax code so that there are fewer loopholes. The Government should also consider greater transparency so that the public knows whether companies are paying a fair share. It should toughen up its proposals on public procurement to deny contracts to aggressive tax avoiders.

"The Government has declared that it will use its presidency of the G8 to promote the tackling of aggressive tax avoidance. This is a welcome recognition of the need for multilateral action to thwart the tax dodgers.

"This committee has vigorously condemned the activities of the big UK accountancy firms in helping their clients find loopholes in legislation and establish highly artificial tax structures.  These firms must recognize that the public mood on tax avoidance has changed and that the time has come for them to advise their clients responsibly."

The views expressed in the contents below are those of our users and do not necessarily reflect the views of GovToday.