Don’t fob us off with this pitiful Google tax gesture

http://www.theguardian.com/commentisfree/2016/jan/23/google-paying-back-tax-only-a-beginning

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Google makes its money by selling advertising. The UK is a vital market for it. When, as the then chair of the public accounts committee, I examined Google in some detail in 2012-13, 11% of its worldwide business, valued at just under $5bn, came from sales here. The UK was its biggest market in Europe. But those UK sales were accounted for in Ireland, where they declared profits of more than $9bn. In 2014, UK sales declared in Ireland netted Google some $6.4bn.

In November 2012, a confident and somewhat arrogant Matt Brittin, the European head of Google, told parliament that the company had deliberately designed its financial structures to avoid tax. Eric Schmidt, Google’s executive chairman, proclaimed that he was “very proud” of the structure. “It’s called capitalism. We are proudly capitalistic. I’m not confused about that.”

So the announcement by Brittin that Google will pay £130m in tax to cover the past 10 years is a step in the right direction. It is a welcome recognition that the company has got things wrong in the past. But this gesture should not be seen as putting things right.

In the public’s eye, the issue of tax is quite straightforward. The amount you pay is directly related to what you earn (for the individual) or to what profits you make (for businesses).

It is hard to believe that £13m tax payment on $6.4bn turnover is an adequate tax bill. It feels more like a PR deal designed to counter the reputational damage created by Google failing to pay a fair share of tax on the profits it makes from its economic activity in the UK.

Google is not alone. Every week, someone rings me about yet another large corporation using artificial structures designed to avoid tax.

If trust is to be restored in the fairness of our tax system, much greater transparency is essential. We need to open companies’ tax affairs to public account. HMRC always refuses to disclose the details of its tax deals with companies by hiding behind the legal obligations to keep taxpayers’ affairs confidential.

That will no longer wash. When we know the assets that companies hold in every country, the revenues they earn in every country and the profits they make from those revenues, we will be able to see if the tax they pay is fair.

I don’t think greater transparency will destroy or even harm capitalism, but it will help to persuade the 85% of the UK population who pay their tax through PAYE that everybody is truly equal under the tax laws.

Google used to be proud of its clever tax-avoidance structures. It took some courageous whistleblowers to prise open what was really happening. French authorities are pursuing Google for $1bn in unpaid tax. The UK government should show the same determination on behalf of all taxpayers to secure the proper sum from this successful company, in order to fund the public services on which Google and its employees also depend.

Until that happens, its original company motto – “Don’t Be Evil” – will remain for me a hypocritical assertion that it may preach but which it fails to practise.