Backlash builds against Google UK tax deal
Backlash builds against Google tax deal
By George Parker and Vanessa Houlder in London January
25, 2016 7:52 pm
Downing Street distanced itself on Monday from George
Osborne’s claim that the tax deal with Google represented “a major success”,
amid growing criticism of the settlement.
Google’s agreement to pay £130m in back taxes to the UK
government has reignited a controversy that pushed tax avoidance to the top of
the international agenda three years ago.
The deal ended a decade-long probe by tax authorities
into whether the tech group had skirted its tax bill by allocating profits
earned in the UK — its second biggest market — to its European base in Ireland,
where tax rates are lower.
Conservative MPs — led by Boris Johnson, London mayor —
have lined up to criticise what they said was a “derisory” payment by the US
multinational.
Andrew Tyrie, chairman of the Commons treasury committee,
announced an inquiry into corporate taxation saying that fundamental reforms
would “probably now have to be considered”.
The chancellor’s enthusiastic reception of the Google
agreement was not echoed by Number 10. David Cameron’s spokesman declined to
repeat Mr Osborne’s assertion that the deal was a “major success” and “a
victory”.
“It’s a step forward but there’s more to do,” the prime
minister’s spokesman said. “We have made it clear that we want to see low taxes
for business but tax must be paid. Clearly there is more work for the
government to do to make sure multinational companies pay their tax.”
David Gauke, treasury minister, was forced to defend the
deal in the House of Commons and rejected suggestions from some MPs that
Google’s effective tax rate was just 3 per cent. But he said he could not say
what rate the company had paid because he was not privy to tax information.
He reminded MPs that international rules dating back to
the 1920s decree that corporation tax was paid on the basis of where economic
activity takes place rather than where profit was made.
But Mr Tyrie’s treasury committee will look at whether
the rules need to be changed. MPs are also expected to call multinationals such
as Google, Facebook and Amazon to give evidence on their tax affairs.
John McDonnell, shadow chancellor, claimed the deal with
Google had helped to form “an unholy alliance between myself, The Sun, the
mayor of London and even Number 10”.
Steve Baker, one Tory MP, said the Google deal was
“derisory”, echoing the view of Mr Johnson, and “totally unacceptable” to the
public. The Sun newspaper said it was “a kick in the goolies”.
The issue of corporation tax has also been rising up the
US political agenda. On Monday, Johnson Controls revived a debate about
tax-cutting “inversion” deals, after it agreed a $20bn combination with Tyco
International which would move the US manufacturer’s domicile to Ireland.
Copyright The Financial Times Limited 2016.
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