HMRC under pressure over Google tax deal

02/01/2016 - 11:27

The government has come under increasing scrutiny this week after a tax agreement reached with Google was labelled a “major success” by George Osborne, but dismissed as a raw deal by almost everybody else.

The £130 million deal, which covered ten years of trading, was branded a “sweetheart deal” by the Labour finance minister, while on David Cameron’s government benches the business minister Anna Soubry admitted that it did not appear to be an “awful lot of money.”

Things got worse for the government when France and Italy looked set to secure a much tougher deal from the search engine giant. Then, just when it seemed to be all over, the EU’s competition commissioner revealed that she was ready to look into complaints about the agreement.

One rule for us, and another for them

Large sections of the public are concerned that Google has been let off too lightly. There is a particularly angry feeling at the gulf between what has been labelled as a victory for the government, and the realities of the deal.

That anger is felt strongly by people in the small-business owning community, many of whom have just completed their tax returns.

At Prime Minister’s Questions last week, Jeremy Corbyn voiced the opinion of thousands of self-employed people when he questioned why many tax payers have to fill in tax returns, while big businesses like Google are allowed to meet with ministers to haggle over how much they owe.

Corbyn told the Commons that the deal equated to a 3% tax rate and argued that there was “one rule for big multinational companies, and another for ordinary small businesses self-employed workers”.

Similar sentiments were echoed in the business world where media giant Rupert Murdoch accused the “posh boys in Downing St” of cosying up to multinational technology companies.

Murdoch argued that unless the practices of “global tech companies” are stopped, it will “ruin local businesses who pay.”

In Britain, and across Europe, there appears to be a growing resentment for companies that use artificial instruments to divert profits away from a host country.

Jon Biddle, Group Chief of Operations at has concerns that these activities could destabilise the British tax system and jeopardise the fortunes of many small British businesses.

He said: “Although legal, many instruments of tax avoidance give an unfair advantage to those who can afford to use them. If multinational companies are allowed to continue avoiding taxes, then it undermines the legitimacy of the whole tax system.

“For the tax regime to be legitimate, it needs to have the confidence of the people. And for a tax system to have the confidence of the people, it needs to be transparent. This behind-closed-doors deal proves that we are a long way from a harmonious system of taxation.”