Photographer: Daniel Acker/Bloomberg

Google Defends U.K. Tax Deal as Lawmakers Go on the Attack

  • Brittin told that consumers `hate' tech giant over taxes
  • Company pays 19% tax on its global profits -- `a fair amount'

Google Inc. defended its settlement with British tax officials as lawmakers used a televised hearing to attack the company and question the 130 million-pound ($188 million) deal.

The technology giant pays the right amount of tax, Matt Brittin, Google’s European chief, told Parliament’s Public Accounts Committee in London on Thursday. He denied the agreement, heralded as a “victory” by Chancellor of the Exchequer George Osborne but denounced as “derisory” by its critics, meant it had only paid 3 percent.

“I understand why constituents are concerned when they see reports saying we’re paying 3 percent tax, but it’s not true,” Brittin said. “We’re paying 20 percent tax like everyone else.”

The settlement has ignited allegations that British tax law remains too lax for multinational companies such as Google, Apple Inc., Starbucks Corp. and Inc., in spite of a much-vaunted drive by Osborne to crack down on tax avoidance. London Mayor Boris Johnson, a potential rival for Osborne in the race to succeed Cameron, said it was "absurd" to attack Google over the settlement because "you might as well blame a shark for eating seals." The rules are the problem, he said.

‘Tin Ears’

As the hearing got under way, Meg Hillier, the chairwoman of the Public Accounts Committee, asked Brittin whether he understood public anger over the settlement and suggested he had “tin ears.”

Brittin confirmed the company made U.K. profits of 106 million pounds on sales of 1.2 billion pounds in the 18 months through June last year, with the country accounting for about a tenth of sales to customers. While Google supports a simplification of international tax rules, there had been no political involvement in the U.K. settlement and no “sweetheart deal.”

“We find ourselves in a position where we are paying the tax that the tax authorities told us to pay,” he said.

“Lots of people hate you because of this, they’re very angry because of this,” Richard Bacon, a lawmaker from Prime Minister David Cameron’s Conservative Party, told Brittin. “Why don’t you face up to it?”

‘Fair Amount’

Jim Harra, director general of business tax at Her Majesty’s Revenue and Customs, later told the committee the settlement took Google’s U.K. tax bill to 196.4 million pounds. While the company had been charged interest on the back tax, it was not charged a penalty, he said.

“Of the tax and interest a very substantial part of it arises from our investigation,” he said. “Penalties and large businesses are quite a challenge. It’s very hard to establish that they’ve taken insufficient care.”

Tom Hutchinson, Google’s vice president for tax affairs, said his team seeks to manage the company’s tax affairs as “efficiently” as possible. Google paid 19 percent on its profits around the world, “a fair amount of tax to pay,” he said.

“The tax rules are complicated, there’s no doubt about that,” Hutchinson said. “It’s up to the governments to decide where we should be paying our taxes.”

The U.K. deal is one of several facing scrutiny in Europe, with multinational conglomerates such as Facebook Inc., Amazon and Apple also being looked into.

In Italy, a Milan court started a criminal investigation into the actions of at least three Google managers as part of a tax-evasion probe, a person with direct knowledge of the matter said. Google is under investigation in Italy for allegedly evading taxes totaling about 250 million euros ($280 million) between 2009 and 2013, three people familiar with the matter said in January. A Milan-based spokeswoman for Google declined to comment.

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