U.K. Parliament Says Google Call for Tax Reform `Disingenuous'

  • 130 million-pound settlement seen `disproportionately small'
  • Says deal lacks transparency and can't say if it was fair

A U.K. Parliamentary committee said Google’s recent support for greater transparency and simplicity in international tax laws rings hollow.

"Google told us that international tax rules are complex and that it just follows them," the committee wrote in a report published Wednesday. "This is disingenuous."

The Public Accounts Committee, which has been investigating U.K. corporate tax settlements, said there was nothing in the tax rules "that says you must set up two companies in Ireland and send large royalty payments, via the Netherlands, to a company resident in Bermuda."

Google shifted more than 10.7 billion euros ($11.8 billion) in international revenues to a Bermuda mailbox in 2014 through a series of tax structures known as a "Double Irish" and a "Dutch sandwich," the most recent year for which figures are available. Doing so saved Alphabet Inc., Google’s parent company, some $2.4 billion in worldwide taxes that year, regulatory filings show.

‘Makes Sense’

In hearings before the committee earlier this month, Tom Hutchinson, Google’s vice president for finance, said that U.S. laws that tax international profits only when they are repatriated to the U.S. made its Bermuda tax structure "make sense." And he told British lawmakers he did not consider Google’s tax structure aggressive.

"Google has been keen to parade its enthusiasm for simplicity in the tax system but the fact remains the company has chosen to set up a complicated tax strategy specifically designed to minimize its tax bill," Meg Hillier, who chairs the committee and is a member of the opposition Labour Party, said in a prepared statement.

The company did not respond to requests to comment for this story.

In its report, the committee also questioned whether Google was paying its fair share of U.K. tax. The company’s 130 million-pound settlement with the British tax authority "seems disproportionately small" compared with the size of the company’s activities in the country, the report said.

But the committee also said that due to a lack of transparency over the details of the settlement, it "cannot judge whether it is fair to taxpayers."

Controversial Settlement

Google’s tax settlement with the U.K. -- which George Osborne, Britain’s chancellor of the exchequer, hailed as a major victory for government attempts to get multinationals to pay more tax -- set off a wave of indignation in Britain. Opposition politicians called the deal "derisory" and even News Corp. chairman Rupert Murdoch tweeted that Google "was now paying token amount for pr purposes."

The U.K. tax authority also was criticized by the committee report for taking six years to conclude its audit of Google’s British tax accounts. It called on Her Majesty’s Revenue & Customs (HMRC), the U.K. tax agency, to seek new powers if necessary to speed up its investigations.

It also asked the HMRC to take the lead in international efforts to prevent "aggressive tax avoidance by multinational companies. Hillier said that HMRC should have developed a new approach to Internet-based companies as "the bigger prize" for its six year tax investigation of Google. But, Hillier said, "we are not convinced HMRC achieved this."

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