Public Accounts CommitteeWritten evidence from Google

1. Could you provide information about how your shareholders benefit from the Bermuda holdings? (Q527, Fiona McTaggart)

During the hearing, several Members suggested that shareholders only benefit if Google pays dividends back to shareholders. This is not the case. Google Inc has not paid dividends to shareholders at any point in the past and we have no current intention to do so. The funds held can be used to expand Google Inc’s business operations outside of the U.S, which should in turn benefit Google’s shareholders.

2. Do you use other tax havens eg Bahamas, Cayman islands, Netherlands Antilles? (Q528–531 Chair)

No.

3. Please provide details of the costs involved in your operation in the UK (Q559–565, Richard Bacon)

Note 3 of the statutory audited financial statements of Google UK for 2011 contains a breakdown of administration expenses. Note 6 contains a further breakdown of staff costs. The breakdown of the administration expenses included in the financial statements is as follows (all in GBP):

Advertising and promotion expenses	105m
Professional services	10m
Auditor remuneration	55k
Stock based compensation expense	51m
Depreciation and amortisation	6m
Employee benefit expense	190m
Other administration expense	54m

4. Please provide information on any royalties paid from Ireland (Q566–567, Stephen Barclay)

Google Ireland Holdings pays royalties back to Google Inc. in the U.S. for the rights to use technology that has been added to the Google portfolio through acquisitions (eg YouTube). For the first three quarters of 2012, this sum was US$200 million.

5. How was the amount of tax paid on your foreign income reached? (Q 568–573, Stephen Barclay)

Google pays all the tax it is required to pay in the UK and in every other country in which we operate. In the UK this included over GBP10 million of corporation tax and close to GBP50 million of employee taxes in the last three years. The US$248 million tax we paid on foreign income that the question referred to relates entities throughout the world other than Google Ireland Holdings. Google follows the principles of international taxation in that taxes are paid based on where products are created rather than where they are consumed

6. Are there any outstanding issues with HMRC about your accounts? (Q593 Chair)

There are no outstanding issues with HMRC about Google UK’s accounts. HMRC are currently carrying out a review of the tax returns filed by Google UK for 2005–2011 inclusive. This is standard practice and we are co-operating fully with that review.

7. Do you think the OECD definition of what a ‘branch’ is should be updated for the internet world? (Q605, Meg Hillier)

Google UK Ltd provides sales, marketing and R&D support to Google Inc. It is paid for those services by Google Inc (in respect of R&D) and Google Ireland (in respect of Marketing and service support) and, in doing so, receives a profit that is equal to what other companies would get for performing the same activities. This relationship would not be affected by any changes to the definition of a “branch.”

8. Do you know how much you spend on tax lawyers and details of any external advice you seek? (Q 607- 610, Meg Hillier)

As with all large corporations, we use outside tax attorneys to consult on various tax issues. We do not have a full breakdown of those costs across all jurisdictions.

21 November 2012