14.Google told us that the tax affairs of companies that operate across more than one country are complicated but it wanted “to pay the right amount [of tax] and be seen to pay the right amount”. In an article for The Telegraph that was published on the day we took evidence Google was quoted as saying that it had “long been in favour of simpler, clear rules” and that the “international tax system needs reform.” Google also wrote in a letter to the Financial Times that “governments make tax law, the tax authorities independently enforce the law, and Google complies with the law.”
15.Google made no mention in that article or letter of the complex set of arrangements it has chosen to set up which involves sending its money to a tax haven in Bermuda, via a series of royalty payments between Ireland and the Netherlands. Google confirmed to us that it employs no staff in Bermuda. The rules do not say that Google has to operate in the way it does and Google’s actions stand in sharp contrast to its apparent desire for a more transparent system.
16.We heard that Google bases its European operations in Ireland. It is widely reported that the disparity between definitions of tax residency between the Irish and US tax codes allows multinational companies to make royalty payments to companies in tax havens that largely go untaxed. We asked why Google chose to base its operations in Ireland. Google told us that it did this for business reasons, not tax reasons, although Google acknowledged that a lower tax rate was one of the factors that had led it to base its European headquarters and sales operation in Dublin. Google maintained that one of these business reasons was the linguistic skills available in Ireland where 40 languages are spoken by its employees.
17.Google told us that it had “looked at our structures to make them simpler and clearer,” but admitted that nothing of substance had changed in how it organises its tax affairs as a result of HMRC’s investigation. The overall substance of Google Ireland invoicing customers in the UK remained unchanged. In 2012, when the previous Committee took evidence, Google was unapologetic about its tax structure. Google continues to have an international tax structure that delivers a low overall tax rate. Google stated that the structures it has adopted are normal for US technology firms.
18.Google told us that despite its very complicated corporate structure, it pays a fair amount of tax worldwide, although it recognised that its structure allows it to avoid its profits being taxed at “very high US rates.” Google noted that its effective global tax rate for the last 5 years was 19% and that it considered this to be a fair rate. Following the evidence session Google sent us further information about this figure and on what basis it was calculated. We note that Google’s latest figures for its global business indicate that it paid an effective worldwide rate of 17%, and that this is lower than the corporation tax rates in its two largest markets, the US and the UK.
55 ‘Tax specialists criticise Google deal as opaque
59 HM Revenue & Customs: Annual Report and Accounts 2011–12
Prepared 23 February 2016