Google on Wednesday defended its £130m settlement with British tax authorities for the first time in a letter to the Financial Times, arguing that it was complying with British law. Separately, Apple said it should pay nothing over Brussels’ investigation into its alleged sweetheart tax deals in Ireland.
The interventions came as David Cameron, UK prime minister, tackled tough questions about the Google tax deal in parliament. Opposition leader Jeremy Corbyn asked: “Why is there one rule for big multinational companies and another for ordinary, small businesses and self-employed workers?”
Silicon Valley groups and US business leaders are stepping up their lobbying campaign in Washington, arguing that European authorities are discriminating against multinationals. A group of US senators recently said any fines imposed on companies such as Apple amounted to “discriminatory taxation”.
Peter Barron, Google’s European public affairs chief, wrote in the FT: “Governments make tax law, the tax authorities independently enforce the law and Google complies with the law.”
Last week, it emerged that Google had reached a deal with the UK’s tax authority, to pay £130m in taxes going back to 2005, while also agreeing to pay higher taxes in future. But ministers, regulators and Google have struggled to contain the media furore unleashed by the deal.
Mr Barron said media criticism of its settlement with HM Revenue & Customs overlooked “international tax rules and how they work”. The company was “paying the amount of tax that HMRC agrees we should pay” following a six-year audit of its practices, he argued.
On Thursday, the Scottish National party said it had written to the European Commission calling for an investigation into Google’s tax deal and whether it could be considered state aid. “We know very little about the settlement,” Stewart Hosie MP, the SNP’s deputy leader, said.
The call could drag the EU’s antitrust chief Margrethe Vestager into the political battle, a move that would alarm Google. The Danish commissioner has already launched a probe into Google’s search dominance and is investigating Apple’s European tax arrangements.
Ms Vestager, speaking to the BBC’s Today programme, said that she would be willing to look into the deal.
“If we find there’s something to be concerned about, if someone writes to us and says maybe this is not how it should be, then we’ll take a look,” she said.
Apple could be liable for several billion dollars in back taxes, analysts’ estimates suggest, if a Brussels investigation over its European tax arrangements goes against it.
Luca Maestri, Apple’s chief financial officer, told the FT: “This is a case between the European Commission and Ireland and frankly there is no way to estimate the impact right now, we need to see what the final decision is going to be.”
He added: “My estimate is zero. I mean, if there is a fair outcome of the investigation, it should be zero.”
HMRC interviewed customers, executives and other employees as part of its six-year probe into Google’s tax affairs. A big part of the investigation concerned whether the company’s Irish business had a “permanent establishment”, with HMRC concluding it did not have a taxable presence in the country.
The Tax Justice Network, a pressure group, has estimated that Google should be paying about £200m every year in corporation tax based, they say, on the company’s declared profit margins and sales in Britain. Google paid £20.5m in tax in 2013 based on attributed UK profits, compared with $5.6bn in UK revenues.
MPs including Boris Johnson, London’s mayor and a senior politician in Mr Cameron’s Conservative party, have described Google’s payment as “derisory”, while tax experts have described the deal as opaque.
News Corp chief Rupert Murdoch weighed in on the dispute, saying strong new laws were required to prevent small local businesses being ruined by global tech companies paying “token” taxes. He also highlighted Google’s once close ties to the British government. He tweeted: “Tech tax breaks facilitated by politicians easily awed by Valley ambassadors like Google chairman Schmidt eg, posh boys in Downing St.”
In his letter to the FT, Mr Barron wrote: “In all the coverage of Google’s tax settlement, little has been said about the international tax rules and how they work. Corporation tax is paid on profits, not revenue, and is collected where the economic activity that generates those profits takes place. As a US company, we pay the bulk of our corporate tax in the US: $3.3bn in the last reported year.”
HMRC is increasing pressure on multinationals using new powers to tackle aggressive tax avoidance. On Tuesday it emerged that the tax office was auditing Facebook over taxes that may have fallen between 2010 and 2014. The social networking company has set aside an unknown amount of money in relation to the probe.
Get alerts on HM Revenue & Customs when a new story is published