It’s fair to say that Google isn’t short of cash – as exemplified by its UK turnover of £395 million last year. That's why many were aggrieved to discover the Silicon Valley giant was paying the Exchequer just £6 million in tax, when reports over its financial dealings emerged last week.
And though Google insists all its operations are legal, the findings could see company executives brought in front of MPs to explain the transactions, reports the Independent.
John Mann, a Labour member of the Treasury Select Committee is leading the calls for extra scrutiny over Google’s “improper” conduct. “It is entirely immoral, this is a company avoiding its obligations and we are letting them get away with doing it,” he said. “I think it would be highly appropriate to pull a Google executive in front of the committee to justify their failure to pay proper taxes, we would be looking at covering the issue in this parliamentary session, so before Easter, realistically.”
To minimise its outlay, Google is understood to conduct a series of complex transfers that sees much of its UK revenue end up in the tax haven of Bermuda. The company’s scheme involves Google UK working as an agent of its Irish division, meaning sales over here are paid to Ireland before a commission of around 10 per cent is transferred back to Google UK. That fee is taxable once costs have been deducted.
Google Ireland then pays a proportion of the money to the company’s Bermudan firm as a licensing fee, so much of the original income raised in the UK ends up free of tax on foreign shores. Google claims the process complies with all UK tax rules.
“We could pay more tax but we would have to do so voluntarily,” chairman Eric Schmidt has previously said on the issue, according to the Telegraph. "It's very good for us, but to go back to shareholders and say 'We looked at 200 countries but felt sorry for those British people so we want to [pay them more]' ... there is probably some law against doing that.”
But Mann is determined to clampdown on the search giant’s ploy. “Firstly, we should be ensuring first of all that this is not possible across the EU,” he says. “There is no point being in if you can tax dodge. Secondly, if Bermuda or any other British dependency wants our help with defence, then it should stop operating this sort of tax policy.”
It hasn’t just been UK authorities taking issue with Google recently. Last week the US Federal Trade Commission imposed a record $22.5 million (£14.4 million) fine on the company after it misrepresented how users of Apple's Safari browser were having their Internet activity tracked.