The Government is having a taxing time after its own minister’s statement on Google tax made grim headlines.
The Government collected £130 million from tech giant Google in back taxes, which Tory business minister Anna Soubry described as not a big amount.
She told BBC Radio 4: “Of course everybody is going to look at it and say it doesn’t seem like an awful lot of money.”
The agreement for Google to pay £130m in UK back taxes has been labelled as “derisory” and a “sweetheart deal” by critics.
The payment covers money owed since 2005 and follows a six-year inquiry by HMRC.
Chancellor George Osborne hailed it as “a victory” for the government, but Labour's John McDonnell said the sums were “trivial”.
London Mayor Boris Johnson heaped pressure on the deal by describing taxes paid by large multinationals as ‘derisory’.
John McDonnell, Labour's shadow chancellor, told BBC the agreement looked like a “sweetheart deal” and called for HMRC to publish full details of what it believed Google had owed.
He said people will be “sceptical” about the firm paying what he called a “relatively trivial” amount of money.
PM David Cameron has defended the deal, saying the Conservatives have done more than any other government.
The PM told the Commons the tax “should have been collected under the last Labour government”.
However, Business Secretary Sajid Javid said Google's £130m UK tax settlement was “not a glorious moment” for the government.
Speaking on the BBC's Andrew Marr Show, Mr Javid agreed that “more needs to be done” to ensure multinational companies pay the correct corporation tax.
“I speak with thousands of companies small, medium-sized as well as, of course, large companies and there is a sense of injustice in what they see,” he said.
But the Google agreement could be seen as a “success” in so far as it would help to change the behaviour of other large companies, he said.
Google parent Alphabet Inc. agreed to pay tax going back 2005 after talks with UK tax authorities, while across Europe the company was criticized for using innovative tools to keep its tax rates low. HMRC has been faulted for not securing more money after reports that France and Italy are demanding higher settlements from the Mountain View, California-based company.
The Sunday Times reported that six of the 10 biggest companies in the benchmark London Stock Exchange index, including Royal Dutch Shell Plc, SABMiller Plc and AstraZeneca Plc, paid no UK corporation tax for 2014. The companies told the newspaper that losses, minimal revenue in the UK revenue and expiring drug patents meant the company didn’t have to pay the taxes.
The Institute for Fiscal Studies said governments should consider going back to the drawing board to develop a tax system that accommodates multinationals which currently escape making corporation tax payments in some countries.
Transport Secretary Patrick McLoughlin defended the deal, which experts said amounted to an effective tax rate of 3%, but said he would like to see the US-based search firm pay more tax in the future.
‘Google tax’ is the popular term used to refer to a diverted profits tax, which is a legislative project in the UK. The aim, beginning in April 2015, is to impose a levy on company profits—excluding those of small and medium-sized enterprises—that are routed via “contrived arrangements” to tax havens.
