Google chiefs could face MPs over tax avoidance schemes

Prime Minister David Cameron (R) speaks with Eric Schmidt of Google (GETTY IMAGES)

Google chiefs face the prospect of being hauled before MPs to explain themselves over their tax avoidance schemes, the Independent has learned.

A member of the Treasury Select Committee called the company’s practices, which saw it pay £6m in tax on a turnover of £395m last year, “entirely improper and immoral” and said he expects a Google exec to be called before MPs by next Easter.

Anger is growing over the revelations that a complex series of transactions sees Google move most of the money it makes into the tax haven Bermuda, paying a minimal sum in the UK. A petition demanding it pay its “fair share” has reached nearly 45,000 signatures in four days.

“It is entirely immoral, this is a company avoiding its obligations and we are letting them get away with doing it,” said John Mann MP, a member of the Treasury Select Committee, who added that he has discussed the idea of looking at tax avoidance with his colleagues and expected Google in particular to be called in.

“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. Whether it is illegal or immoral, the British tax payer loses out. Google is one of the big ones but there are others,” he told The Independent.

Figures emerged last week showing that, while it paid more than it did in 2010, Google contributed £6m to the Exchequer in UK taxes last year. The company operates a scheme under which its Irish subsidiary employs Google UK as an agent, meaning the proceeds of sales made in the UK end up in Ireland. A commission of around 10 per cent is then paid back to Google UK. That fee is taxable once costs have been deducted.

Google Ireland then pays much of the money it makes to the internet giant’s Bermudan firm as a licensing fee, ensuring that a large portion of its turnover ends up in the tax haven. The process is entirely legal.

The company’s executive chairman Eric Schmidt said last year that Google could pay more than it does but “would have to do so voluntarily”. In what was widely interpreted as an attack on British tax laws, he added: “There are lots of benefits to [being in Britain]. 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 Mr Mann, the Labour MP for Bassetlaw, said that the Bermudan government needs to take a stronger stance on tax avoidance schemes which hit British tax receipts. “This sort of scheme is running, meanwhile we are providing a legal base and defence for Bermuda because it is a British dependency,” he said.

Mr Mann added: “Firstly, we should be ensuring first of all that this is not possible across the EU 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. We are paying twice because we are paying for Bermuda.”

A Google spokesman said: “We make a substantial contribution to the UK economy through local, payroll and corporate taxes. We also employ over a thousand people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in East London. We comply with all the tax rules in the UK.”