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Thursday , January 21 2021

British lawmakers tell Google to come clean on tax – US demands EU reconsider tax probes of its companies

In this image made from a video, Google Vice-President Tom Hutchinson (left), and President of Google Europe, Middle East and Africa, Matt Brittin, give evidence to the British government Commons Public Accounts Committee in London, on Feb 11. The executives are appearing before the government committee following controversial agreements over tax payments by the internet giant.(AP)
In this image made from a video, Google Vice-President Tom Hutchinson (left), and President of Google Europe, Middle East and Africa, Matt Brittin, give evidence to the British government Commons Public Accounts Committee in London, on Feb 11. The executives are appearing before the government committee following controversial agreements over tax payments by the internet giant.(AP)

LONDON, Feb 11, (RTRS): UK lawmakers accused Google on Thursday of trying to fool Britons into believing it was a proponent of tax reform while remaining a prime beneficiary of loopholes in existing rules, and said if it was sincere the company would be more transparent over its tax affairs.

Google’s president for Europe, Middle East and Africa (EMEA), Matt Brittin, told the parliamentary Public Accounts Committee that the company had paid all the tax that it should but wanted the international tax system reformed.

But Stewart Jackson, a Conservative member of the committee, questioned claims that the company was trying to be open about its affairs and supported a rewriting of antiquated tax rules which allow it to shift its profits into Bermuda.

“You sort of pose as an enlightened helper to the public debate … And that the wicked awful tax system across the world somehow just happened to Google, whereas actually you’ve made a choice to avoid tax and set up structures specifically so to do,” he said.

Brittin was appearing before the committee for the third time in four years, just weeks after Google had announced a controversial 130 million-pound ($187 million) backtax deal with the UK.

News of the deal met with a public outcry, with critics saying the payment of 130 million pounds to cover the last 10 years of earnings was too little, even though finance minister George Osborne initially described the settlement as a major success for the government’s work on tackling tax avoidance.

The opposition Labour party and some members of Osborne’s own Conservative party criticised the settlement, which brought Google’s total tax bill for 2005 to 2015 to around 200 million pounds whereas its UK revenues amounted to 24 billion pounds.

Tom Hutchinson, Google’s vice president for tax, also told the committee the dispute with HM Revenue & Customs (HMRC) reflected the complexity of tax law, rather than any attempt not to pay the right amount and that this was echoed in the fact the settlement included no penalty.

Google pays an effective tax rate of around 5 percent on non-US profits by channelling earnings from clients in EMEA and Asia into a Bermuda-based, Irish registered company, a Reuters analysis of company filings shows.

Meg Hillier, a Labour member of parliament and chair of the committee, said Google should follow the examples of companies like Norway’s Statoil and UK bank Barclays which itemise their earnings and tax payments by country.

US Treasury Secretary Jack Lew called on the European Union to reconsider tax probes targeting US companies on Thursday, arguing that such moves represented disturbing precedents.

Lew made the plea in a letter to European Commission President Jean-Claude Juncker and EU antitrust chief Margrethe Vestager, a copy of which was seen by Reuters.

“While we recognize that state aid is a longstanding concept, pursuing civil investigations — predominantly against US companies — under this new interpretation creates disturbing international tax policy precedents,” Lew wrote.

“We respectfully urge you to reconsider this approach.”

The European Commission has been pursuing so-called sweetheart tax deals involving US firms such as Apple and McDonald’s in several EU countries, which Vestager says give them an unfair advantage in breach of state aid laws.

Amazon is also in the EU’s crosshairs, while Starbucks faces back taxes of up to 30 million euros. Apple Chief Executive Tim Cook last month personally lobbied Vestager on the tax case involving Apple and Irish authorities.

European Commission spokesman Ricardo Cardoso acknowledged receipt of the letter, in which Lew said the Commission appeared to be targeting US companies disproportionately and warned they may be more heavily penalised than other companies.

Lew said regulators were going after income which EU countries are not entitled to tax under international rules, and that such action could undermine bilateral tax treaties.

Cardoso denied any bias against US companies, saying EU laws apply to all companies doing business in Europe.

“In its state aid decisions on tax rulings to-date, the Commission has ordered member states to recover unpaid taxes mostly from European companies,” he said.

Last month, Vestager ordered Belgium to recover about 700 million euros from 35 multinational companies including Anheuser-Busch InBev, BP and BASF because of their participation in an illegal tax scheme.

Cardoso said the Commission does not apply its rules retroactively, that it had been in contact with US authorities on several occasions and would give any clarifications required.

Meanwhile, prosecutors are investigating five managers at Alphabet Inc’s Google as part of a probe into allegations the firm evaded taxes worth 227 million euros ($257 million) in Italy, investigative sources said on Thursday.

Lawmakers across Europe are looking for ways to change tax rules which allow multinationals to shift untaxed profits into low-tax jurisdictions.

Meanwhile, tax authorities in some countries, including Italy, are also trying to use existing tax rules to force companies to pay more tax on the profits generated by sales in their countries.

In response to a request for comment on the investigation, Google said in a statement, “Google complies with the tax laws in every country where we operate. We continue to work with the relevant authorities.”

It made the same statement in response to reports last month that the Italian authorities were accusing the company of evading paying 227 million euros in taxes between 2009 and 2013.

Italy believes the company failed to declare some 100 million euros in revenues over five years which would have fallen into a 27 percent corporate tax bracket, investigative sources said in January.

Finance police also suspect the company should have disclosed some 600 million euros of royalties which would have led to a tax demand for some 200 million euros.

During a parliamentary hearing in London on Thursday, Google declined to confirm Italy’s tax claims and a similar discussion in France.

Google has based its regional headquarters in Dublin, where corporate tax rates are much lower than in Italy. The firm says its Italian presence merely provides consulting and marketing services for Google Ireland, the Middle East and Africa.

In January Google agreed to pay the British government 130 million pounds ($188 million) in back taxes in a deal which opposition parties criticised as too little.

Last year Apple, which also has its European base in Ireland, agreed to pay Italy’s tax office 318 million euros to settle a tax dispute, a source with direct knowledge of the matter said.

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