Google grilled over alleged UK tax avoidance

Google Inc came under fire from British lawmakers investigating its tax affairs and whether it had misled parliament in testimony last year, adding fuel to a debate on taxation that has risen to the top of the UK political agenda.

Google’s Northern Europe boss, Matt Brittin, was called back to testify to parliament’s Public Accounts Committee (PAC) on Thursday after an investigation by the Reuters news agency showed the company employed staff in sales roles in London, even though he had told the committee in November its British staff were not “selling” to UK clients.

Reuters correspondent Tom Birgin said that his investigation showed that Google employed UK-based sales staff.

“Google told the public accounts committee in November that it did not have a taxable presence in the UK in respect of its main advertising business, because it did not actually have any sales people here in London. It did not sell from London, it actually conducted all its sales from Ireland,” Birgin said.

“Our investigation showed that the company employed many sales people here, and indeed advertised for jobs for people to conduct high level negotiations to close deals,” he said.

Google’s Brittin said the company was already being investigated by the UK tax authority in relation to transfer pricing of services traded between Google UK Ltd and other Google companies, but added that he believed Google fully complied with UK tax law.

He also denied misleading parliament in November. 

But lawmakers challenged the veracity of his November testimony and comments made on Thursday, and Birgin said that Google’s Brittin faced some tough questioning.

‘Heated exchanges’

“Today the meeting was very testy, there were some very heated exchanges between the lawmakers and Google. In particular the lawmakers were questioning the veracity of statements that Google had made in the past, and even the statements that it was making today,” he said.

“So there was really quite a degree of anger directed at the company from the lawmakers, and it was certainly an uncomfortable, clearly an uncomfortable situation for the Google executive present.” 

In November, Google told the PAC “Nobody (in the UK) is selling”. He said all UK sales were conducted by Google Ireland and UK staff were only involved in promotional activity.

That arrangement allows Google to shelter most of its income on UK sales from taxation, since Google Ireland sends most of its turnover to an affiliate in Bermuda.

But the Reuters report revealed that Google advertised for staff in London to “negotiate” and “close” deals and that LinkedIn profiles of dozens of staff claimed they engaged in such work.

Committee chairwoman Margaret Hodge said the PAC had also been approached by whistleblowers who had said they had worked for Google in London, selling advertising.

On Thursday, Brittin said UK staff did offer discounts to customers to encourage them to buy and that the staff were remunerated partly by commission on sales, but he said the fact Google Ireland was the legal counterparty on trades meant his November comments were not inaccurate.

“The UK team are selling, but they are not closing,” he said.

Google’s auditor, Ernst & Young, was also called to give evidence. John Dixon, Head of Tax Policy, said there was a grey area between promoting products and concluding sales in Britain, which would, most likely, create a taxable presence for a company in London.