MP warns Google could face questions over tax arrangements

Speaking to the Independent, Treasury Select Committee John Mann said that it would be appropriate to call representatives of Google before the Committee to explain complex tax arrangements used by the company which, although legal, result in it allegedly moving most of its earnings to Bermuda.

Last week the Telegraph reported that Google had paid just over £6 million tax on a UK turnover of £395m last year. A petition demanding that it pay its "fare share" of UK taxes has since generated over 45,000 signatures.

"It is entirely immoral, this is a company avoiding its obligations and we are letting them get away with doing it," Mann told the Independent. "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 taxpayer loses out. Google is one of the big ones but there are others."

However tax expert Ray McCann questioned Mann's emotive language, warning that branding major companies as "improper and immoral" could damage the reputation of the UK as a place to invest in the eyes of international companies.

"If, as suggested, Google paid only £6m in corporation tax during 2011 then it is perhaps understandable that MPs and others may cry foul," he said. "However, properly taxing the profits of companies operating globally is a highly complex subject. Relevant tax law and compliance requirements also differ from country to country and many companies typically pay much greater amounts in employer taxes, and national insurance contributions on employee wages and salaries, than is paid on business profits. Google has a responsibility to file correct tax returns and it is the job of HM Revenue and Customs to ensure that it has complied fully with all appropriate UK tax obligations."

Google's UK business is run as an agent of the company's Irish subsidiary, meaning that it only pays tax on the 10% "commission" it makes on sales on behalf of the Irish company. Google Ireland then pays some of the money to Google Bermuda as a licensing fee.

A Google spokesman told the Independent that the company made a "substantial contribution" to the economy in the UK while complying with all national tax rules.

"We make a substantial contribution to the UK economy through local, payroll and corporate taxes," he said. "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."

The company employs more than 1,300 people in the UK based in London and Manchester. Its East London technology hub, Campus, was opened by Chancellor of the Exchequer George Osborne in March and offers working space to technology start-ups.

The Government has recently announced a variety of measures aimed at cracking down on tax avoidance, including the proposed introduction of a 'general anti-abuse rule' intended to apply to the main direct taxes and national insurance. It is also consulting on changes to the Disclosure of Tax Avoidance Schemes (DOTAS) rules that would make it easier for HMRC to find out about taxpayers using avoidance schemes to artificially reduce their tax liability.