One of the bigger controversies of the last week has been the deal signed by HMRC with Google where they have agreed to pay £130m in respect of taxes dating from 2005-2015. George Osborne welcomed the deal via Twitter as “a success”. As soon became apparent, that was a view shared by just about nobody. Google had a UK turnover of approximately £4bn in 2014-15 which is estimated to mean about £1bn in UK profits. At a 20% corporation tax rate this should mean Google pay £200m in tax for a single year. Independent experts have estimated the actual rate Google have paid tax at is closer to 3%.
This is not a new phenomenon, as long as there have been taxes there have always been people and companies who have used various methods both legal and not to minimise their liability. What is different now is the sheer scale of it not just from Google but other multi-national corporations like Amazon and Starbucks and this week a report revealed that six of Britain's 10 biggest multinationals, including Shell, British American Tobacco (BAT) and Lloyds Banking Group, paid no UK corporation tax in 2014. It looks like we have entered a world where these companies are immune to national Governments, and whatever your view on what the correct level of corporation tax should be, I believe most people would expect that rate to be fairly applied across the board. There will be many small businesses in Ellesmere Port & Neston who feel that they are not operating on a level playing field and when they also hear stories that Google executives met with Tory ministers at least 24 times in the 19 months before the deal was agreed and that Google is now supplying IT services to HMRC they may well feel angry that tax avoidance seems to give privileged access to Government Ministers and contracts.
So what can be done about this? First, Governments have got to be united and stop these big companies from playing one country off against another. With our Government actually lobbying to allow Bermuda to retain its tax haven status we clearly have a long way to go before we have a cohesive approach both domestically and internationally. Government and other public bodies should not spend their money on using companies who don’t pay into the system in the first place. We should also as individual consumers consider whether these companies deserve our custom. If their actions can be shown to hurt their profits then companies may be encouraged to change their actions. Ideally though a level playing field should be created and that ultimately is a responsibility of Government.