Top leaders from HM Revenue and Customs have told MPs that internet giant Google’s controversial £130m tax deal was evidence of behaviour changing, cross-governmental work of which Whitehall should be proud.
Answering questions from the Public Accounts Committee today, HMRC chief executive Dame Lin Homer said the settlement – which covers the 10-year period from 2005 and follows a six-year investigation – showed how progress was being made to crack down on strategies used to avoid tax.
The session heard details of complicated accounting arrangements involving the Irish Republic, the Netherlands and Bermuda, that clouded precisely where Google’s profits were made.
Asked why chancellor George Osborne considered the deal a “victory” when by some measures the settlement could be viewed as falling short, Homer said there was clear evidence that tactics such as “base erosion and profit shifting” (BEPS) was being addressed.
“We don’t write the chancellor’s press releases. I don’t know exactly what he meant by his tweets,” she said.
“We feel that the work both the Treasury and ourselves have done in relation to the OECD work, the BEPS and the diverted profits tax is bringing about a change in behaviour. We are rather proud about that, If the chancellor is as well, that’s a good thing.”
Homer said HMRC had a “fine set” of tax inspectors who did a very good job, and whose efforts deserved more recognition.
Jim Harra, HMRC’s business tax director general, told the session that the six-year investigation that had led to Google’s settlement had resulted in officers developing “greater expertise” in relation to the affairs of digital businesses.
He was unable to provide details of the precise cost of the investigation and the number of staff involved.
Earlier in the session, Google executives Matt Brittin and Tom Hutchinson told committee members that £18m of the firm’s settlement represented interest.
Google Inc vice president Hutchinson insisted HMRC had not requested that a higher level of tax contribution be paid, only to see the figure subsequently negotiated down.
Repeatedly quizzed by committee chair Meg Hillier, Brittin – Google’s Europe, Middle East, and Africa president – was unable to give a figure for his salary from the firm.
Both men said that Google paid a global average of 19% tax on its profits based on a five-year average, but they could not give an overall figure for profit on which the figure was based.