The Public Accounts Committee (PAC) has criticised internet giant Google for trying to avoid to pay its fair share of tax.
In a new report, the PAC highlighted that the UK was able to generate $18 billion (£11.5 billion) for the company between 2006 and 2011, but Google only ended up paying £16 million (£10.2 million) in corporation taxes over the five years. Google had backed its actions up by stating that the sales of advertising space, which contributed to such revenue, had taken place in Ireland and therefore it was exempt from tax, but the PAC believes that this was “deeply unconvincing on the basis of evidence”.
The PAC has therefore stated that HM Revenue and Customs (HMRC) should do a full investigation into the matter. Margaret Hodge, the committee’s chair, said: “Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. [But they have] no purpose other than to enable the company to avoid UK corporation tax.
“Google’s reputation has been damaged… That damage will not be repaired until the company arranges to pay its fair share of tax in the country where it earns the profits from the business it conducts.”
Many other businesses fear that Google's actions have completely diminished any trust and confidence in HMRC, whilst the reputations of large accounting firms have also been tarnished if they have played a part in ensuring that their clients do not have to pay tax. By trying to find loopholes and build false tax structures, these firms may also be held responsible.
The report concluded that HMRC needs to deal with its tax arrangements more clearly to reduce the number of potential loopholes. This may mean that the HM Treasury may have to lead international action and update various tax laws in order to prevent this from happening on a large scale again.
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