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Feb 3, 2016

The Guardian | Opinion | Tax and Spending - February 3, 2016: These Mate's Rates From George Osborne Let Google Off the Hook on Tax by John McDonnell
John McDonnell
Perhaps the best indicator of George Osborne’s shifting position on the Google deal has been his studied refusal to answer questions about it. After sending along a junior minister to answer my urgent question last week, the usually camera-friendly and politically ambitious chancellor has been notable by his absence from the media.

This has left details of the deal, and how it was reached, significantly less than transparent. We do know Google executives met Tory ministers 25 times over the 18 months before the deal was announced. We also know the £130m to be paid by Google covers a full 10 years of unpaid taxes, from 2005 to 2015. This is for a company whose last financial announcement, published this week, show that Google’s UK sales rose by 16%, to $1.9bn in the last three months of 2015. Google’s parent company, Alphabet, is now the most valuable corporation on the planet, overtaking Apple.
Yet tax experts, looking at the headline figures for the deal and its UK accounts, suggest Google will be paying a tax rate of about 3% here, while the headline rate of corporation tax has been between 20% and 30% over the period.
This deal looks like mate’s rates for taxes. It’s totally unacceptable that while most of us pay the taxes expected of us - recognising that part of living in a civilised society is ensuring that everyone who can makes a fair contribution to vital public services -a major multinational can, first, pay virtually no corporation taxes for a decade, and then pay what is a tiny amount relative to its deep pockets. We can’t say for certain if the seemingly close relationship between Google and Tory ministers helped sway the deal - but until the chancellor can provide full details, that suspicion will remain.
Other questions have emerged as a result of the chancellor’s ill-advised “victory” tweet in the aftermath of Google’s announcement. Government agencies are not supposed to procure services from tax avoiders, but according to the Sunday Mirror HMRC signed a deal for administrative services with Google last year – at the same time as it was debating whether Google had avoided tax for the past 10 years.
Further reports suggesting Facebook has set aside over $2bn to settle global tax disputes show why we urgently need to get to the bottom of the deal. And George Osborne needs to now make sure Britain gets its fair share of this sum. Taxpayers cannot afford another “major success” from the chancellor.
There is, however, worse to come. After years of lobbying and protesting by tax justice campaigners, tax avoidance has become a major political issue. The chancellor, responding to this, announced in last May’s budget a new “diverted profits tax”; the aim of the tax was to clamp down on complex profit-shifting avoidance schemes being exploited by multinationals, by levying an increased rate of 25% tax on profits found to have been shuffled around in this way. The so-called Google tax had its sights set on precisely those major tech firms making most assiduous use of accountancy devices.
At the time the chancellor hailed this as a breakthrough. According to him, the diverted profits tax meant that “this country’s tolerance for those who will not pay their fair share of taxes has come to an end”.
Yet we read in recent days the suggestion that Google will not, in fact, be paying a single penny of diverted profits tax under this agreement. The Google tax is a dead letter: and if Google can so easily duck this tax, with its own Tory tax deal, what exactly will stop any other tech firm doing the same?
If the chancellor started the week by creating special new Tory tax deals for a favoured company, he ended it by overseeing the UK’s signing of a “multilateral competent authority agreement” with 30 OECD member countries, intended to promote international cooperation on tax avoidance. But by approving the Google deal, experts believe the chancellor risks driving a coach and horses through this multilateral approach. So what does the chancellor prefer? Robust international agreements on tax avoidance, working with our partners in the OECD and across the world – or cosy backroom deals with his pals in glamorous tech multinationals?
That is why in Labour’s debate on tax avoidance today in parliament I am going to call for a country-by-country reporting agreement across Europe as an important part of increasing transparency to address international tax avoidance. Last year the European Union voted overwhelmingly for country-by-country reporting by banks and companies involved in the exploitation of natural resources. We have already seen that leading UK banks are not paying taxes here; it’s time to extend this to other big multinationals. But to give country-by-country-reporting any credibility it has to be open to public scrutiny.
Others are taking a more robust approach. France’s finance minister has ruled out “negotiations” with Google and other multinationals over their taxes. But while Osborne has pretended to talk tough on tax avoidance at Westminster, Conservative MEPs in Brussels voted against proposals to clamp down on aggressive tax avoidance by multinationals six times last year. Voters could be mistaken, once again, for being confused as to which way the Tories are facing.
It is vital, therefore, that the chancellor uses the EU negotiations not to cut the pay of people on low incomes but to get a deal at EU level on tax avoidance so that we are getting the tax status of these big multinationals under control. To do otherwise would be a huge missed opportunity.
There are huge issues at stake here: the ability of governments to levy fair taxes is being directly challenged. We need a chancellor who sticks up for ordinary taxpayers, for those small businesses and workers who do make their contribution – not one who rolls over for the giant corporations.
Otherwise, the British public will rightly ask: in whose interests is our economy being run – those who elect governments, or the multinational corporations that the Conservatives seem to always side with? Because it’s those ordinary taxpayers and businesses that pay their way who have to shoulder the burden of those who do not pay their fair share in taxes.