Last week saw the announcement that HMRC has come to an agreement
with Google on the issue of back taxes. In
the UK, Google will be paying £130 million of taxes on profits relating back to
2005. While the Labour Party has
criticised this as a “sweetheart deal”, it is worth reflecting on the circumstances
surrounding this announcement.
I share the anger many people feel that Google, and others,
have got away with paying little or no tax in the UK for so many years. It is
incredibly frustrating that no action at all was taken to address this issue
until recently. However as unsatisfactorily as this deal feels we have to
recognise that it is a big step in the right direction.
Over the past few decades, multinational companies have
grown, both in size and geographic reach.
Revenues generated in the UK by global companies such as Google, Apple,
Facebook, Starbucks and many others, run into billions of pounds, yet these
organisations seemingly pay little or no tax in this country. On the face of it this appears unfair and
much has been made of this so-called “tax evasion”.
The root cause of the issue is the existing international
tax system. Each country has its own
rules for taxing individuals and companies.
The rules and rates of tax can vary greatly between countries. In France, for example the rate of tax
applied to companies is 33.33%, while in Ireland it is 12.5% and in Bermuda no
tax is levied on companies at all.
Multinational companies work to ensure that as much of their
profits as possible are reported in the countries with the lowest rates of
tax. It is this practice that is seen as
unethical and even immoral, but is actually currently a perfectly legal way to
maximise returns to shareholders. In the
case of Google, much of the business it undertakes in the UK is reported via
Ireland, where tax rates are lower. The
international tax system has failed to adapt to these issues, and a tax system
that will address the problem is likely to be some way away.
It is currently the job of individual Governments to get the
best deal for their countries. In Italy,
for example the tax authorities are taking an aggressive approach, with raids
on corporate offices and other similar tactics.
The Conservative Government in the UK has taken a more constructive
approach. We see the need to continue to
build relationships with the global multinational companies; they bring jobs
and economic prosperity and we should do all that we can to encourage their
ingoing investment in our country.
At the same time this strengthening relationship leads to
the deal that HMRC brokered with Google.
While Labour criticise from the side-lines that this is a sweet deal for
Google, it is worth noting that the last Labour Government was unable to reach
any such deal and collected no tax revenue at all from Google.
I concede that the outcome is not ideal, but in the light of
the circumstances outlined above, I believe that the agreement reached with
Google is a good step forward.
My team and I are here to serve the whole constituency and
seek to make a real difference to the lives of everyone who needs help and
support in any way.
If there is any issue that we can help you with then please
contact us on either 01726 829379
or on office@stevedouble.org.uk.
