I’ve just googled “Google and tax” and find that so have another 1.1 billion or so people. It’s amazing that Google hasn’t built in a filter against itself but the sheer volume of searches into its tax affairs, up from 679 million on Thursday evening, is even more astonishing; about a sixth of the world’s population.
The latest spike in searches came after last week’s decision by parliament’s public accounts committee to recall Google, and its auditor, Ernst & Young, to restate their evidence on the search engine’s tax position in the UK following a new investigation into its advertising sales practices.
It’s based on a report from Reuters claiming that some of Google’s staff, who are closing advertising deals, are based in London. Now you might say, what’s wrong with that? Isn’t London the centre of Europe’s advertising community?
But no. Under the UK’s bizarre tax rules Google, which is based in Dublin to reduce corporation tax, is able to mitigate tax if it proves that the job of the UK staff is to market Google as an advertising space – but not to negotiate and close deals with advertisers. Mad or what? If it is found to be the case that Google’s London staff were closing deals, then its tax bill – a paltry £6m in 2011 on revenues of £2.6bn – could rise significantly. Some lawyers say the real tax figure should have been £218m.
Yet in evidence to the PAC last November, Matt Brittin, Google’s European boss, claimed that nobody in the UK is selling or promoting the products although they are “encouraging people to spend money on Google”. Mr Britten denies he misled the committee.
It gets odder still; Google only employs a few hundred staff at its in Dublin but more than 700 in marketing and advising on its products in the UK. What’s more, Reuters claims that the profiles of around 150 London-based staff on LinkedIn say they are involved in sales strategy, closing deals or other sales work, while Google’s own corporate website was recruiting London-based staff whose duties would include “negotiating deals”, closing “strategic and revenue deals” and achieving “quarterly sales quotas”. It’s dangerous, isn’t it, all this internet transparency?
Google has denied this of course, although the company is saying that it may have “confused” some of its wordings. However, even if Mr Brittin is shown to be technically correct, it seems to me that anyone working for Google, or any other company for that matter, is de facto working for and is part of the corporate entity even if their job is only to clean the offices. That’s why this tax loophole is such a farce and needs changing.
Instead of which, parliament is going to have to go through another painful session to get to the bottom of who did what and where. What a waste of brains and money.
Ernst & Young has also been asked to give more evidence to the PAC to clarify whether its accountant checked what sort of work Google’s staff in London were doing and what they claimed in the company’s accounts. Apparently, they have. Do we really believe that? And should it matter?
How much tax companies, or individuals, pay is not a moral issue. But it is one of fairness, and should be one of clarity. You can’t blame Google for paying as little tax as possible if that is what the tax rules allow.
Google’s Eric Schmidt, right, must be thanking his lucky stars that the public can’t boycott the search engine as easily as they can Starbucks. But Mr Schmidt won’t like such bad publicity and nor will the government which, once again, looks as though it favours the big boys over the little ones.
It doesn’t look good.
DIAMOND’S IN THE DARK
So Bob Diamond didn’t know how Libor was set. The ex-boss of Barclays also says that if you’d asked him who at his bank set Libor he wouldn’t have known.
Nor does Mr Diamond, known as RED after his initials, think that any other bank chief executive would know either. Mr Diamond makes this damning admission in the most extraordinary interview with the New York Times, the first since being sacked over the Libor scandal.
Here it is in full: “Up until all of this, I didn’t even know the mechanics of how Libor was set. If you asked me who at Barclays submitted the rate every day, I wouldn’t be able to tell you. I bet you if you asked any chief executive of any bank on the street, they would give you the same answer.”
Well, if that’s true, then all the other chief executives need to be sacked too. It’s as if the NHS boss doesn’t know how blood is pumped or the Rolls-Royce chief doesn’t know who is in charge of the workshop. Learning that Libor is the daily rate at which banks borrow unsecured funds is what that trader or banker worth his salt finds out on their first day on the desk.
But then maybe Mr Diamond spent too much time elsewhere; like buying the £25m New York penthouse in the name of Novgorod to avoid his identity being revealed.
This interview was trailed as Mr Diamond’s attempt at a “second coming” but I suspect his banking mates may want to throttle him for showing they are not just too big to fail, but too big to care.Reuse content