European officials have been urged by the British government to remove Bermuda – a tax haven used by Google – from an official blacklist, according to reports.
The behind-the-scenes lobbying by UK Treasury ministers involved a memo circulated among Tory MEPs in Brussels describing the sanctions against tax havens as “unhelpful”, according to reports in the Observer.
The blacklist, which was drawn up last year to protect member states’ revenues, includes 30 tax jurisdictions.
The newspaper adds that Treasury ministers told the European commission they are “strongly opposed” to proposed sanctions against Bermuda – where Google is poised to confirm on Monday that it has accumulated £30bn of profits from non US-sales.
Companies are not liable to pay corporation tax on the British island territory.
Last week a deal struck between UK tax authorities and the internet search giant amounted to £130m in back taxes, on the estimated £7.2bn that it has earned in profits over the last decade. The Chancellor has insisted that the settlement is a “major success”, despite considerable public outcry.
Speaking to the Observer John McDonnell, the shadow chancellor, said: “The mask has finally slipped. The Tories have been saying they want to clamp down on tax avoidance to the British people, but when they think our backs are turned they are telling their MEPs to oppose any measures to make it happen.
“The truth is they run a ‘don’t know, don’t care’ approach to tax avoidance.”
The former Conservative Chancellor Lord Lawson has also been critical of the so-called “sweetheart” deal between Google and the Treasury. He told the Telegraph: "It is profoundly unsatisfactory that corporation tax has to be collected from large multinational corporations by a series of ad hoc compromise deals, as we have once again seen with the Google affair.
"It is also grossly unfair on smaller businesses, who are unable to shift profits between tax jurisdictions and have to pay the full amount due under UK law."
The controversial Google deal with HMRC could be investigated by the European Commission following complaints from the SNP and Labour. Google's vice president of communications and public affairs, Peter Barron, insisted the company paid UK corporation taxes at the standard rate of 20%.
A Treasury spokesperson said to the newspaper: “It is simply wrong to suggest the UK is anything other than at the international forefront of tackling aggressive tax planning, avoidance and evasion.
“The government has led the way in the G20 to strengthen international rules that counter aggressive tax planning by multinational companies, and supported global tax transparency through the automatic exchange of information, which will help HMRC to crack down on tax evasion.
“All of the UK’s Crown Dependencies and Overseas Territories are early adopters of this new global standard. This is all in addition to introducing the world-leading diverted profits tax which stops companies moving profits to tax havens.”Reuse content