Last weekend Chancellor George Osborne hailed a new tax deal between Britain and Google as "a major success". By mid-week he had had to downgrade the arrangement, which will see the tech giant pay £130m in back taxes calculated over ten years, to a "positive step".
The apparently generous settlement, which will see Google pay around £30m a year rather than the £20m it owed before, provoked widespread scepticism. It hardly helped that Italy, a much smaller market, appeared to wring more money out of Google in its own back-tax deal, or that Facebook made clear it was resisting UK efforts to reclaim taxes from it. Facebook paid £4,327 of corporation tax last year.
What the commentators said
The crux of the deal, continued Kelner, seems to have been Google's successful argument that it has no "permanent establishment" in Britain, despite the £1bn headquarters it is building in London. This is not so much a loophole as "a socking great breach" the government encourages corporate giants "to drive a coach and horses" through.
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The deal was also struck "wholly untransparently", said the FT. HMRC hasn't said what basis the liability is being calculated on, or justified the new rate it has come up with. Secret deals "only deepen public disquiet", added Jonathan Guthrie in the same paper. "What weird discount might HMRC apply to Facebook's liabilities, one wonders?" One based on how many "likes" CEO Mark Zuckerberg's daughter's pictures have triggered? In any case, with Google having agreed on just £130m, Zuckerberg "will hardly be quaking in his Adidas sandals".
In the end, these multinationals are not going to pay taxes out of charity, said Matt Warman on Spectator.co.uk, no matter how much some politicians whinge about it. The only way to get them to pay a fair level of tax is international co-operation to tighten rules and close loopholes. It's hard to fit big internet firms into "territorial tax systems", said the FT, given their ability to shift intellectual property and money around the world. "But that is no excuse not to try."
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
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