When George Osborne announced at the Conservative Party conference in 2014 that he would force companies such as Google, Facebook and others to pay more tax in the UK, some of those firms were privately incandescent. As a Daily Telegraph journalist covering the conference at the time, I was witness to a rare example of usually conciliatory American firms eager to critique government policy in robust Anglo-Saxon. Why, they asked, didn’t the UK see the wider benefits of having major digital employers based here, and didn’t ministers understand that they were paying their due taxes where they were founded, in America? In public, technology-friendly commentators suggested the announcement was all politics and no practicality.
Last week, however, Google announced that it would pay £130m in backdated taxes, after a six-year HMRC investigation. Backbenchers from across all parties fulminated that multi-billion pound Google surely owes more than that, with some sounding as though they were looking to the firm like hopeful correspondents writing to recently minted lottery winners.
The payment makes Google the first firm of many to be affected by the ‘diverted profits’ tax, and while France and Italy may claim they’d like infinitely more from Google, it sets a standard independent from politicians that is likely to be used throughout Europe. In short, global tax rules probably do indeed mean £130m is all that Google can legally be persuaded it owes for around a decade of taxes.
And ‘persuaded’ is in a sense the right word: some MPs railed that Google had ‘negotiated a sweetheart deal’ when small businesses in the same position would have found themselves talking to the police over unpaid taxes. But the fact remains that major US technology firms, and indeed all global companies, have a global tax system from which they can cherry pick the best rates and best working environment. The balance Britain must strike has to see low enough rates to entice companies to the UK, alongside an economy and a position in relation to the wider world that makes those taxes a price worth paying.
Ireland, Bermuda, Luxembourg and others have all made themselves irresistible to major companies whose shareholders demand that firms operate in the most efficient way possible within the law. It requires global cooperation and pressure from customers to ensure companies are compelled to pay a fair level of tax. In May 2013, shamelessly grandstanding Public Accounts Committee Chairman Margaret Hodge told Google that their tax record was ‘evil’. But in the light of finally extracting more tax from Google, it seems that what’s more evil is pretending that without global cooperation to seek changes to the tax system, companies will pay taxes out of charity. And perhaps even worse was the pretence that politicians are not duty bound to change the system – or to stop whinging when companies manipulate it to their best advantage. Any such global harmonisation of taxes might be a mixed blessing anyway, which is a view it’s hard to take about a £130m boon to the Exchequer.
Matt Warman is the Conservative MP for Boston and Skegness, and former technology editor at the Daily Telegraph.
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