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Google Ordered Back To UK Parliament To "Explain Itself" Following Investigation 176

Posted by samzenpus
from the what-do-you-have-to-say-for-yourself dept.
DavidGilbert99 writes "Last November Matt Brittin, Google's European chief gave a pretty convincing account of himself as he tried to explain why Google wasn't paying more tax in the UK. All the sales staff were based in Ireland apparently and the UK-based staff were there just to promote the platform for advertisers. Great. Nothing to see here. Move on please. Well, actually there is a little more to the story, as an investigation by Reuters has discovered. There are many sales staff in the UK with titles and responsibilities curiously close to what most people would call sales staff and as a result Mr. Brittin will once again have to face Margaret Hodge and the PAC to explain just what is happening."
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Google Ordered Back To UK Parliament To "Explain Itself" Following Investigation

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  • Googled it? (Score:2, Insightful)

    by M3.14 (1616191)
    I wonder if Reuters did use google to find it out.
  • by Anonymous Coward

    I did a couple of interviews for Google in Ireland, yet all my interviewing was through the UK... 0.o

  • Why explain himself? (Score:5, Interesting)

    by cerberusss (660701) on Thursday May 02, 2013 @03:56AM (#43607283) Homepage Journal

    Why does this guy get to explain himself? In my country, the IRS just sends me a letter about me misbehaving, and says I've got 30 days to pony up the cash.

    Why the flying duck does a company then gets to make apologies, when it's obvious by now that they're cheating?

    • by beelsebob (529313) on Thursday May 02, 2013 @04:05AM (#43607309)

      "Explain himself" is british english for "to face a bollocking".

      • Re: (Score:2, Interesting)

        Also, there's nothing really to explain here. Nobody is claiming the law has been broken or tax was mispaid. Hodge is just an idiot who wants to spend more money to make herself more popular and is holding "show trials" of companies who she believes somehow are too good at taking deductions. This is hilarious because she herself has a stake in a large company that uses exactly the same tax strategies.

        • by beelsebob (529313)

          Actually, if sales staff are based in the UK, then sales are being made in the UK, and profits are being made in the UK, so tax is being miss paid. That's the issue.

          • Re: (Score:2, Funny)

            by flyingfsck (986395)
            Yeah, well you see, the UK sales staff are totally ineffective and never managed to sell a durn thing, despite receiving lots of training from the Irish. They are only retained to help reduce unemployment in the UK...
          • by IamTheRealMike (537420) <mike@plan99.net> on Thursday May 02, 2013 @05:26AM (#43607569) Homepage

            That's not how the law is written. The money that is being charged for the ads are paid to the Irish subsidiary. Therefore Irish taxes apply. There's no legal definition for what it means to "make a sale" in that regard and the location of the first person you talk to on the phone makes no difference. Otherwise if you call up a company and your purchase is handled by an Indian call center, is the sale suddenly taxable in India now even if you're a Brit and pay a British company? No, that's not how tax works.

            If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

            • by Anonymous Coward on Thursday May 02, 2013 @06:08AM (#43607689)

              That's not how the law is written. The money that is being charged for the ads are paid to the Irish subsidiary. Therefore Irish taxes apply. There's no legal definition for what it means to "make a sale" in that regard and the location of the first person you talk to on the phone makes no difference. Otherwise if you call up a company and your purchase is handled by an Indian call center, is the sale suddenly taxable in India now even if you're a Brit and pay a British company? No, that's not how tax works.

              If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

              I thought the whole point was for the Parliament to understand what is happening, and use that to consider adjustments to tax laws to address some of the current weaknesses that allows extreme (but today legal) tax avoidance. That is not a matter for HMRC, that is what the Parliament should be doing.

            • by Xest (935314) on Thursday May 02, 2013 @07:36AM (#43608033)

              These parliamentary committees exist to investigate issues in society. They have the option of summoning individuals or representatives of corporations to get to the bottom of those issues. If those individuals lie to them (as Google did in this case) then they have the right to recall them and question them hard about that.

              Saying it's a waste of time and is guaranteed to achieve nothing is absurd, how the fuck do you think policy gets made if politicians aren't allowed to call in relevant people to explain how things work and to see if they can provide any justification for their position if they lie, or are perceived to be on the wrong side of public opinion?

              The whole reason this committee has been pursuing these lines of questioning is to see whether the law needs to change precisely so HMRC can prosecute, but when companies like Google and Amazon come to the committee and either lie, or fail to answer simple questions, then it's not really surprising the committees push them a bit harder for justification is it? The point being that if even after all these chances, even after all this deep questioning they can't provide reasonable answers to questions such as "Why is your corporation tax payment so low, when you make so much profit here?" then yes, the law is going to change, and yes, if they persist after that, they will be prosecuted. The law can't change in an effective way however if MPs don't understand the problem in depth to make sure the changes work, and are relevant.

              • Because I don't believe MPs are really in need of random company executives to teach them how their own laws work? And this is random - lots of companies sell into the UK, have offices there, and book profits in some other, including one that Hodge is herself involved with. So how are these people picked ... well, by how well known their brands are. So Hodge can look tough in the tabloids. I am struggling to see what other rationale there could be.

                I agree that they need to learn about the issues in order to

                • by Xest (935314)

                  But obviously the laws aren't working are they? That's precisely the point - the vast majority of the public and MPs do not believe the law was ever intended to be such that companies could avoid paying corporation tax in the ways they do so the whole point in the committee is to find out why the law is not working as it was intended to so they can see if there is actually a real problem, and hence whether new laws are needed or the law needs to change, or whether companies are in fact not paying as much ta

            • The fact that Google went to lengths to say the sales were negotiated and finalized in Ireland, and that UK Googlers were just there to provide marketing 'support', undermines your assertion.

              Because in fact, the UK employees have titles like "Sales manager", and publicly describe their roles as negotiating sales, making sales, closing deals.

              If that is true, then the sales occur in the UK, regardless of the fact to whom the invoice payment was addressed.

              Google is being asked to explain the discrepancy

    • Re: (Score:3, Interesting)

      by Captain Hook (923766)

      Why does this guy get to explain himself? In my country, the IRS just sends me a letter...

      This isn't the HMRC, this is a special parlimentary committee who are trying to work out how the companies are legally avoiding tax.

      The companies questioned (Google, Amazon, Starbucks + 1 other I can't remember off the top of my head - probably MS) were all choosen because they pay very little tax in relation to the turnover the companies are reporting in the UK, and are therefore either very badly run or are engag

      • by gdr (107158)

        "The Google executive is being brought back because it's now been shown that most of the Google operations are based in London, not Dublin and he was therefore telling porkies."

        Google claim that their UK operations are in marketing and advertising, sales are negotiated and finalised in Dublin. So far no conclusive evidence has been found that Google UK staff are negotiating and finalising sales.

        The PAC are just trying to distract attention away from the fact that the tax laws that are being explioted

        • The article linked in the summary showed Googles own job titles and descriptions for the London offices as being Sales, and one of their own clients saying all the sales contact he has with Google is based in London... with the exception of the address on the invoice being Dublin.

          OK, it's not 100% proof, but it is certainly enough to ask whether Google were truthful last time around.
        • It is not a trial. It is an investigation on how the laws need to be updated to make the currently legal, but nevertheless unintended and undesirable, tax avoidance schemes illegal.

    • by Xest (935314)

      For the same reason newspapers get to "reject" the implementation of the Leveson enquiry.

      Companies rule the government, apparently for corporations, the law is optional and something they get to decide whether they opt in to or not.

      Meanwhile it's just forced on the rest of us which is a shame, because I'd also quite like to "reject" the digital economy act and RIPA just like the papers say they're rejecting legislation against their decades of abuse and illegal intrusion into people's private lives.

    • by Angostura (703910)

      Because in this case the large companies aren't actually doing anything illegal. In most cases they are using a very detailed understanding of the law to stay within the letter of it, if not the intent.

      Much as I dislike the way Google, Apple, Microsoft et al operate in this regard, it is up to the legislature to create their laws precisely and carefully - and in this case clearly the tax laws need to be amended.

      • by jamstar7 (694492)

        Much as I dislike the way Google, Apple, Microsoft et al operate in this regard, it is up to the legislature to create their laws precisely and carefully - and in this case clearly the tax laws need to be amended.

        You don't think the corporations bought the law just like they did in the US?

    • by hairyfeet (841228)

      Because in case you ain't figured it out friend classism is alive and well in the 21st century, its just wealth has taken the place of birth titles. Its the same result either way, the peasants get one set of laws and the large corps and the wealthy get a different much nicer set.

      Hell wasn't it the UK where we saw the MAFIAA altering evidence and they didn't even get a slap on the wrist, nor was the damages against the peasant set aside? if that would have been you then you'd be rotting in a cell right no

      • by jamstar7 (694492)
        I thought that case was in Scandanavia someplace. Sweden, IIRC, which struck me as ironic because Sweden was the home of The Pirate Bay...
        • by hairyfeet (841228)
          Honestly it doesn't matter where it is because borders may as well not exist, multinationals get better treatment no matter where you go. Again just like the barons of the middle ages or the robber barons of the 1800s there is one set of laws for them, a different set of laws for you, and things that would have a peasant thrown in PMITA prison gets swept under the rug or just plain ignored if it involves one of the new ruling class.
    • by jamstar7 (694492)
      They're a corporation. A corporation has more rights than you do in the US. So be a good little meat citizen and worship your local corporation, and pray they don't figure out how to move your job to some Third World toilet to inch their profit margins up.
    • by Ash Vince (602485) *

      Why does this guy get to explain himself? In my country, the IRS just sends me a letter about me misbehaving, and says I've got 30 days to pony up the cash.

      Why the flying duck does a company then gets to make apologies, when it's obvious by now that they're cheating?

      Because that is if you break the law. Google are not breaking any laws here, they are just making sure they pay as little tax as legally possible.

      Big international companies always have the ability to declare their profits in whatever country they see fit by rigging the rates that the parent companies charge for use of the brand name, this is perfectly legal, if the government want to stop this they can try changing the law. Even if you changed this law though it would be tremendously hard to prove if the f

    • Because the government likely won't have the balls to go through with it and punish them but they have to put on a show.
  • by Lincolnshire Poacher (1205798) on Thursday May 02, 2013 @03:59AM (#43607293)

    Corporation Tax is, of course, only levied on the profits disclosed by the company's annual return. So only profitable companies have to pay 23% of their net as tax.

    But this encourages the Big Boys to simply shift their profit to other, overseas, divisions, through 'franchise payments' and other mechanisms.

    Perhaps it's time to say that any company making over 1 million in annual revenue will pay, say, 5% on its revenue above that level. No discussion of profits. It is much easier to determine how much money a company took-in. What money landed in its UK bank accounts is what is taxed.

    • by beelsebob (529313)

      That would help defeat companies like Starbucks, but it would have no effect on google or amazon. They'd simply move the bank account that's paid into to ireland. Of course what would potentially work would be to put the tax on money paid by people in the UK, to the company, no matter where that money goes to.

      • by 91degrees (207121)
        Google is very tricky to deal with because they do operate essentially on the internet. They can genuinely operate anywhere in the world. they might need a few servers in or near the UK, but they can easily do most of the work from any other European country. Switzerland and Gibraltar both have very low taxes, and few barriers to business with the EU.

        Not sure I agree this is the same with Amazon. Amazon do, at least, have to have warehousing in the UK. Claiming it's a foreign transaction when you pay in U
    • They already tax revenue. its called VAT, and for every £100 of takings, 16.6p is sent to the govenment.
       

      • I meant £16.66 ! lol

      • by iserlohn (49556)

        Which probably Google isn't paying either. This is because most people buying services from Google are VAT registered businesses, and the entity processing the sale is based in Ireland. Under EU VAT rules, the place of supply is based in the UK (where the customer is located), so the whole transaction is under the reverse charge and hence no VAT is charged either in the UK or in Ireland.

        Of course, the idea is that the VAT is charged when the business sells the product to the end-user, which is probably in t

        • by beelsebob (529313)

          Which probably Google isn't paying either. This is because most people buying services from Google are VAT registered businesses

          Note – this means that google is paying it, they're just probably also claiming a proportion of it back when they purchase items from other companies.

          • by iserlohn (49556)

            Under EU tax rules, if the supplier is in a different EU country than the customer, and both are VAT registered in their respective countries, then the supplier does not pay or claim for VAT. This is called the reverse charge.

            It was clearly explained in my post. I don't know how you missed that.

            The only reason they would pay VAT would be if Google's Irish subsidiary registered for VAT in the UK as well as in Ireland. But why would you want to do that when you could keep all that revenue away from HMRC by no

        • Had to google 'VAT', do I now owe the U.K.?

          From Wikipedia, the free encyclopedia

          For the UK tax, see Value Added Tax (United Kingdom).Taxation:

          A value added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference be

          • by fnj (64210)

            There is somebody who didn't know what VAT is? Not a criticism, just an expression of abject amazement.

      • Did it change? Last time I looked it was 20%. Or are you averaging with non-VATable items?

    • by xelah (176252)
      Consider a company which owns dairy farms, a cheesemaker and shops. They'd pay 5% of the final selling price (which would, of course, ultimately come from customers). Now consider a set of independent farmers, selling to a number of independent cheesemakers, selling to a number of different shops. Those people don't pay 5% of the final selling price, they pay more because they pay several times, and need to collect the extra from customers. So, you've just created a competitive pressure which favours large
      • by iserlohn (49556)

        Talking about just the sales tax angle, that's exactly the same issue faced in British Columbia with PST due to it being a cascading tax. The major businesses are all vertically integrated to avoid paying PST on supplies again and again. This was eventually replaced by the HST, which is a tax combining the federal GST with the provincial PST, but is a value-added tax as opposed to a cascading tax.

        Interestingly enough, the voters rejected the fairer HST last year and opted to return to the PST because people

    • by dnaumov (453672)

      So basically, you want to outright kill every single big company that has a net profit margin of less than 5%?

      • by iserlohn (49556) on Thursday May 02, 2013 @05:21AM (#43607549) Homepage

        For an example is how prevalent this practice is, look at how Pepsico structure it's operations in the UK. They sells crisps (ie. potato chips) in the UK under the Walkers brand. There was an article no long ago in one of the major newspapers that described how they are able to effective transfer all the profits away from the UK part of the business to avoid paying tax. They did it by assigning all the potatoes that goes into the making of the crisps to be owned under the Swiss subsidiary. These are processed and made into crisps in the UK owned plants, which makes almost no profit in its operations. The finished product, still owned by the Swiss subsidiary is sold, and all the profits make are accounted for under the Swiss operation.

        The problem with is that in the EU, we have the free movement of goods through economic union, but there is not overriding political union to plug the loop holes. This needs to be addressed somehow, or otherwise, we are just subsidising Switzerland, Luxembourg and Ireland through tax loopholes.

        • by khallow (566160)

          The problem with is that in the EU, we have the free movement of goods through economic union, but there is not overriding political union to plug the loop holes. This needs to be addressed somehow, or otherwise, we are just subsidising Switzerland, Luxembourg and Ireland through tax loopholes.

          Subsidizing countries with relatively low tax burdens sounds far preferable to overriding political unions. So I'd have to disagree on the "need" for such things. As I see it, competition at the country level helps curb government abuses.

          I think this is classic free lunch thinking. You want a free lunch from Pepsi. Pepsi moves their lunch to Switzerland where they are treated better. Lunch is no longer free. Something must be done. But the obvious solution is not "clean up my act so that Pepsi will come

          • by xaxa (988988)

            That doesn't work very well in practise. Luxembourg can take a tiny amount of money from lots of essentially foreign businesses to subsidise their 500,000 residents. With over 100 times the population, Germany, the UK or France simply need much more money to pay for infrastructure.

            I've been to Luxembourg. It's tiny, about 70km from top to bottom. The whole country is perfectly maintained, like the very nicest areas in London (like Knightsbridge, where a house costs £10M). There's perfect paving,

            • by khallow (566160)

              That doesn't work very well in practise.

              For you. It works quite well for others.

              And if it's so easy to avoid paying those taxes, maybe the UK should tax things that aren't easy to avoid? This seems a lot like using the legal system in the US to enforce *IAA business models.

              If both Luxembourg and the UK had similar tax rates, Luxembourg would tax actual companies there (not that many, for 0.5M people) and the UK would tax companies based here (somewhat more, for 68M people).

              And why would that be a good idea? As I see it, all that wealth still remains in the EU and the UK gets a portion of it through both taxes from employees in the UK as well as trade with Luxemborg and the corporations that declare profits there.

              • by iserlohn (49556)

                Maybe because it violate the basic tenants fair play? There is a reason for tax and a large part of it is to pay for the upkeep of the physical *and* social infrastructure in a country. What you are advocating is that we should let differences between the tax regimes be taken care of solely by market forces, and by extension the rapid downsizing of the state in a race to the bottom.

                I guess if you sold it *that* way, it doesn't look half as attractive does it?

                • by khallow (566160)

                  Maybe because it violate the basic tenants fair play?

                  And what is that for a multinational corporation? Keep in mind that the real problem is that you want more money out of these sorts of businesses from a particular, obsolete taxation scheme (here, the VAT). Rather than fix the tax or replace with something that works better, you propose to widen the area of its effect via a kludge, a broader government.

                  What you are advocating is that we should let differences between the tax regimes be taken care of solely by market forces, and by extension the rapid downsizing of the state in a race to the bottom.

                  That's how it worked in the past, right? And yet we somehow still have governments. Having a monopoly on force in a location is a very powerful and lucrativ

                  • by iserlohn (49556)

                    You and I are talking about different things. The issue with PepsiCo is not based on VAT, but corporation tax on the profits. The VAT still has to be charged (and remains in the UK) as the seller of the product is the supermarket or corner store.

      • by N1AK (864906)
        Another pretty obvious alternative result would be that companies would increase prices to make up for any tax increase, like they've done with tax increases in the past. You're also missing the point that this would be instead of a tax on profits so if the total amount of money raised was the same then any company which isn't currently avoiding taxation would end up paying less tax. Some issues aren't simple black and white; think a little harder about likely consequences when you think it really is that s
    • by _Shad0w_ (127912)

      Unfortunately that fucks over a lot of companies. In fact most companies that have high overheads; we had an income of over £80m last year. Only £3m of that was profit.

    • by Xest (935314)

      The problem is that this hurts companies that are genuinely making a loss through a genuine need for restructuring and so forth.

      What really needs to happen is to reorganise the way in which profits are calculated and at what point tax occurs.

      Right now, the problem is that tax is taken after every other possible deduction on revenue has been calculated. The key is to move it up the chain of importance (but not all the way up to revenue). Realistically tax should come after genuine expenditure like staff wage

  • by Required Snark (1702878) on Thursday May 02, 2013 @05:37AM (#43607599)
    Pay No Taxes
  • If you do something that is illegal in your country but legal on the server where you are doing it then you get in trouble because you're in the country where it's illegal. You've committed the act in that country. It only makes sense then the purchase, if made in the UK, is UK revenue and therefore UK tax should be paid on it. Just treat the corporations like you'd treat your citizens.

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