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UK PM Cameron under pressure over Google tax deal

Image: Britain’s Prime Minister David Cameron leaves Number 10 Downing Street in London, Britain January 27, 2016. REUTERS/Stefan Wermuth

By Tom Bergin

LONDON (Reuters) – British Prime Minister David Cameron came under increasing pressure on Wednesday over a back tax deal agreed by Internet group Google that was hailed by his finance minister as a major success but dismissed as “derisory” by the opposition Labour Party.

Labour leader Jeremy Corbyn challenged Cameron to defend the deal, which he said represented a tax rate of just 3 percent on 6 billion pounds ($8.5 billion) of profits that Google, now part of holding company Alphabet Inc, has earned in Britain since 2005.

“Why is there one rule for big multinational companies and another for ordinary small businesses and self-employed workers?”, he asked the prime minister in his weekly parliamentary question session.

Cameron did not comment on the 130 million-pound settlement, which covers 2005 to 2015 and which brings the company’s total tax bill to around 200 million pounds for the period, during which it had UK revenues of around 24 billion pounds.

However, he said he had been genuinely angry over Google’s failure to pay much tax, adding that this largely occurred when Labour was in power from 1997 to 2010.

“We’ve done more on tax evasion and tax avoidance than Labour ever did,” he said.
Finance minister George Osborne, seen as a possible successor to Cameron, has said the settlement was “a victory for the action we’ve taken” against corporate profit’shifting.

Google has said it paid all the tax that was due. It says it declares little profit in the UK because most of its profits are derived from innovations invented in the United States.

“We pay tax based on the value added by the economic activity of our staff here,” a Google spokesman said.

Profits from European sales are reported in Bermuda, which has a zero tax rate.
Domestic media have roundly criticized the tax deal and even vociferous opponents of Corbyn such as the tabloid Sun have backed Labour on the issue.

Rupert Murdoch, executive chairman of News Corp and 21st Century Fox Inc[NWSNA.UL], criticized the deal, tweeting that “Google et al broke no tax laws. Now paying token amounts for p r purposes. Won’t work. Need strong new laws to pay like the rest of us.”

His tweets set off a Twitter storm, with others criticizing Murdoch for meetings with the Conservatives, wondering about the taxes paid by Murdoch’s companies, and even referring to some of the reporting tactics at his papers.

“Can’t you get some journalists on this instead of hacking celebrities’ phones and the like,” tweeted a user under the handle @tradercoach.

Tax avoidance has become a hot political issue in Britain, where people question whether the burden of fixing the public finances has been fairly shared.

Since the deal was announced on Friday, Labour has called for an investigation by the National Audit Office, the Parliamentary Public Accounts Committee (PAC) has said it will investigate the deal and the Treasury Committee said it would examine the whole corporate tax system.

Google said it was prepared to testify at the PAC hearing, the date for which has yet to be confirmed.

(Editing by Larry King)

Copyright 2015 Thomson Reuters. Click for Restrictions.

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