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January 29, 2016

European Commission could investigate Google’s ‘sweetheart’ tax deal

By Franchesca Hashemi

The European Commission could examine Google’s £130m ($186m) ‘sweetheart’ tax-deal with the British government following a letter of complaint from the Scottish National Party to the EU competition chief, the EC told this magazine.

Deputy leader of the Scottish National Party Stewart Hosie has called on the Commission’s competition chief, Margrethe Vestager, to investigate the multinational company’s controversial tax settlement with the British government.

Of which, Google has agreed to pay £130m in a decade’s worth of back taxes. It has been alleged by opposition politicians in Britain this equates to an effective 3% corporation tax rate.

It has been confirmed that Google will appear in front of the Public Accounts Committee, the British Parliament’s body in charge of overseeing the effectiveness and honesty of government expenditure, on 11 February.

The Shadow Chancellor, John McDonnell, has called for HM Revenue & Customs to provide transparency on how the £130m figure has been calculated.

A spokesperson for the European Commission told this magazine it is looking at the SNP’s letter of complaint, as is protocol for all letters received from stakeholders, political parties and citizens.

"This of course does not prejudge the opening of any investigation, which must be based on concerns under EU state aid rules", the spokesperson added.

In a letter to the Financial Times, Google’s vice president of European public affairs Peter Barron said: "After a six-year audit we are paying the full amount of tax that HM Revenue & Customs agrees we should pay, including £130m in additional back tax.Governments make tax law, the tax authorities independently enforce the law, and Google complies with the law."

Barron adds that as Google is a US company, it pays the bulk of its corporate tax in the US: $3.3bn in the last reported year.

"What should Google pay in the UK? We pay tax based on the value added by the economic activity of our staff here, at the current standard rate: 20 per cent", Barron explained.

Tackling tax evasion and tax avoidance is high on the political agenda on international, EU and national levels.

"As a matter of principle, it is the job of member states and national tax authorities to properly enforce national tax laws", the Commission’s spokesperson continued.

"At the same time, the Commission’s state aid decisions regarding tax rulings in Belgium, Luxembourg and the Netherlands make clear that national tax authorities cannot give any company, however large or powerful, an unfair competitive advantage compared to others. This is illegal under EU state aid rules."

On Thursday morning, the European Commission had been proposing new rules to align tax laws in all EU countries that tackle aggressive tax practices by large companies.

Entitled ‘The Anti Tax Avoidance Package’, the measures build on the OECD’s base erosion and profit shifting (BEPS) standards.

Namely, a revision of the Administrative Cooperation Directive so that national authorities exchange tax information on a country-by-country basis, and the implementation of a Common Consolidated Corporate Tax Base (CCTB) across the entire EU later in 2016, were on the agenda.

More generally, the European Commission has said Thursday’s proposals will help to counter-act some of the most damaging tax avoidance schemes in the EU and beyond. However it would not be drawn into confirming or denying whether a full examination of Google’s £130m deal will happen.

"The Commission seeks to tackle tax evasion and tax avoidance in the EU with a combination of legislative action as well as competition enforcement of EU state aid rules", the Commission’s spokesperson concluded.

 

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