PAC inquiry into Google: Grandstanding and bear-baiting a distraction from the real issues

Responding to today’s Public Accounts Committee hearing into Google’s tax deal with HMRC, George Bull, Senior Tax Partner at RSM said:

‘HMRC recognises that transparent, predictable and fair taxation is at the core of the UK’s public finances. The government has a responsibility to assess and collect tax due from all taxpayers, without fear or favour, and taxpayers should pay all that tax which is due.

‘Select Committees should play a vital role in our democratic system. In 2012 the Public Accounts Committee looked at HMRC's accounts, when a principal concern to the inquiry was the corporation tax paid by multinational companies. Four years later, the performance by some of the MPs sitting on the Public Accounts Committee during today’s interrogation of Google and HMRC raised real questions about their effectiveness.

‘The hearing exposed how little some Committee members knew about the practical application of tax laws enacted by Parliament, and the grandstanding and bear-baiting stood in the way of getting clear answers to some very legitimate questions. A number of the MPs present claimed to have been representing their constituents, but many of those same constituents may well feel let down.

‘One issue which received scant recognition was the probability that increased tax liabilities for a company in one country might well result in lower taxes being paid elsewhere. Unless the fundamental structure of corporation taxes worldwide is to be changed, debates such as this present the spectacle of individual countries – France and Italy were also mentioned during the hearing – scrambling for larger slices of the same cake.

‘Fundamentally, the Public Accounts Committee has to decide whether to accept that the Google tax settlement has been arrived at after a thorough and professional review by HMRC which has considered all the facts and applied the law correctly. If they do not, then they have three choices:

  1. change the way HMRC is organised;
  2. increase the resources available to HMRC; or
  3. reassess the situation when legal changes currently in the pipeline have taken effect.

‘One of the more intriguing aspects of the hearing was HMRC’s insistence that large corporates and small businesses are treated in exactly the same way. However, it today emerged that many micro-businesses have been removed from the online VATMOSS service because they do not make enough regular sales. This appears at odds with HMRC’s assertions and could result in those businesses being forced into using sales platforms owned by the multinationals who themselves are at the centre of tax avoidance claims.’