In contrast, Google settled an investigation by British tax officials for £130 million over ten years, despite Britain being a much bigger market. The US company’s effective tax rate in Britain is thought to be 3 per cent.
Details of the deal, reported by the Italian media and which has not yet been concluded, have been kept confidential so the number of tax years in dispute is unknown. However, Google Italy is estimated to generate about $530 million (£369 million) in sales a year — less than a tenth of the British amount. Google is estimated to have made about £6 billion in profit on UK sales from 2005-15.
The Times reports that the disparity raises questions over how Google could settle a tax dispute in both countries for approximately the same amount.
The Treasury has come in for heavy criticism over the deal announced last week after secretive talks between Google and HM Revenue & Customs. George Osborne’s department hailed it as a success but Boris Johnson, the London mayor, and David Davis, the former Tory leadership contender, criticised the agreement.
The Italian deal came after a year’s negotiations with Milan prosecutors. “If it is 15 per cent, then it sounds like prosecutors started with a higher figure, including fines and interest, before reducing it during negotiations because the legal framework is not clear,” Eugenio Pinto, a professor of business economics at LUISS University in Rome, said. “It’s not enough.”
In France, where Google is being pursued for an estimated €500 million of back taxes, experts contrasted the tough approach with softer British tactics.
The UK deal secured a third of the amount of tax that France is demanding, despite Google’s UK arm generating about three times as much revenue and employing four times as many people. “This [UK] agreement is fiscal surrender,” Pascal Perri, an economist and author of Google, a Friend who does not just Wish you Well, said. “The French approach is much more hardline . . . The British are perhaps more liberal and pragmatic.”
The revelation came as a former Google executive told The Times that he had given more than 100,000 emails to HMRC, which he said showed that Google staff in London were responsible for making sales.
This is something that the company has denied and which was critical to its negotiating position with HMRC. By arguing that it has no fixed place of business in the UK, Google can register sales in Ireland and then divert profits to Bermuda.
MEPs on the European parliament’s tax committee called on the EU yesterday to examine Britain’s Google deal as part of its competition investigations. “HMRC’s move and the way they try and sell it is an insult to the idea of tax justice,” said Philippe Lamberts, a Belgian MEP on the committee, which is conducting is own investigation.
Pressure is mounting in Brussels for tougher action against Google and other multinationals that take advantage of differing tax systems around the EU. Two weeks ago the European Commission called on Belgium to recover €700 million in illegal tax breaks for multinational companies over the past decade. These were said to include Anheuser-Busch InBev and BP. The Belgian order was part of a Brussels crackdown on corporate tax deals. Commission rulings are imminent on deals for Apple in Ireland and Amazon and McDonalds in Luxembourg.
Christian Chavagneux, editor of the monthly Alternatives Economiques, said that he believed reports in recent weeks that Google had settled with the taxman after being told in early 2014 that it faced the possibility of up to €1.5 billion in back taxes and penalties. “I think the reports are true . . . They are said to have begun paying back at the end of 2015.”
Emmanuel Macron, the French economy minister, said last week that there was “a positive dynamic” in Google’s efforts to resolve its tax problems with France, Britain and other EU states.
Neither Google nor the French finance ministry would comment on the secret negotiations that opened after tax inspectors raided Google’s Paris headquarters in 2011.
Google said: “After a six-year audit we are paying the amount of tax that HMRC agrees we should pay. Governments make tax law, the tax authorities enforce the law and Google complies with the law.”
