Top UK investor turns on Google over tax ‘sham’

Growing resentment at Google’s £130 million deal with the taxman extended into the business world yesterday, with senior financial figures labelling it pathetic, unfair and a sham.

James Anderson, whose investment trust owns £120 million of shares in Google’s parent company, Alphabet, said that it was time for Google and other multinationals such as Facebook voluntarily to pay far higher tax rates in the countries where they operated.

The Times reports that he has called on US technology companies to campaign for a “reasonable” rate of global profit tax of 15 to 20 per cent, far higher than the 3 per cent that Google’s critics claim that it pays in the UK.

Mr Anderson, who runs the £3 billion Scottish Mortgage Investment Trust and has a formidable reputation among technology investors, is the first British institutional investor in Google to publicly demand that it do more after the settlement with HM Revenue & Customs announced on Friday.

Some investors privately worry that while Google’s small tax payments might be good for its share price in the short term, it needs to come up with a more publicly acceptable contribution or risk being hit with draconian measures or a consumer backlash.

“My take remains that it is in the longterm interests of Google and others of that ilk to pay decent rates of tax and that they and others would be best served in taking the lead in volunteering this,” Mr Anderson told The Times. That meant paying “much more” UK tax. “They are beneficiaries of state spending at many levels and in return they would get respect,” he said.

The political row over the deal deepened yesterday with angry exchanges in the Commons. Under attack from Jeremy Corbyn during prime minister’s questions, David Cameron said Google had enjoyed a zero per cent tax rate under Labour and insisted it was only now paying tax as a result of the Tories.

Other business figures weighed in yesterday. Luke Johnson, the entrepreneur who built Pizza Express into a nationwide chain, said that Google operated a “virtual monopoly”, forcing advertisers to do business with it.

“Google pretend they are doing business in Ireland for tax purposes, but that is patently a con,” he said. “They leech billions from the British entertainment and cultural industries without investing anything in them, and should pay an appropriate level of corporation tax.”

Mr Johnson, who runs the investment firm Risk Capital Partners, added: “This cosy deal with HMRC is a sham and an insult to all those honest UK businesses that cannot manipulate international tax systems to their advantage like Google does. The deals other European governments are doing with Google shows how incompetent our officials have been.”

Tim Martin, chairman and founder of the JD Wetherspoon pub chain, said: “The tax pact with Google indicates government is mesmerised by trendy IT companies. The main principle of taxation is that taxes should be fair and equitable. Wetherspoon pays over 40 per cent of its sales as taxes; letting Google off with a fraction of 1 per cent is unfair and pathetic.”

Nigel Terrington, chief executive of the mortgage lender Paragon, said: “It is very irritating to see Google’s effective tax rate when we will have landlords providing accommodation to the social housing sector where their effective tax rate may exceed 100 per cent following the recent buy-to-let changes by the chancellor.” Sir Martin Sorrell, head of the advertising group WPP, took a more neutral position, saying: “It’s a difficult balance for governments between being ‘open for business’ and raising revenues to cover deficits.”

Mr Anderson said that any deal on tax needed to be done at a global level. The OECD has been attempting to push through a multinational solution.

Peter Barron, Google’s European public affairs chief, wrote in a letter to the Financial Times: “Governments make tax law, the tax authorities independently enforce the law, and Google complies with the law.”

He added: “Corporation tax is paid on profits, not revenue, and is collected where the economic activity that generates those profits takes place. As a US company, we pay the bulk of our corporate tax in the US: $3.3 billion in the last reported year.”

In a separate development Apple’s chief financial officer defended the company over a European investigation into its Irish branch, which could land it with a multibillion-dollar tax bill. Of the possible impact of the investigation, Luca Maestri said: “My estimate is zero. I mean, if there is a fair outcome of the investigation, it should be zero.”