An explanation of the Google Tax Deal
In recent days and weeks, a fair deal of news coverage has been given to the Google tax deal made with the government of this country. The deal, to pay money to the government in tax, has been highly controversial for a number of reasons that this article attempts to explain.
Firstly, it is important to explain the basic terms of the deal. Google agreed to make a back payment of £130million to the government due to unpaid tax over the past decade. This can be broken down into £117million in unpaid taxes, with £11million of interest. Google have a poor record on the issue of corporation tax, and therefore also announced that they would now pay tax “on revenue from UK based advertisers” which will result in them bearing a much greater tax burden in the future. The Guardian believe that deal increased Google’s tax for the 2014-15 period by £13.8million.
Now, there are a number of reasons why this is inherently controversial, and is some ways almost negligible. Firstly, the deal ultimately showed the HMRC are still not capable of forcing Google to stop their aggressive tax dodging, by reporting £4.6billion worth of sales through Ireland. Secondly, Labour claim that the money paid back by Google for the previous decade accounts to a tax rate of approximately 3%. These and other far more complex issues (the UK tax rule book now stretches over 17,000 pages so I won’t attempt to summarise every issue with the deal for both our sakes!) have led to the deal being reported to the European Commission by people including the SNP. Margrethe Vestager, the competition commissioner, has said that the matter will be investigated, and that so-called “sweetheart deals” between countries and corporations are unfair and could even amount to illegal state aid. Ultimately this will be the only way to get true answers about the somewhat nebulous nature of the deal, so it may have to be a case of waiting until then before all questions are answered. Indeed, anything suggested by those in opposition to the government is mere conjecture at the moment.
One positive that does have to be taken from this deal, in my opinion, is that the government are finally beginning to chase the companies that for so long have felt they are totally above the law. I am not of the opinion that the Google tax deal means this company can be forgotten about as an issue now, rather I think the government should continue negotiations for a higher rate of tax in the coming years. But the issue goes beyond Google, there are many other companies, mostly technology or digital-based businesses, that pay nowhere near enough tax on a global scale. Something does need to be done about these companies, and this Google tax deal, is the smallest of stepping-stones to that end.