Politicians question Google's 'sweetheart' tax deal

Late last week, Google agreed to pay £130 million in back tax in the UK. Despite being heralded as a 'major success' by the Tory chancellor George Osbourne, the feeling among politicians is that Google should still pay much more tax. The deal struck between the search giant and HMRC has also been dismissed as "only a start", "breathtakingly complacent", and in need of further explanation.

MP John McDonnell was granted a Commons urgent question on the tax deal, leading to an impassioned debate. MPs said that it appeared the government was giving Google preferential treatment, and that had smaller businesses failed to pay taxes in the same way, they would have found themselves in court rather than at the center of a headline-making deal.

Google has long been criticized for its tax arrangements: the company uses a financing structure that channels some funds through Bermuda where no corporation tax is payable. But while George Osbourne was hoping to bask in the glory of being the man to extract millions from Google, the government refused to agree with his statement that the new deal is a 'major success'.

With some tax experts suggesting that Google's tax bill should be closer to £2 billion, the £130 million squeezed from the company does seem rather meager. Questions were raised about why the UK government was happy to settle for a tax payment of just £130 million, while Italy is seeking in excess of £1 billion.

When pressed in parliament, Financial Secretary to the Treasury David Gauke was not able to say whether Google had broken any laws between 2005 and 2011 but brushed aside claims that a 'sweeheart deal' had been struck. Other MPs accused the government of giving 'mates' rates' on tax to global corporations, meaning smaller businesses were not getting a fair deal. Gauke said that there were no plans to go public with details of how much tax Google owes, saying that if the UK abandons the confidentiality of the tax system, it would "become a less attractive place for companies to operate from".

While many will be pleased that Google has been forced to put its hand in its pocket, this looks like being a debate that will run for some time yet.

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