The chancellor, George Osborne, has described his tax deal with Google as a “victory” and argued that it was “a real vindication of this government’s approach”. While it certainly isn’t a victory, it definitely underpins this government’s approach: one set of rules for the rich and powerful, and another set of rules for the rest of us.
Google has a financial structure which means that its cash generated in the UK is directed into accounts in Ireland and Amsterdam and then into a tax haven in Bermuda.
It is estimated that Google has avoided around £1.6bn over 10 years, even though it has generated 10% of its revenues in the UK. Osborne has got Google to pay back £130m, but this means that the search engine has paid only £200m in tax since 2005, despite its UK profits being more than £7bn. This is the equivalent of paying less than 3% corporation tax, despite the corporation tax rate being 20%.
But Osborne asserted that it was a “really positive step”:
This is a major success of our tax policy. We’ve got Google to pay taxes and I think that is a huge step forward and addresses that perfectly legitimate public anger that large corporations have not been paying tax. I think it’s a really positive step. I think it’s a big step forward and a victory for the government
While Osborne proudly trumpeted getting a company to do a small amount of what it should be doing all the time anyway, tax expert, Richard Murphy expressed outrage at the deal, which allows Google to get away with paying only a small fraction of the tax due:
I can’t understand why the deal with Google is so cheap. I’m worried if they are going to repeat that with other companies. What was agreed is far removed from what is required for sustainable corporation tax in future. They are undermining the new international tax consensus which David Cameron and George Osborne have worked for, supposedly.
The head of Google Europe, Matt Brittin said:
We want to ensure that we pay the right amount of tax
Though Brittin seems to miss the point that Google is not paying the corporation tax it should be paying.
The Labour shadow chancellor, John McDonnell, said that it was “unacceptable when most people in this country pay much more”.
It appears the government’s view is that something is better than nothing, but it sets a dangerous precedent for other corporations to request equally favourable deals. This could lead to rich corporations having a smaller tax rate- as low as 3%- while small businesses have to pay a much higher rate of 20%. This, as Osborne has said, is “a real vindication of this government’s approach”… to inequality. Google paying its 20% share of tax could transform the lives of those that have been hit by austerity measures:
– Welfare cuts have been linked to people to killing themselves
– Pensioners are being charged for falling over
– Students are facing cuts to grants, meaning they cannot afford housing and many are suffering mental health issues due to financial stress
– Less than 1% of welfare claims are fraudulent (around £1bn) but over £5bn is lost in tax avoided by the rich
Despite the fact ordinary people are struggling, large corporations operating within the UK are allowed to contribute as little as possible to the treasury. The fact the government sees this as a “victory” really shows where their loyalty lies.
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Featured image via Flickr and Wikimedia