Taxman defends itself following criticism over how it’s handled Google’s tax avoidance
HMRC has released a comprehensive factsheet on its relationship with big businesses as it looks to defend itself over how it taxes multinationals, stating that it’s “satisfied” with the amount of tax it received from Google.
The factsheet has been published just two days before HMRC CEO Lin Homer and Google chief Matt Brittin appear before the Public Accounts Committee to defend themselves over HMRC’s controversial tax deal with the Silicon Valley tech firm.
The government department has come under fire from politicians, the media and the finance community following the deal, with one adviser claiming that the agreement “will not help public perceptions on tax”.
HMRC has now released a statement detailing how they keep an eye on multinationals.
“The largest companies often pose big tax risks, which is why we closely manage their compliance,” said HMRC in a statement.
“Because of the tax at stake, their size and complexity, and the significant risk these businesses present to the Exchequer, this resource-intensive approach is the most cost-effective way of ensuring they pay the right amount of tax,” continued the tax authority, which added that it investigates two thirds of the UK’s 800 largest companies at any given time.
Following the Google tax controversy, HMRC has come under pressure to make the details of the deal public, with shadow chancellor John McDonnel questioning financial secretary to the Treasury David Gauke on the subject in parliament last month.
HMRC said that it is bound to a “strict statutory duty of confidentiality”, one which taxpayers respect because “they trust us to keep their information and details of their tax affairs confidential”.
HMRC then attempts to dispel the ‘myth’ regarding its £130m deal with Google, with many critics, including McDonnell, labelling it a “sweetheart deal”.
“In accordance with our published guidelines on resolving disputes, HMRC has taxed all of Google’s profits chargeable to tax in the UK for the period in question, at the full statutory rate of tax… HMRC is satisfied that our enquiry has secured all the tax that is due in the UK.”
HMRC also discussed the debate over Google’s tax rate, after Gauke failed to disclose the information during last month’s urgent questions, with critics suggesting that the firm’s rate is just 3%.
“This calculation does not reflect how tax law works,” said HMRC.
“Under international tax rules, corporation tax applies to profits created from economic activities carried on in the UK, not to profits from sales to customers in the UK,” continued the department, adding that it is “actively engaged in the G20-OECD BEPS project and is pursuing the modernisation of international tax rules.”
ICAEW has commented on the recent media speculation regarding HMRC, defending the government’s actions on how it deals with tax avoidance.
“We now have a robust, HMRC, arrangement for oversight of settlements with large business and HMRC has a very strong rule book which it abides by and which is designed to ensure that all settlements are based on a correct appreciation of the facts and are handled in a way which avoids any potential conflict of interest,” said ICAEW’s tax faculty team.