What Google Should Focus On With Upcoming UK Tax Talks

February 10, 2016 - Written By Daniel Fuller

It’s no secret that Google’s approach to international operations and taxes, especially routing all sales through their Ireland arm, is questionable at best, according to many applicable parties. Taxes in Ireland are lower than most other places for multinationals due to transfer laws, and allow Google to put out a lower budget, and thus pay less taxes, in areas of international operations where things may get a bit pricier, such as Asia and Europe. Operations are budgeted and taxed where they occur, whereas sales are apparently headed up and thus passed through Google’s Irish offices in Dublin. On the heels of a £130 million settlement in the UK, local authorities think that Google’s practices not only are questionable, but in need of intense scrutiny. That is exactly what they plan to do on Thursday, February 11. UK publication The Guardian weighed in on some of the key questions Google will have to answer, as well as those who may play a key role in the hearing.

According to The Guardian, the biggest question at hand was Google’s routing of sales income through Ireland. To many, this is a textbook example of what’s called a Double Irish layout, where a corporation transfers money or assets to a lower-tax area in order to decrease their total worldwide tax liability. Ireland passed a law in 2010 that was meant to close this loophole, but the law did not affect current operations of many entities, instead targeting future operations. The Double Irish has been in use by multinational conglomerates since the 1980s, but UK authorities, jilted by the relatively small figures reported by Google’s UK arm, feel that Google’s use of the Double Irish needs to be addressed and the recent £130 million settlement was simply not enough. Chancellor George Osborne’s diverted profits tax, touted by Osborne as playing a big role in the settlement, is also laid out as a point of contention.

The Guardian was very blunt about another issue, asking, “Why do ‘expert’ sales staff in Ireland earn less than half that of marketing support staff in the UK?” With Google having admitted that most of their Irish sales force are on board because they know foreign languages and are not expert deal closers, and that most of their sales operations are automated, this very pointed question could very well be justified. The question of the disparity between Google’s worldwide tax rate of 17 percent and their bigger tax leviers charging 35 and 20 percent was also brought up. In an especially pointed gesture, The Guardian asked outright if Google’s use of lobbying and investment to pressure politicians was fair. The Guardian named Revenue and Customs chief Lin Homer, chair of the public accounts committee Meg Hillier and Google Europe director Matt Brittin as key figures in the hearing who may be able to steer the discussion toward or away from the questions that The Guardian feels should be asked.