MPs react with incredulity to claims the company did not carry out advertising sales in the UK, despite £3bn a year in revenues

This article is more than 7 years old

This article is more than 7 years old

Google was branded devious, calculating and unethical as MPs stepped up pressure on the internet giant over its efforts to shelter its multi-billion profits from UK taxes.

At a stormy session of the Commons public accounts committee (PAC), members reacted with incredulity to claims that the company – which paid just £6m in corporation tax in 2011 – did not carry out advertising sales in the UK, despite generating more than £3bn a year in revenues.

Vice-president Matt Brittin, Google's head of operations in northern Europe, insisted that he stood by evidence he gave last year that all the company's European sales were routed through its operation in Ireland and so were not liable to UK taxes.

But he was told by the committee chairman, Margaret Hodge: "You are a company that says you do no evil and I think that you do do evil in that you use smoke and mirrors to avoid paying tax."

A Downing Street spokesman told a daily Westminster media briefing: "We are not going to comment on a specific company but it's absolutely imperative that all companies pay the tax that they owe.

"Within that, the government is committed to creating the most competitive corporate tax system in the G20 because we want to encourage businesses to invest here, to create jobs, to create opportunities, which is good for people in this country. But it's very important, critical, that they pay the tax they owe.

"When we are looking in this area, one of the issues is that these are transnational, multinational organisations. Therefore it is important to reform the tax rules at a global level, and that's why the prime minister has made it a key part of the G8 agenda in Lough Erne next month that we put this on the table and start looking at how we can strengthen rules and regulations to ensure that the global tax rules work."

The Labour leader, Ed Miliband, said he was shocked by evidence that Google was avoiding tax – just days before he is due to attend a high-profile event organised by the internet giant. Miliband said there was a culture of corporate irresponsibility among some firms.

A senior Labour source said Miliband would be taking his message "loud and clear" to Google when he appears at a conference next week.

Miliband said: "People will be shocked by the evidence that Google is going to extraordinary lengths to avoid paying their fair share of tax.

"It comes on top of other firms apparently engaging in similar practices. It is evidence of a culture of corporate irresponsibility among certain firms which is totally unacceptable.

"And of course we've now seen allegations about petrol fixing as well.

"It comes at a time when ordinary families are seeing services cut, their taxes rising and so many businesses are struggling to make ends meet and are actually doing the right thing and paying their fair share of taxes.

"As so often under this government, I think it is evidence of one rule for those at the top and another rule for everyone else. David Cameron says we have to just wait for international action. He's wrong."

Miliband will appear at Google's Big Tent UK event in Hertfordshire next Wednesday, where other speakers include the firm's executive chairman, Eric Schmidt.

A senior Labour source said: "We will take Ed's message loud and clear to Google."

Earlier, Hodge – who also strongly criticised the performance of HM Revenue and Customs – said the committee was now considering recalling Amazon to give evidence following the disclosure that it paid just £2.4m last year in UK corporation tax, despite sales of £4.2bn.

There was further embarrassment for HMRC on Thursday when a high court judge ruled that a "sweetheart" deal with bankers Goldman Sachs had been procedurally flawed, even though it was not unlawful.

Listing a series of failings, Mr Justice Nicol said the then head of HMRC, Dave Hartnett, had been wrong to take into account the potential embarrassment to the chancellor, George Osborne, if the settlement, worth up to £20m, did not go through.

Meanwhile it emerged that the coffee shop chain Starbucks has yet to hand over the £20m voluntary tax it announced it would make last December. A spokesman said talks with HMRC were still ongoing.

'I stand by everything I said'

Brittin, who originally appeared before the PAC last November, was recalled after the committee were contacted by what Hodge said had been a stream of whistleblowers challenging his evidence.

She said that one whistleblower had provided documentation showing that when Google began operating in the UK in the early 2000s, the entire trading process and sales process took place in the UK.

Customers included Amazon, BT, eBay, Argos, Halifax, British Airways, Land Rover and Lloyds TSB.

She said the committee had also been contacted by a senior UK salesman who was paid a "modest" salary, but who received three or four times that in commission for sales he made and for closing deals.

"I think you should think really carefully about what you said to us and whether or not that holds true," she said.

Brittin acknowledged that Google staff in the UK were involved in encouraging clients to spend money with the company, but insisted that they did not handle the actual transactions.

"I stand by everything I said last November," he said.

"Any advertiser in the UK or Germany or France or any European country contracts with Google in Ireland because that is where they have the rights to sell Google advertising. The way we are established is Ireland owns the technology, owns the intellectual property for the purposes of selling across Europe."

"People in Google UK Ltd are promoting our properties and encouraging people to spend money with Google. Clients may well feel that they are selling – we hire people with sales skills and they are encourgaing people to spend money. But what is very clear is that no-one in the UK team can execute a transaction, no money changes hands."

Hodge accused Brittin of "devious, calculated and, in my view, unethical behaviour in deliberately manipulating the reality of your business in order to avoid paying your fair share of tax to the common good".

Afterwards she said she believed Google in the UK was a sales business "masquerading" as a marketing business.

Hodge also sharply criticised the HMRC chief executive, Lin Homer, over the way her staff interpreted the law in relation to companies like Google.

"It is an issue of judgment," she said. "I think your judgment belies common sense. We don't trust your judgment.

"I think your staff are being bamboozled."

Homer, who was appearing after Brittin, insisted that HMRC was better qualified than MPs to determine what taxes were due.

"That is a matter for the application of expert tax knowledge. I'm afraid that that is something I think we do rather better than a select committee," she said.

She added: "Unless and until you change the law, we cannot collect the tax people would like us to collect."

• This article was amended on 17 May 2013 to correct the phrase "fare share" to "fair share" in the 10th paragraph.