Google tax: why there should be an inquiry

The "not evil" solution.

A committee of MPs have said that Google should face a comprehensive inquiry into its tax affairs, calling the internet company’s tax arrangements "deeply unconvincing" — which is quite an understatement. In the five years to 2011, Google enjoyed £11.5 billion in revenues and paid £10 million in corporation tax.

Google executives, of course, have always maintained that its tax arrangements are lawful — its brainy accountants probably follow the letter of the law with utmost care, their job depends on it. Whether they follow the spirit of the law — or indeed the spirit of Google’s own "don’t be evil" motto — is quite another matter. 

The government’s sweetheart tax deals admittedly send out mixed messages, but I’m quite sure that the dry wording of the UK’s corporate tax codes doesn’t exactly say: ‘The standard rate of corporation tax in the UK is 23-30 per cent, but if you want to employ some of this country's most expensive brains to set up super-complex networks of branches and shell companies to process profits on tropical islands (or indeed, in Ireland) that’s cool too!’

No other area of law offers such great rewards — or indeed makes so many allowances — for individuals to twist its meaning.

The figure that’s often circulated in this context is that the UK’s tax gap stands at £32 billion (which includes tax avoidance by individuals as well as companies.) This is high enough, but tax evasion or avoidance by big corporations has a second cost: it penalises smaller companies that aren’t able to employ genius accountants to set up complex international structures to avoid tax. How are small tech start-ups meant to compete with the likes of Apple, Google and Amazon when the latter are able to pay virtually no tax? 

You can be both pro-business and anti-corporate tax avoidance, especially if you’d like to see more innovative, exciting new firms challenge today’s internet giants, whose power has allowed them to show a casual disregard to the privacy and rights of the customers they purport to serve. 

The challenge MPs will face when trying to hold Google to account is that the tax affairs of international companies require international tax solutions — and these will take time and will need near-unprecedented international co-ordination. But that doesn’t mean we should take the pressure off the likes of Google.

This article first appeared on Spears magazine

Google CEO Larry Page. Photograph: Getty Images

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

Photo: André Spicer
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“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.