In caving to Google, George Osborne has let Britain down

You can't have one law for big companies and another for the rest of us, says Seema Malhotra. 

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Aggressive tax avoidance by global companies is not a victim free zone.

When companies like Google don’t pay their fair share, businesses and families in the UK take a hit.

British businesses, especially small businesses wonder why there is one rule for large multinationals and one rule for them. People feel it’s just too easy large multinationals are able to shift their profits and avoid the taxes they should be paying.

And British families lose out too. Uncollected taxes are revenue lost to the Treasury – it means bigger cuts to public services and lower levels of investment, at a time when we need it most.

The Google tax deal proved one thing – the global giant has been short changing us for many years. That’s now a fact rather than suspicion.

But that deal has left a series of big questions in its wake.

Firstly, how could we ever know if Google is paying their fair share of taxes as they tell us?
We don’t know because the deal is shrouded in secrecy. It’s hard to understand how HMRC accepted at face-value Google UK's claim that they, a company with over 2,000 UK employees, do not have a "permanent establishment" in the country for corporation tax purposes.

And why did HMRC accept a deal which involves an effective tax rate of 3 per cent compared to the 20 per cent or more paid by UK businesses and individual tax payers? The ten year deal is worth just £130 million set against Google’s estimated £7.2bn in profits in the UK over that decade.

The second big question is whether anyone can trust the judgement of a Chancellor who hailed the deal as a “victory”.

You can be sure that if the Google deal was really a good news story George Osborne would be all over it like a rash. But he’s been a nowhere to be seen – an isolated figure mocked by colleagues and commentators.

We have recently seen the government lose a legal battle over the grotesquely unfair bedroom tax – and now are likely to spend more in legal costs on appealing that decision.

If you want proof that this is a Chancellor who has his priorities wrong compare the bedroom tax to the Google tax – standing up for the richest in the world whilst penalising the most vulnerable in  our community

There’s another reason for questioning the Chancellor’s judgement.

How can people trust the judgement of a man who thinks it’s a good idea right to undermine and demoralise his tax collecting agency, the HMRC?

A classic example of a false economy – short term cuts that have long term costs.

And along with the Shadow Justice Secretary Lord Falconer I have written to the Chancellor to ask for more information about the legal basis of the HMRC deal.

His French opposite number has said: “The French tax administration does not negotiate the amount of taxes owed. It applies the rules…We can discuss which rules apply, but the rules apply to all, to Google or others.”

Is there any reasons why the vast majority of law-abiding British taxpayers should not expect the same approach?

How he responds to our questions and to the other investigations that are pending will be test of character for the Chancellor.

What we need is a renewed focus and action on tax avoidance, and a more effective plan to now close the UK tax gap.

We need international agreement and implementation with country by country reporting of the tax arrangements of multinational and with information made public not just shared between tax authorities.

We are ready to work on a cross party basis to make that a reality.  

The Chancellor should be the guardian of fairness in the tax system.

Unless he commits to complete openness he will be failing in that duty. He will be letting down British people and British businesses.

Seema Malhotra is Labour MP for Feltham and Heston.