/ 24 May 2013

Google says it welcomes tax reform

Google Says It Welcomes Tax Reform

Google also welcome the crackdown on other multinational internet businesses that take billions of pounds of sales from the United Kingdom through overseas companies, which Her Majesty's Revenue & Customs (HMRC) cannot tax.

"Given the intensity of the debate, not just in the UK but also in the United States and elsewhere, international tax law could almost certainly benefit from reform," he conceded this week. He said an action plan from the Organisation for Economic Co-operation and Development (OECD), due to be presented to the G20 in July, was now "hotly awaited".

OECD officials have already signalled that the plan will include "updated solutions to the issues related to jurisdiction to tax, in particular in the areas of digital goods and services".

An OECD positioning paper published in February said: "Developments brought about by the digital economy are putting increasing pressure on … well-established [tax] principles. In an era where nonresident taxpayers can derive substantial profits from transactions with customers located in another country, questions are being raised as to whether the current rules ensure a fair allocation of taxing rights on business profits, especially where the profits from such transactions go untaxed anywhere."

Schmidt's latest remarks on tax represent a marked softening in tone. In December he dismissed critics, saying: "We pay lots of taxes; we pay them in the legally prescribed ways. I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate."

Loopholes
But Schmidt now appears to accept that many of those "tax incentives" are in truth loopholes that have opened up as technological innovation has allowed companies to operate in ways unimaginable by those who drafted international tax rules.

Schmidt said he also supported moves by the UK's Prime Minister David Cameron to use Britain's presidency of the G8 to tackle tax. "The UK government has the perfect opportunity to take the lead in shaping this complex debate at the G8 summit next month. We hope [it] seizes the initiative and makes meaningful tax reform one of the top items on the agenda."

Schmidt will meet the prime minister today, along with other multinational business leaders who sit on his business advisory group. One pressing issue for all is likely to be growing calls for big-business tax reform. Bosses of BAE Systems, Tata Group, GSK, Vodafone and John Lewis will all be keen to give Cameron their perspective before the G8 meeting in Northern Ireland next month.

The prime minister has already signalled he wants to use Britain's presidency of the G8 to tackle "aggressive tax avoidance" by multinationals. Google did £3.2-billion of business with UK advertisers and media buyers last year but told HMRC these transactions were technically "closed" in Ireland, and therefore not liable for UK tax. — © Guardian News & Media 2013