Is Google misleading on tax?

London: Google Inc faced angry questions on Thursday from British lawmakers investigating its tax affairs and whether it had misled parliament in testimony last year.

Google’s Northern Europe boss, Matt Brittin, was called back to testify to parliament’s Public Accounts Committee (PAC) after a Reuters investigation showed the company employed staff in sales roles in London, even though he had told the committee in November its British staff didn’t sell to UK clients.

Brittin said the company was already being investigated by the UK tax authority in relation to transfer pricing of services traded between Google UK Ltd and other Google companies, but added that he believed Google fully complied with UK tax law. He also repeatedly denied misleading parliament in November, but added Google UK engaged in more selling activities than he had previously revealed.

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In November, he said “Nobody (in the UK) is selling,” and that Google Ireland was the contracting party for UK sales; UK staff were only involved in promotional activity. That arrangement allows Google to shelter most of its income on UK sales from taxation, since Google Ireland sends most of its turnover to an affiliate in Bermuda.

On Thursday, Brittin said, “the UK team are selling, but they are not closing.”

Members of parliament said that scheme was deliberately misleading. “It really doesn’t wash,” said Stephen Barclay, a PAC member with the ruling Conservative Party.

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Committee chairwoman Margaret Hodge said Google was not living up to its original motto of “don’t be evil”.

“You do do evil,” by shielding UK income from tax, she said.

Corporate tax avoidance has become a major issue in Britain, where there are concerns over rising government debt and accusations from lawmakers that the UK tax authority has adopted a light-touch approach to taxing big businesses.

From 2006 to 2011, Google generated $18 billion in revenues from the UK, according to statutory filings, and paid just $16 million in taxes.

Google is just one of a raft of companies including Apple Inc., Microsoft, Starbucks and Amazon.com , whose tax affairs have come under scrutiny.

All the companies say they follow international tax rules.

Google’s auditor, Ernst & Young, and representatives from the UK tax authority were also called to answer questions.

Reuters