Clients question Google's tax situation in UK

Some of Google’s clients have questioned its assertion that it does not sell to customers from its London office, a key plank in its ability to operate almost tax-free in Britain, a poll said on Friday.

The Drum, a magazine for marketing professionals, asked 80 ad buyers and digital agencies — companies which purchase advertising products on behalf of clients — about their dealings with Google’s London office and their interaction with the office in Dublin. Of the 29 which replied to survey, “Almost 80 per cent of respondents said they dealt with London when buying Google advertising. Around 14 per cent said they used Dublin, the remainder said they did not know,” an article posted on The Drum’s website said.

Google Inc says it sells all advertising in the UK, France and Germany from its Dublin office. It declined to comment on Friday on the details of the survey. Corporate tax avoidance has become a hot political issue in Britain amid austerity measures to pay for the banking crisis.

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British Prime Minister David Cameron has said he is working to address the problem and plans to put it on the agenda for the G8 meeting of the world’s largest economies to be held in Northern Ireland in June. From 2006 to 2011, Google generated $18 billion in revenues from the UK, according to statutory filings, and Google UK paid just $16 million in taxes, its accounts show.

Google could come under scrutiny in Britain

“When asked what they considered they were doing when dealing with Google’s London team, 76 per cent said they considered they were buying from them. 17 per cent said they were receiving general advice in order to buy through Dublin,” the Drum report added.

When asked what they considered to be the primary role of Google’s London advertising team, 80 percent said “sales”, while 17 percent said “support”, the report said.

Earlier this week British lawmakers said they planned to call Google back to testify to a parliamentary committee after Reuters revealed the company advertised for UK staff to “negotiate” and “close” deals, despite a Google executive telling the committee in November that UK staff did not sell to clients. The profiles of around 150 London-based employees on the LinkedIn networking website said they were involved in formulating sales strategy, managing sales teams, closing deals or other sales work.

Google has denied misleading lawmakers and said it complied with UK tax law. Google says it employs around 1,000 London-based “digital consultants” who educate customers about the benefit of Google products. It said these people did “encourage” clients to buy but said all selling was done by “a couple of hundred” staff in Dublin.

The company declined to say specifically how the process of selling was divided between Dublin and London or whether this involved London staff negotiating contracts which were then rubber-stamped by Dublin. It said: “We accept that the wording of some job adverts may have been confusing and we are working to make it clearer.”

Under international tax law, companies are allowed to engage in promotional work in a country without creating a tax residence but lawyers and academics said negotiating on British soil could mean Google’s UK revenues became assessable for income UK tax purposes. Currently, Google UK receives fees from Google Ireland that are intended to cover Google UK’s costs, plus a small premium.

Reuters