Google called back to Parliament to defend UK tax situation

Google is to face a second grilling over its UK taxes following an investigation by Reuters. The Big G, along with auditor Ernst & Young, has been called back to Parliament by Margaret Hodge, chair of the Public Accounts Committee, to clarify evidence it gave last year.

At a hearing last November, Matt Brittin, Google's vice president for Northern and Central Europe, claimed his company did not have a significant business presence in UK, with its workforce here merely providing "marketing services" for Google employees in Ireland, hence it paying relatively little corporation tax on its UK income.

All its sales, it claims, were made in Ireland, so its taxes were payable there -- where corporation tax is 12.5 per cent, considerably lower than the UK's 23 per cent.

Since then, Reuters has been looking into Google's presence in the UK, and it claims UK staff are indeed making sales, rather than just supporting the Ireland staff with marketing services.

Reuters spoke to a number of people who deal with Google UK. "All the people you tend to deal with are in London," said Simon Andrews of advertising agency Addictive. "You would never know about the Dublin thing apart from if you looked closely at the address on the invoices. All the people are based in London."

"They do lots of sales pitches," said Andrew Johnson of digital marketing agency Stickyeyes. "That's how we view them. They view them as new product pitches, we call them sales pitches."

Not all of this is behind closed doors. Around 150 UK Google employees reportedly list themselves as being in sales roles on LinkedIn, some saying they're involved in formulating sales strategies and closing deals, and others being endorsed for their sales skills by Google customers. Google has even advertised for sales positions for its London offices, with 39 job adverts online in mid-April.

In 2011, Google UK employed 1,300 people, of whom 720 were providing marketing services to Google Ireland. A spokesman for Google told the Guardian that Brittin denied misleading Parliament. London-based staff were "digital consultants", he said, while only Dublin staff handled sales contracts.

Following Reuters' revelations, Margaret Hodge said, "We will need to very quickly call back the Google executives to give them a chance to explain themselves and to ensure that actually what they told us first time around is not being economical with the truth."

Should the Public Accounts Committee and HM Revenues & Customs deem that Google UK employees are indeed making sales, Google would be considered to have a UK presence, and therefore would be liable to pay more tax. If it's determined that Brittin intentionally misled Parliament last year, he could face formal censure.

In 2011, Google paid a mere £6m in tax on its £395m UK revenue, and between 2006 and 2011, Google made £11.5bn in the UK, yet only paid £10.3m in tax.

Last month, chairman Eric Schmidt defended Google's tax management.