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Google whistleblowers inform Parliament on UK tax situation

Margaret Hodge MP has grilled Google UK boss Matt Brittin, saying she had evidence from whistleblowers that Google was avoiding UK tax.

Whistleblowers inside Google's UK arm have given confidential evidence to Parliament's Public Accounts Committee, which is investigating whether the search giant should be paying more tax here in Britain.

Margaret Hodge MP, the PAC's chairperson, grilled Google UK boss Matt Brittin this morning, saying she had evidence from whistleblowers that Google was making far more money in the UK than it was admitting, and thereby avoiding tax here.

Google's European headquarters, for tax purposes, are in Dublin -- Ireland has a much lower rate of corporation tax. Google says that all its UK sales -- worth £4.2bn last year -- take place in Ireland, because they're all done online. So if you want to put an ad next to a keyword, for example, you have to win an online auction for that word.

Hodge and her whistleblowers claim this is not the case. She said she had pay slips that showed sales people working in London earning commission on sales that the company claimed were actually made in Ireland.

Brittin claimed that only 1 per cent of Google's UK customers were directly sold to by UK staff, but didn't say what value that 1 per cent represented. If those were the biggest customers, they would clearly make up a greater proportion of revenue.

Update: Brittin later admitted that those 1 per cent account for 60 to 70 per cent of UK revenue, Channel 4's Siobhan Kennedy reports.

So what do all of Google's 1,300 UK employees do? "They grow the business by encouraging people to spend money," Brittin said. "They grow the business by selling," Hodge testily replied.

"It doesn't make sense to us, it doesn't make sense to your staff, it only seems to make sense to Google," Hodge said.

Brittin appeared in front of Parliament last November and gave much the same evidence. Hodge warned him that if sales were really happening in the UK, he might be guilty of misleading Parliament. That's potentially a serious offence, although in reality no one in recent years who has given evidence to a committee has been found guilty. Even if Brittin were guilty, the penalty would be an official reprimand -- a very public and embarrassing dressing down, but with no fine or prison sentence.

Google chairman Eric Schmidt recently defended his company's tax affairs, saying, "We fully comply with the law, and will obviously, should the law change, we will comply with that as well." Google made £11.5bn in the UK between 2006 and 2011, yet only paid £10.3m in tax. Tax is paid on profit, not revenue, but the company is generally much more profitable than that meagre tax payment would indicate.

Amazon's tax situation has also been investigated by Parliament recently, which found it unusual that it paid almost no tax on billions of pounds of sales here in the UK.

What action should Parliament take over Internet companies and their tax affairs? How can they be made to pay their fair share? Mull it over in the comments below, or over on our taxing Facebook page.