£130 million Google-UK tax deal could be squashed by EU

European Commission

Google's 130 million UK tax deal could be crushed by the EU following complaints suggesting the arrangement amounts to special treatment.

Both the Labour Party and Scottish National Party (SNP) appealed to the European Union's Competition Commissioner, Margarethe Vestager, to investigate the terms of the deal and determine if it was unfair.

Vestager said she would be willing to investigate the 130 million settlement, which covers a period of 10 years and allegedly amounts to just three per cent tax.

Vestager told BBC Radio 4's Today programme: "If we find there is something to be concerned about, if someone writes to us and says this maybe not as it should be, then we will take a look.

Stewart Hosie, deputy leader of the SNP, said the fact little is known about how the 130 million figure was reached is of greatest concern.

"The truth is we know very little about the settlement reached between the tax authorities and the company. These discussions have taken place in private; little detail has been revealed by the Treasury and the methodologies employed by HMRC are shrouded in Secrecy," Hosie said.

"The only way to put these ... issues beyond doubt is to refer the settlement to the European Commissioner for Examination; a commissioner who is independent of the UK Government and who has a reputation for pursuing tax transparency," he added.

The arrangement is also set to be scrutinised by the Commons Public Accounts Committee, which is the hold a session on corporate tax deals on 11 February. Matt Brittin, head of Google Europe, plus three senior representatives of HMRC, will give evidence. The National Audit Office is also understood to be considering a call by Labour to carry out a formal probe into the matter.

The tax contributions of large tech multinationals have been a cause of controversy for many years, particularly since the 2007/08 global economic downturn and European Commission is currently investigating tax agreements between Apple and Ireland.

The EU does have precident for quashing so-called sweetheart deals, ruling they amount to illegal state aid for the companies in question. Belgium has recently been ordered to collect an additional 700 million from 35 companies, and in October overruled private settlements reached between Starbucks and the Netherlands and Fiat Chrysler in Luxembourg.

Nevertheless, both Chancellor George Osborne and Google insist that the deal is fair and appropriate.

Peter Barron, a Google spokesman, said the company complied with UK tax law, paying corporation tax at the standard 20 per cent rate.

Osborne meanwhile, told Sky News: "When I became Chancellor, Google paid no tax. Now Google is paying tax and I have introduced a new thing called a diverted profits tax to make sure they pay tax in the future. I regard that as a major success."

Jane McCallion
Managing Editor

Jane McCallion is ITPro's Managing Editor, specializing in data centers and enterprise IT infrastructure. Before becoming Managing Editor, she held the role of Deputy Editor and, prior to that, Features Editor, managing a pool of freelance and internal writers, while continuing to specialize in enterprise IT infrastructure, and business strategy.

Prior to joining ITPro, Jane was a freelance business journalist writing as both Jane McCallion and Jane Bordenave for titles such as European CEO, World Finance, and Business Excellence Magazine.