Is tax-avoiding Google telling the truth about UK engineers?

12 Nov 2012
Google's london office

Google exec tells MPs it doesn't pay much UK tax because it has no engineers here. Its website disagrees

Google has claimed it does virtually no engineering in the UK, saying that's one reason why it doesn't pay as much tax as many expect - despite pushing its London offices as a centre of engineering.

Google, alongside Amazon and Starbucks, gave evidence to the Public Accounts Committee this afternoon, attempting to answer questions about how much tax they pay in the UK.

Matt Brittin, the vice president of operations for Northern Europe, repeatedly stressed overseas operations must pay the Google's US offices for the IP it creates, saying no engineering happens in the UK.

"People in the UK are not doing innovation, not doing the computer science," Brittin told the committee during the lively session. "Google is not a British business, it's a US business."

People in the UK are not doing innovation, not doing the computer science

"We follow the rules that HMRC lays out," he said, adding "all of the engineering work is done in California".

That might be news to Google's UK engineering staff. Google's UK operations has 1,300 staff in total, some of which work in marketing and sales.

But Google's UK jobs website says its London office is "the company’s second-largest engineering office in Europe", with engineers working on AdSense, Mobile Apps, Voice Search, Local Search, Maps, Google TV, YouTube and core infrastructure.

There are currently 18 engineering jobs on offer in London. While that's far fewer than the number of jobs on offer in California, it's by far the most in Europe - and Europe is second only to the US when it comes to engineering job openings.

A current job advert for a software engineer in the UK states that: "You will design and develop systems to run Google Search, Gmail, YouTube, Maps, Voice, AppEngine, and more."

Value "created in the US"

Brittin said the company's value is created in the US, rather than the UK, hence the difference in the amount of tax it pays in each country. However, committee chair Margaret Hodge MP pointed out that large amounts of Google's revenue ended up in Bermuda, questioning what value that country creates for Google.

At issue is how Google pays taxes on money received, mainly for advertising, from UK customers. Google's US filings suggest the UK is its second largest market, after the US, and companies with UK addresses contributed $4bn in revenue. However, that is all routed through its EU headquarters in Dublin, while Google's UK offices are paid by the Irish office to have sales and other staff.

In its most recent filing with Companies House, Google UK said the Irish operations had paid it £395m, leading to profit of £31m and corporation tax of £6m. Asked by one MP how Google UK manages to charge so much for the work of 1,300 employees, Brittin responded that some of the cost was attributed to property and data centres.

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