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

Google's london office

By Nicole Kobie

Posted on 12 Nov 2012 at 18:07

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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User comments

Apple escapes grilling!

Despite paying next to no tax in the UK, Apple has somehow escaped scrutiny.

By tirons1 on 12 Nov 2012

You expect PC Pro to scrutinize Apple?

Or criticize them in any meaningful way?

By kadmus on 12 Nov 2012

Squirm, squirm, squirm

Absolutely loved watching Amazon's Andrew Cecil being berated by the chair. Quality.

By bronven on 12 Nov 2012

MPs asking companies about tax avoidance? Kettle. Pot. Black.

By TiredGeek on 12 Nov 2012

Cash cow country

We pay more for goods than in other countries and receive less in tax. The US routinely treats us like a joke - and we are, in no small thanks to Westminster.

By dubiou on 12 Nov 2012

So...close the loopholes

It's the governments own fault but they are trying to say "How dare companies take advantage of the loopholes we have created and legally avoid tax"

By blueleader01 on 12 Nov 2012

Hi tirons1 and Kadmus - this story is a report from the PAC taking evidence from three companies: Starbucks, Amazon and Google. Apple wasn't asked to attend.

Nicole Kobie,
News Editor

By Nicole_Kobie on 13 Nov 2012

Do we care?

Do we really care? Think of all the individuals employed by these companies. They’re earning instead of being on benefits, spending in shops, restaurants and hairdressers (and paying 20% VAT on all of it), driving cars and paying the fuel tax etc. And the businesses themselves are paying rates. We could extradite Starbucks but their premises will either remain empty or become charity shops.

The better answer would be to abandon Corporation Tax and encourage free enterprise and employment. Governments are incapable of designing any taxation system that’s watertight, primarily because they’re not terribly bright people and secondly they spend most of their time fabricating their expenses claim.

p.s. @Cash cow country – then stop buying their products.

By SparkyHD on 13 Nov 2012

SparkyHD - Do we care?

These companies benefit from our society, that is the infrastructure, the security and stability, the skilled and educated workforce and many other aspects of this country and its people. They must contribute towards that and if they are avoiding paying their fair share then the rest of us are having to pick up the difference and thus are subsidising them. It is also an unfair playing field for our home grown competition whose margins could not hope to gain the tax benefits the internationals are extracting. If all of the businesses in this country avoided tax, then the rich, self-employed, higher earners so on and so forth, then the cost of running of the country would fall on the ordinary working people who can't avoid paying tax (and the country would fail as we cannot possibly pay for it all). It's so easy to lose sight of everything that supports our modern life, but it's there and it has to be provided, maintained, repaired, improved and replaced (from the roads to the military and everything else). This is expensive and is exactly why modern societies came about with regard to taxation and all the rest of it. These companies benefit from us, profit from us, so they must be made to contribute towards us. We had better care or it will lead to our demise.

By Binder on 13 Nov 2012

PCPro 4 Apple, Love Love, Kiss Kiss

Seriously, what has PCPro become? Even by Apple's own standards there is a distinct difference between a Mac and a PC. For over ten years now I have had PC Pro on subscription but that ends now. It is utterly unacceptable how biased in your reporting you have become. Your recent '100 best Mobile Apps' article is a joke, with about 50 of them only available on iOS. Look at your magazine's title guys, seriously... PC Pro... that's 'PC'... remember? Google get this full on article about their tax situation but somehow you only saw fit to publish a short paragraph at the footer of a Breakfast Briefing about how Apple only pay 1.9%.

And where's your full-on report about the many flaws of the iPhone 5? The internet is awash with disgruntled and unhappy customers, some of which are on their fourth phone already... but yet, nothing here on PC Pro or in the mag? Like a metal band that sells out to the corporation, you have sold your souls and forgotten what you're supposed to be. You no longer have an identity or a focus, so, I'm sorry but, "I'm Out".

By Jammyd0dger on 13 Nov 2012

@dubio

England has become the bargain basement shopping excursion for many Europeans.

5 years ago, Europeans used to go to Poland or Hungary for a shopping excursion, now Britain seems to be the number one shopping destination, according to reports, because it is cheaper than the former Eastern Block.

It might be more expensive than the USA, but it is certainly cheaper for many things than mainland Europe, especially software, like Adobe Creative Suite, Microsoft Office etc.

By big_D on 13 Nov 2012

@Jammyd0dger

Bye!

By creechitup on 13 Nov 2012

@big_D

by "England" I take it you mean the UK? ;-)

@Jammyd0dger isn't the only one. So leave him be. He's about the 40th person I've noted this year on pc pro who's said they've had enough.

By TigerUnleashed on 13 Nov 2012

i think Apple are different...

...because I don't think they do any R&D/engineering in the UK. I could be wrong, but that's what I've seen so far

I agreed with @SparkyHD though. These companies employ thousands of UK people, and it's their wages that pay for infrastructure, NHS etc. Corporation tax is just full of loopholes. Maybe the government should charge more tax on employees who work for corporations who are not HQ'd in the UK - that would encourage both UK bias (which is not a bad thing).

C

By Chatan on 13 Nov 2012

@Nicole_Kobie

I'm just commenting on your Apple coverage in general.

Not this article in particular.

By kadmus on 13 Nov 2012

Let's increase VAT

Abolish Corporation Tax and increase VAT, which seems more inescapable. That way Costa Coffee, who are paying millions in Corporation Tax, could afford to drop their prices to counter the VAT increase. Starbucks either remain uncompetitive or drop their prices in response and we get the same tax out of both companies via VAT.

Meanwhile avoid Starbucks by either drinking tap water (cheaper and healthier), buy a Nespresso machine or go to Costa’s.

By SparkyHD on 13 Nov 2012

Tax - ONS

If you examine the link :

http://www.hmrc.gov.uk/stats/tax_receipts/tax-nic-
receipts-info-analysis.pdf

You will see that UK has approx 10billion pounds of corporation tax income per year - the sums these businesses are not paying is significant.

We have an increasing debt due to the recession - hence if they operate in this country, they are using UK public to fund their business - they ought to pay their dues.

The money paid to outside recipients of this country means that this is wealth leaving the country systematically.

By shadders on 13 Nov 2012

Tax - ONS

If you examine the link :

http://www.hmrc.gov.uk/stats/tax_receipts/tax-nic-
receipts-info-analysis.pdf

You will see that UK has approx 10billion pounds of corporation tax income per year - the sums these businesses are not paying is significant.

We have an increasing debt due to the recession - hence if they operate in this country, they are using UK public to fund their business - they ought to pay their dues.

The money paid to outside recipients of this country means that this is wealth leaving the country systematically.

By shadders on 13 Nov 2012

Tax - ONS

If you examine the link :

http://www.hmrc.gov.uk/stats/tax_receipts/tax-nic-
receipts-info-analysis.pdf

You will see that UK has approx 10billion pounds of corporation tax income per year - the sums these businesses are not paying is significant.

We have an increasing debt due to the recession - hence if they operate in this country, they are using UK public to fund their business - they ought to pay their dues.

The money paid to outside recipients of this country means that this is wealth leaving the country systematically.

By shadders on 13 Nov 2012

Tax - ONS

If you examine the link :

http://www.hmrc.gov.uk/stats/tax_receipts/tax-nic-
receipts-info-analysis.pdf

You will see that UK has approx 10billion pounds of corporation tax income per year - the sums these businesses are not paying is significant.

We have an increasing debt due to the recession - hence if they operate in this country, they are using UK public to fund their business - they ought to pay their dues.

The money paid to outside recipients of this country means that this is wealth leaving the country systematically.

By shadders on 13 Nov 2012

******** SparkyHD *****

Jacking up sales tax to recover lost Corporation Tax is a false hood
One is a consumer tax, the other is not

By invalidscreenname on 14 Nov 2012

******** SparkyHD *****

Jacking up sales tax to recover lost Corporation Tax is a false hood
One is a consumer tax, the other is not

By invalidscreenname on 14 Nov 2012

People say this is a symptom of globalisation. I say it's a symptom of not enough globalisation. Google, Starbucks, etc have a legal obligation to their shareholders to minimise costs. In effect they're legally required to avoid tax in this way.

Most countries agree that setting reasonable levels of tax is a good thing. The EU, G# and yes the UN should set minimum levels of corporation tax, and end this race to the bottom which gives multinationals an unfair advantage over small domestic companies. Apply stringent penalties (eg trade embargos, restriction of travel) on parasite offshore and nearshore nations that accumulate company wall plates in return for low tax and no questions asked. MPs should have our international representatives in the dock, asking them why their not trying to change the system, not ask orgs with a profit imperative why they aren't acting charitably.

By brendan on 15 Nov 2012

Margaret Hodge is a Tax Dodger

http://www.telegraph.co.uk/finance/businesslatestn
ews/9668396/Margaret-Hodges-family-company-pays-ju
st-0.01pc-tax-on-2.1bn-of-business-generated-in-th
e-UK.html

She's a f*cking hypocrit.

By Lazy_Gun on 15 Nov 2012

Do no harm. Hah!

There's a lot of hypocrisy around, but saying that, it still does not get round the fact that zilch tax is paid here by a business that earns 4 billion in advertising and we are it's 2nd largest market.

Just because the messenger has dirty clothes doesn't mean the message is wrong.

Of course, since we are talking globally, take the situation to its global reach - if we had one united world with free trade and movement anywhere and one universal government imposing global taxes, tax'd be paid then, wouldn't it?
But who would go for it? Utopia.

By mdrees on 15 Nov 2012

mdrees, technology has already united the world. Govt needs to catch up.

It's not utopian, it's a pragmatic necessity. Individual countries' tax, libel, etc laws are becoming an unenforcable joke. Stronger international regulation backed up by harsh sanctions on countries that flout minimum standards on things like tax and secrecy is the only solution.

By brendan on 15 Nov 2012

Strange double standard

I'm amazed they get away with throwing their little tantrums in public to be honest.

Close the loophole, solve the problem.

What they dont say is that failure to enforce the loophole is an attempt to lower the effective rate piad to match that in Ireland, where Apple, Google, Paypal, Intel, Dell et al pay even less corporation tax., but where corporation tax is mostl urgently required to help boost the economy.

By Gindylow on 15 Nov 2012

Tax Turnover/Income

This way customer's don't pay twice and it will also have the added benefit of companies over-inflating income.

By Manuel on 15 Nov 2012

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