The deal between Google and the UK authorities has reignited the debate on what we believe is the right level of taxation of multinational companies. However, whilst Google is the target of this wave of criticism, it is certainly not the sole cause or the evil empire that everyone makes out. Google, like every business around the world, is doing its fiduciary duty to minimise its tax exposure for its shareholders, whilst in constant dialogue with the authorities. All whilst receiving mixed messages from the Governments that set the laws and the very low corporate tax rates that are designed to attract them. The only way to end this debate is the creation of a level playing field of corporate tax rates across the world and comprehensive tax reform, where clarity and transparency from both corporates and authorities play a large part.
At a domestic level the UK has taken a number of significantly positive steps in recent years to make its corporate tax system more attractive to multinational investment. However, smaller enterprises have no need to undertake the tax planning multinational enterprises are required to. As such, while the UK needs to remain competitive internationally, a balance needs to be struck between achieving this and creating a level playing field for all corporates.
Despite this deal, the tax headache may not be over for Google as the Scottish National Party (SNP) has called for a probe and the European Commission has said it will investigate whether HMRC’s deal signifies ‘state aid’, should it receive such complaints and has been investigating and ruling on the tax arrangements of global companies for some months. Google could soon join the likes of Apple, ABInBev, BP, Starbucks and Fiat in Margrethe Vestager’s spotlight, which is not conducive to improved business and investment confidence at a time when businesses are facing many challenges, including turmoil in global markets.