Google UK tax row: Here's what you need to know ahead of tomorrow's Public Accounts Committee hearing on corporate tax deals

Hayley Kirton
Follow Hayley
IF! Italians Festival 2015 - Day Two
Google has got some questions to answer... (Source: Getty)

At 10am tomorrow, representatives from Google and HM Revenue & Customs (HMRC) will face the unenviable task of talking tax deals with the Public Accounts Committee (PAC). Before it kicks off, here's our quick guide of what you need to know:

HMRC I understand, but why are Google being brought in on this?

The PAC undoubtedly has some uncomfortable questions regarding the technology giant's recent deal with the taxman to pay £130m in unpaid corporation tax.

Although that sounds like a hefty sum, critics, including shadow chancellor John McDonnell, have argued that Google should be shelling out a lot more, given the large amount of revenue it generates in the country.

However, Google has pushed back, saying that this isn't a so-called sweetheart deal, while chancellor George Osborne has called the arrangement "a victory".

I feel like I've heard this criticism levied at multinationals before...

You'd be right. The PAC's attention was sparked by a 2012 review of HMRC's accounts, which suggested that some global companies were finding it too easy to take advantage of tax system loopholes to avoid paying corporation tax.

At the time, the PAC slammed HMRC for not taking an aggressive enough approach towards collecting this money, pointing out that, if larger companies were being allowed to slide on the amount they paid, other taxpayers might have to pick up the slack.

So, I'm guessing the PAC really wasn't pleased to hear about Google?

Not really, no. Shortly after the deal was revealed, Meg Hillier, chair of the PAC, released a statement saying:

"HMRC now needs to assure taxpayers that it will keep up the pressure to tackle whatever the next emerging issue is in real time, rather than years later. It is effectively admitting it pulled in too little tax from Google for nine out of ten years. This is not a great success rate and the Public Accounts Committee will be calling in HMRC and Google to explain."

What's HMRC's track record for collecting taxes?

On the face of it, there's some nasty numbers. Recent estimates of the UK's tax gap – the difference between the amount of money HMRC should collect and the amount it actually collects – put it at £34bn.

However, HMRC points out that it has brought in more than £100bn since 2010 from compliance revenues, which is money that would have otherwise been lost had the organisation not stepped in, and slashed the gap related to corporation tax from 9.3 per cent of tax liabilities in tax year 2010/11 to 6.7 per cent in 2013/14.

Related articles