The Public Accounts Committee (PAC) has become a vehicle for grandstanding, showboating and political profile-building over recent years. It was perhaps unsurprising, then, to see the latest cohort of MPs on the much-feared PAC sink to a new low during yesterday’s questioning of Matt Brittin and Tom Hutchinson, Google’s EMEA president and vice president responsible for tax. Statistics were abused, misused and disregarded, all in the aim of putting on a good political show.
Depressingly, the issue at stake – the role of corporation tax as a suitable revenue raiser – was largely skipped over. The MPs, presumably well-briefed if not well informed, had no response to Google’s legitimate claims that its global corporation tax rate of about 20 per cent of pre-tax profit is in line with the UK’s headline rate of corporation tax. Similarly, they had nothing to say about the fact that it has about 20 times as many software engineers – the people who create the products and services which generate Google’s profit – based in the US as in the UK. These facts are extremely important, but MPs instead held up Google’s £5bn of UK sales against its £130m tax deal and cried foul.
They are right to be outraged, but their anger is misdirected. MPs should be pointing fingers around the House of Commons, not towards executives hauled before them. Corporation tax is a tired, outdated, archaic, uncertain and inflammatory way to tax businesses. Fundamentally, it is a tax on profits or “value-added”. And whether MPs like it or not (and they appear to not), this has only an indirect and very complicated relationship with UK sales.
If MPs want to do something about it, they need to channel their enthusiasm into hauling our tax code into the twentieth, never mind the twenty-first, century. This means considering innovative – and more certain, less avoidable – alternatives to corporation tax, such as modest sales taxes and payroll levies on the top earners who create much of that value-added. The PAC is perfectly positioned to lead this charge and become a force for genuine change, where MPs use calculators as more than just visible props. But first, MPs need to climb off their soapboxes and, yes, grow up a bit.