THE BRITISH tax system should be simplified to reduce the chance of multinational companies such as Google abusing loopholes, according to a report released today by an influential group of MPs.
The public accounts committee concludes the web giant actively reduces its UK corporation tax by using the “deeply unconvincing argument” that sales to British clients actually take place in Ireland. This is despite the fact that Google employs hundreds of staff in London to work closely with UK clients on advertising accounts.
But the report also attacks a tax system that has “not kept pace with the way businesses operate globally and through the internet”.
As a result the MPs call on the UK government to take a leading role in simplifying international tax law to make avoidance even harder.
“The government clearly needs to act to strengthen HM Revenue & Customs and to simplify the tax code so that there are fewer loopholes,” says committee chair Margaret Hodge MP.
“The government should also consider greater transparency so that the public knows whether companies are paying a fair share.”
HM Revenue & Customs should now investigate Google’s tax arrangements and those of other large international companies, the MPs say.
The report also warns large accountancy firms to “recognise that the public mood on tax avoidance has changed” and consider the potential impact of their actions before setting up artificial structures for the single reason of avoiding tax.
The report comes after David Cameron was yesterday rebuffed by Bermuda in his attempt to make all UK overseas territories sign up to a new code on tax transparency.
The Prime Minister has made tackling tax evasion a key part of next week’s G8 summit but his Bermudan counterpart has indicated he will not sign up to share information before the meeting begins.