The whole thing stinks of a so-called "sweetheart" deal. The best figure the American tech giant can keep on pointing to is that it did actually pay GBP20m in corporation tax on GBP3.8bn worth of UK sales in 2013. To do so, under normal accounting rules, the likes that you and I share with the corner shop and the local plumber, would have meant the giant only made around GBP100m profit. That would mean its cost Google GBP3.7bn to sell GBP3.8bn worth of ads to UK buyers. Unless order confirmations are currently being delivered carved out on gold ingots delivered by Beyoncé personally in a private jet, it's hard to imagine quite how the company could be making such a tiny profit on massive sales.
So, the GBP130m backdated tax, which of course it didn't owe but volunteered to pay, is pretty much in line with this ridiculous type of accountancy. I'm no expert, but usually when you see these kind of figures that don't make sense to the average person it's for the very reason that they just don't make sense. Typically a huge corporation will set up in the lowest tax regime possible and then ensure that profits are minimal by paying licencing fees to use its own name. As I remember, Starbucks was importing a whole load of coffee for European use through Switzerland, a country famous for mountains, secret bank accounts, opaque corporate tax relationships -- and not to put too find a point on it, being a land-locked country. One can only presume they have a very clever way of mooring cargo ships through chains that can span across several other EU countries or perhaps a teleportation device?
The end result is that typically Ireland's capital, Dublin, is used as a base. Ireland then runs out of money, despite have every tech giant imaginable base there, and has to be cap in hand to the European Central Bank for a bailout. To think there was actual widespread pressure on the British government to bail out the very country that sits next to our shores, offering a low tax haven through which the giants can reach our consumers without paying our taxes.
It leaves Europeans in a quandary. Do we hate the American tech giants more than our own politicians who got us into this mess? Facebook is top of the tax avoiders but it's so useful to see how successful our friends' kids are and share funny dog videos. Apple is about to be clobbered with an absolutely massive backdated tax bill which the Irish government will be forced to levy via Brussels, against which it has already said it will appeal, but the iPhone is pretty cool. Then there's Google. We know it's been doing all it can to somehow avoid UK tax, but how else are you going to find out what's out there on the Web?
I have a distinct feeling that brand image is starting to play a role here. The American tech giants are starting to feel they've taken candy from the baby for too long now and so Google has thrown a sum widely termed "derisory" at the tax authorities at the same time as its EU antitrust investigation rumbles on toward some conclusion this year. It will then, of course, be survived by its Android antitrust investigation. The wheels are very slow to turn in Europe, but they are most definitely turning. However, so too is public opinion. Europeans are simply fed up with having no EU equivalents to the American tech giants who flood our markets with stuff we love but which they should at least be taxed for. It's this change in public attitude that Google is just starting to tap into and thought it could buy off for GBP130m to represent ten years of tax apologising it claims it has never had to be sorry for.
The tide is turning. The relatively new European parliament is taking a far tougher line of American technology tax avoiders, and hence the European Commission is expected to take a tougher line than some might have expected when it eventually rules on its Google search case. Whenever I questioned Google execs on tax, they would always grimace and say they pay what they have to and that the company does great things for communities. It was always BS -- they knew and so did the public. Now at long last they could be on the verge of recognising it themselves.