The U.K.'s Google Tax Deal is Far From a 'Major Success'

UK Google tax deal
Google has reached an agreement with the U.K. government to pay £130 million in back taxes, but critics say the deal is too lenient. Justin Sullivan/Getty Images

It was certainly an embarrassing week for the Tories, and Chancellor George Osborne in particular. By claiming in a tweet on January 23 that the U.K.’s tax deal with Google was a “major success”, the chancellor completely misjudged the mood of the country and the commitment of anti-tax avoidance campaigners over the years who have helped put tax avoidance on the political agenda.

On January 25, I had an “urgent question” granted in the House of Commons which resulted in Treasury Minister David Gauke admitting he has no idea what rate of tax Google are paying. Since then the story has unraveled further and further.

On January 26, we found out that top Tories had met with Google chiefs 25 times in the run-up to the Google deal. Osborne, his policy chief Oliver Letwin, and ex-Tory chairman Grant Shapps are among 17 different ministers to have held talks with Google over the past two years.

On January 27, at Prime Minister’s Questions, Labour leader Jeremy Corbyn asked Prime Minister David Cameron: “Why is there one rule for multinational corporations and another for ordinary, small businesses and self-employed workers?” Cameron made no attempt at answering the question and instead disappointingly could only resort to the old-style knockabout politics.

And on January 28, EU officials confirmed they will look into complaints about the deal, the day after I wrote a letter to Margrethe Vestager, the EU commissioner for competition.

I requested an investigation under EU competition law because we are concerned that the deal could be breaching state aid rules by handing out favors to a particular company. Quite why Osborne would want to privilege Google, when he has done nothing for steel, is not clear.

But we’re also concerned that by creating a special loophole for Google here, we’re undermining the ability of our EU partners to levy taxes effectively.

Despite many requests, the government continues to refuse to publish details of the deal beyond the headline figure.

We believe £130 million ($185 million) to be significantly lower than a fair or reasonable assessment of Google’s U.K. turnover and profits would suggest, with experts suggesting that Google has been levied an effective tax rate of around 3 percent. With headline corporation tax set at 20 percent for nearly every other business in this country, the agreed deal is anything but a “major success”.

We need to ensure that the deal Osborne struck was not one that undermines our tax system and is not a deal that fires the gun on a new race to the bottom for corporation tax in Europe.

Given that the chancellor has personally intervened in the EU renegotiation, it would seem odd if he doesn’t now intervene to get a better deal on the taxation of big multinationals. Otherwise, it will give the appearance that he can bend over backwards for Google, but he can’t raise a finger to help our steel sector or get a fair deal for taxpayers.

John McDonnell is Britain’s opposition Labour Party shadow chancellor.