‘Just deal with it!’: MPs despair at taxman’s Google apathy

MPs are turning public anger about multinational tax-dodging on HM Revenue and Customs (HMRC), by pointing the finger at the taxman's failure to do more against Google's "highly contrived" tax arrangements.

The Commons' public accounts committee (PAC) said it was "extraordinary" that HMRC had not challenged Google's corporate arrangements on the basis that it seems "common sense" the legality of the internet giant's activities is questionable.

Google paid just $16 million in taxes to the UK government between 2006 and 2011, despite notching up turnover of $18 billion over the same period.

It took investigative journalists and whistleblowers to reveal Google's practices of claiming its sales to UK clients take place in Ireland – when there is now clear evidence the bulk of the company's UK sales do take place in Britain.

"The government clearly needs to act to strengthen HMRC and to simplify the tax code so that there are fewer loopholes," PAC chair Margaret Hodge said.

"The government should also consider greater transparency so that the public knows whether companies are paying a fair share. It should toughen up its proposals on public procurement to deny contracts to aggressive tax avoiders."

David Cameron has indicated he is prepared to use the G8 to clamp down on aggressive tax avoidance.

But he offered a more nuanced message in a briefing to journalists at the Foreign Press Association yesterday, telling them "I'm a low-tax Conservative" and worrying that "we can't have tax competition between countries".

"What we can agree about in this very globalised world, where companies are able to structure themselves in all sorts of different ways, [is] that we need more exchange of information," the prime minister said.

"We need more information about who owns what, we need a clearer set of rules of the road… I want them to invest rather than just pay taxes."

Google's chief executive Eric Schmidt insisted his firm was prepared to play by the rules and that he would remain in the UK "no matter what you guys do".

That seemed to back up Labour leader Ed Miliband's judgement that the UK could take much firmer steps against Google and even act unilaterally on the issue if agreement is not reached at the G8.

"For too long politicians have been cowed and not acted on the banks, on big media like Rupert Murdoch," Miliband told Politics.co.uk last month.

"I think we've got to try and do the right thing and do it internationally but if that doesn't work, we've got to do it domestically."

MPs used today's report to demand that HMRC and the Treasury work to develop proposals which would improve international tax transparency.

It found companies were able to "exploit the rules" by establishing structures in low-tax countries too easily.

Specific ideas could be developed improving the quality and credibility of public information about firms' tax affairs, today's report recommended.

HMRC responded by ignoring MPs' complaints about Google altogether.

"Since 2010 we have collected over £23 billion in extra tax through challenging large businesses' tax arrangements," head of business tax Jim Harra said.

"Through tackling transfer pricing issues, we have collected £2 billion since 2010 alone. We relentlessly pursue businesses who don't play by the rules, these results reflect this."