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back to article Google 'DOES DO EVIL', thunders British politician

Even as its I/O shindig in San Francisco dominated the headlines, Google was today accused of lying over its claims last year that it makes no sales in the UK - in order to justify its tiny UK corporation tax bill. The web giant keeps its vast UK ad revenues out of reach of Blighty's taxmen by insisting that a team in Ireland …

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Mushroom

An open letter

Dear Ms Hodge (and other MPs involved in this),

Please stop wasting our money with these Parliamentary panels and meetings with large corporations where you accusing them of acting immorally and legally avoiding paying tax and all they say is we're following the letter of the law.

Either change the law to make these profits taxable or save us some money and shut the fuck up.

Google are not going to suddenly start paying extra taxes they don't have to just because you get upset about it.

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Re: An open letter

While I agree with what you're saying, it sounds like the possibility exists that they aren't acting legally. If so then it should be investigated.

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Stop

Re: An open letter

IF Google are selling in the UK, then what they are doing *is* illegal.

Google say they are not selling in the UK.

PAC say "it sure as hell looks like you're selling".

Google say "no really we're not".

The next step is a court case to determine whether or not they are selling. If it turns out that they are selling, then (1) they *are* doing something illegal in not paying (much) UK tax and (2) they also did something illegal by lying to PAC.

Yes, there may be a need to change the law to make the definition of "selling" clearer, or whatever, but that is a separate discussion.

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Re: An open letter

"If sales are being concluded in the UK, you're misleading [UK's taxmen at] HMRC."

""You're a company that says 'we don't do evil' and I think you do do evil in using smoke and mirrors to avoid paying tax," she said."

She's not accusing them directly of doing anything illegal as she knows that here evidence isn't strong enough and Google's legal team will destroy her. She only mentions avoidance (which is legal) and suggests that if they were selling in the UK then they would be misleading HMRC.

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Re: An open letter

This comes down to the issue of somantics and what selling actually is.

On the governments side of the fence, selling is the act of pushing the deal, which is what google employees are being told to do. You get a customer you convince them to buy a product and then to seal the deal you forward them to your "sales department" which effectively reads the details back to the customer, and then gets them to agree to the contract.

Google are arguing that the sale is the process of closing the deal, which is what the sales department are doing.

This is one of the problems with somantics, everyone interprets them in the way that best suits them. Personally I'm in agreement with the government on this one. Even though they aren't the ones finalizing the deal, the UK workers are still attached to the sale (otherwise how would they get their bonus?)

Honestly though I'm still worried that if these 'loopholes' are fixed it'll just drive business away. Why stick around in the UK and pay our incredibly high taxes, when they can close down shop and move everything to ireland where it's cheaper for them.

I'd still argue that if / when these loopholes are fixed, a tax cut would be in order, just to encourage big business to hang around (as well as encouraging others to come back)

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Stop

Re: An open letter

AIUI proceedings of parliamentary committees are covered by parliamentary privilege, so if Ms. Hodge chooses to call Google liars, she can, although I suspect there are etiquettes around this sort of thing (like MPs can't call each other liars).

I see this whole exercise as a little bit of grandstanding ... maybe a warning shot across the bows. It sounds like HMRC have pulled their finger out and found *something* to beat Google with, and this is a very public way of telling Google they might not want to press the issue. At least I'd hope so. Otherwise the message the entire world is getting is "UK plc is run by a bunch of powerless tossers". Which may be true, but I'd rather it wasn't.

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Re: An open letter

So if Google are selling in the U.K. this is illegal, but if they are marketing it's OK.

So when does marketing become sales ?

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Anonymous Coward

Re: An open letter

"Copyright minister: Google has better access to No. 10 than me"...

From the other Reg article today we know its all smoke and mirrors. The exact same politicians continue to be influenced more by Google's lobbyists. But they have to be 'seen' to be doing something for the economic good of the country...

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Boffin

Re: An open letter

A long time ago - when it was invented.

Market=large scale selling.

Don't worry - you've just swallowed a large dose of doublespeak - it will wear off later and you will probly feel a bit grimy, so take a shower.. you are't the first and you won't be the last.

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Joke

Re: An open letter

>So when does marketing become sales ?

Marketing are the people who hold the customers down while Sales screws them..

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Re: An open letter

isn't the next step, HMRC taking a really good look at the books? It ought to be....

If the company was in the wrong, they blame some individual engineer accountant, and start negotiating on some settlement for the difference.

Court cases come much later

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Anonymous Coward

Re: Google's legal team will destroy her.

Like Apple's clearly failed to do recently? It's almost like British Justice isn't as easy to buy as American....

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Re: An open letter

Margaret Hodge and the Public Accounts Committee aren't part of the government so probably can't do much directly to change tax legislation. They can however keep banging on about this, keep drawing attention to it and eventually the public mood may harden enough that the actual government feels compelled to act.

I can't imagine that George Osbourne would even be saying a single word on the matter if tax avoidance wasn't hitting the headlines so much at the moment.

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Anonymous Coward

Re: An open letter

No one ever got rich being moralistic.

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Mushroom

Re: An open letter

We all know EXACTLY what Google is doing:

'Thank you for purchasing our ad program, Mr. Smith! Sign here...just disregard that the invoice says "Google Ireland' even though we're both here'

Smoke and mirrors, indeed. Many companies pull these shenanigans and yes, in this case it is only to say "We don't sell here!" when in actuality the accurate statement is "We just don't invoice, here'".

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Boffin

Re: An open letter

The next question is to see what the VAT rate is.

~If they are charging you the Irish rate then fine

If they are using the UK rate then they are in deep shit with the HMRC.

Just like Adobe.

Buy a download and it is fulfilled form Eire. Buy a boxed copy (cue funeral march music) and it is fulfiled from Scotland.

One attracts the Eire VAT rate and the other the UK's 20%.

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Anonymous Coward

Re: An open letter

Truly the amount being spent on this is as worth it as it was on a certain excellent value-for-money MP who spent our taxes employing a crony on PR for herself.

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Anonymous Coward

Re: An open letter

"So when does marketing become sales ?"

It's an interesting question and one that was covered in the article - it's what is being referred to as "the line" that they're debating. If staff have the power to negotiate and enter into contracts AND habitually use that power, then they're conducting sales, rather than marketing. That's the taxman's line. If it came into court there'd also be consideration of the reasonable intent and on that count having sales commissions on the payslip is pretty damning.

The problem is the PAC is toothless in this regard. They aren't a court, they aren't operating with any kind of legal force - parliamentary committees operate purely with consent in an informal investigatory role.

Now that normally wouldn't be a problem, because when a senior MP comes knocking on the CPS's door, they will listen. Unfortunately, in issues of tax evasion, there is an absolute quagmire of jurisdiction, with HMRC's archaic prosecutory powers clashing with those of the CPS and their investigatory powers clashing with those of the plod. Up until very recently there were even insane situations whereby if HMRC had conducted a civil investigation into your affairs you were then immune from any criminal prosecutions.

HMRC lacks the will and resources to investigate or prosecute these kind of cases effectively and the CPS have their hands tied politically (it isn't "their turf"), so we end up with a situation where HMRC just takes multinational companies at their word that "nothing illegal" is happening and no substantial investigation can take place to verify that.

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Re: An open letter

"So when does marketing become sales ?"

Never really, marketing are the people who analyse whether your ad campaign worked after you bought it. I think you're thinking of advertising.

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Re: An open letter

> So when does marketing become sales ?

A commission implies that a transaction has taken place.

Therefore, it's sales when the employee earns a commission.

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Re: An open letter

Wowfood: Somantics? Really boring detail?

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Re: An open letter

" Why stick around in the UK and pay our incredibly high taxes, when they can close down shop and move everything to ireland where it's cheaper for them"

In the case of Amazon, because they'd lose the £4bn in sales. I don't think the population of Ireland is going to take up that slack. Amazon need us much, much more than we need them.

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Re: An open letter

"Either change the law to make these profits taxable or save us some money and shut the fuck up."

Amazon, and probably Google, are acting illegally. They are engaged in fraud by claiming that their UK business is a supplier of services to its Luxembourg company. It isn't; the whole business of buying a book from amazon.co.uk is carried out in the UK. Luxembourg is as irrelevant to the process of buying a book as it is to everything else.

I agree that all this yakking is pointless. People should be doing time and/or Amazon and co. should be finding that their IPs are blocked at a European level, or at least a national level until they stop engaging in these tax evasion activities. There are plenty of other places to buy books from, and there are other search engines than Google, so it's not really a big deal if they are held to account, IMO.

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Re: An open letter

What have politicians got to do with it anyway? They are just supposed to legislate.

The courts and HMRC are the bodies who deal with it, anything said in Parliament is just grandstanding trying to make a name for themselves.

While we believe that Google may be in the wrong (teithing fuckers is the current term) we also know this is the same for 90% of the corporations.

What pisses us off is not really the corporations, but the hypocritical lying fuckers called politicians (again the current term in the office) Who use the same schemes to line their own pockets as the big companies.

The politicians just don't get it.....

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Re: An open letter

@wowfood "Why stick around in the UK and pay our incredibly high taxes, when they can close down shop and move everything to ireland where it's cheaper for them."

Because you do not then allow them to do business in your country or to take advantage of the infrastructure of your county. And other players step up to fill in the gaps left by this company.

Our high taxes would not be so high if people paid them, laugh at the Greeks as much as you like, we are the same.

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Re: An open letter

Or, thank you for purchasing our ad program, I will walk you through the process of logging onto google.ie to set up your google wallet and agree to the contract.

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Headmaster

Re: An open letter

"This comes down to the issue of somantics and what selling actually is"

I think it comes down to semantics

Somantics is

"The Somantics concept is a a suite of applications that use touch, gesture and camera input to encourage, capture and amplify the interests of young people with Autistic Spectrum Conditions and other related communication difficulties."

If you're going to talk language, get it right.

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Anonymous Coward

Re: An open letter

" But they have to be 'seen' to be doing something for the economic good of the country..."

fine, they can return their salaries and all the dodgy expenses over the last decade

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Coat

Re: An open letter

"If you're going to talk language, get it right."

Agree - you could even try using Google:

https://www.google.co.uk/search?q=somantics

Did you mean: semantics ?

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Re: it sounds like the possibility exists

No it doesn't. It sounds like a politician is pissed off and demagoguing the issue. If MP has the evidence he should produce it. If it is a real whistle blower there are laws that protect them so long as the government wants them protected. Or is innocent until proven guilty even less of a reality in Old Blighty than it is in the US?

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Re: next step is a court case

assuming of course the MP has actual evidence as opposed to a well written bluster that plays well with the masses he is trying to buy off with Google's money.

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Re: This comes down to the issue

First up it's 'semantics.' And I'll agree with the bit about everybody spinning them to their own advantage. I'll disagree about the bit on who is right. The lawyers will tell you that you don't have a sale until the contract is signed. If the signing is taking place in Ireland, that's where the sale is made. The lawmakers can always update the law to change how the lawyers have to interpret it. I also concur about lowering taxes, but then I'm one of those crazy 'Merkin rednecks the UK socialists who visit El Reg consistently downvote on economic issues. So even though you're right, it won't get any traction.

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Re: An open letter

Except if it isn't a commission on the sale but a bonus for marketing success and it just so happens that the way in which you are confirming the marketing success is the increase in sales.

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Re: high taxes would not be so high if people paid them

Seeking low taxes is a rational behavior. If Google were seeking to pay the HIGHEST taxes they could, I'd invest in another company. Same with Amazon. Pretty soon both would be broke. Just because you think it's the appropriate tax rate doesn't mean anybody let alone everybody else does. That's why there's supposed to be an objective legal standard by which compliance is measured. Yelling and screaming about it in public is just demagoguing it. I really would expect Brits to be more familiar with the inevitable outcome of the bread and circuses route than 'Merkins are.

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Flame

This was always going to happen ...

tax law being so labyrinthine, Google were always running a risk that if they didn't play nicely, HMRC will find *something* to hit them with. Same for Amazon.

(It's the same principle as never *ever* piss off a traffic cop. You could be driving a brand new car out of the showroom, and he'd find something you can be charged with.)

Returning to the fray, I can't help but feel rather than trying to twist and crowbar the existing system to fit the emergence of the online universe, our politicians should be DOING THEIR FUCKING JOB and working on devising a new paradigm. And no, I don't have any answers ... but then I'm not paid to.

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Anonymous Coward

Sigh...it's so easy.

Dear Google.

Pay your taxes that we believe you should or we will never give you ANY business.

Yours H.M. Government.

And watch them go Oh look we forgot these sales people, silly us.

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Anonymous Coward

Re: Sigh...it's so easy.

and what do you "believe" should be right amount???

yup, oh so frickin' easy - to mouth off. How about some rules instead of picking a number out of thin air.

Oh, we have rules you say?!? Then either STFU or change the RULES!

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Facepalm

Re: Sigh...it's so easy.

Really, a UK government openly taking part in extortion, blackmail and encouraging bribery?

Wow, I'm sure there be no implications with that...

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Meh

Evil.

It was pretty smart to have 'Do No Evil' as part of the company ethos. Nothing they are doing is evil (douchey yes but not evil). It takes a lot to descend into evil and ascribing evil to things like tax evasion/manipulation/dodging/minimization or patent and product protectionism or personal privacy demeans the word evil. Are Google guilty of being a bunch of festering assholes in a lot of things; Yes. Are they being evil; No.

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Anonymous Coward

Re: Evil.

On the contrary, it was a bloody silly idea to have "don't be evil" as a corporate slogan. For one it makes them sound like teenagers and for another it makes the staff that work at Google think that they can do pretty much anything. The thought process goes along the lines of "I work for a company who don't do anything evil, therefore what I'm doing must be all above board."

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Happy

Re: Evil.

That's precisely why it was smart. They can be complete dicks if they want but they aren't betraying the ultra high (low?) bar they set with 'evil'.

I doubt if individual employees take notice though. Do you really buy into your company mission statement? I don't think I've met anyone who really believes all that crap. They should say "Our mission is to make money" & skip the bullshit.

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Joke

Re: Evil.

Google don't pay taxes. Governments don't have as much money. Care homes get closed or have less money. Kids at risk. Ergo Google are Evil!

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Re: Google don't pay taxes.

Google pays it employees and stockholders more. Care homes and poor houses aren't needed. Kids not only get to eat, they get to pay for college. Ergo Google are not Evil!

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Anonymous Coward

Time for a sweetheart deal!

Time for Google and HMRC to have a nice cosy chat in a backroom somewhere to agree a deal that allows Google to pay a miniscule amount of extra tax, minus the usual penalties and interest charges we'd be stung with if we evaded tax. Either that, or Google will be shocked and saddened to find that it's UK office has been acting contrary to corporate policy, with the rogue managers sacked forthwith.

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Is it so easy?

Imagine you, as a UK company makes Super Widgets from your manufacturing based in Wisledon. You have a factory of 50 people making them along with admin employees, sales and marketing.

They sell well and you branch out, selling them in Europe. Do to the need for demonstrations and language barriers you employ some people in France and Italy to cover those regions. They demo the product and take a purchase request which gets sent back to Wisledon. The invoice is raised and sent out along with the goods.

Now should your company have to set up limited companies in France and Italy, along with auditing and local legislation (and then also in Germany, Poland, Denmark etc as you expand)?

Therefore it isn't balck an white, how many staff do you have to have before you need to start paying taxes in that country, how many sales do you need, what constitutes a sale, does the product need to be manufactured there, does a virtual product need to reside there... not easy just to create a law to cover it. Combines with EU open trade agreements and legislation and it gets harder still.

Now if you are a US company coming to Europe to trade and you need to set up a sales office in one location to simplifiy accountancy, auditing and other requirements are you going to choose the highest Taxed country or the Lowest assuming all else is equal?

Does the UK government call in UK companies who are trading abroad and criticise them for not paying their fair amount of taxes to other countries where their goods are purchased?

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Re: Is it so easy?

Nicely argued and obviously a valid point but I think that it is not so easy. Sure, Ireland (as in Google's case) has a nice little earner but the Irish staff are not doing the majority of Google's business in Europe. I suspect that there is far more 'product' and 'sales' work carried out in Google offices in UK, France, Germany etc than in Ireland. If this is the case then the governments of these countries have a obvious interest in getting their hands on some of Google's profits.

Just because Ireland, Luxembourg (and I'm sure UK also) have wangled some nice little tax schemes doesn't mean that there is any natural justice in their schemes and that allows politicians all the justification they need to try and put a stop to it.

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Re: Is it so easy?

Well that is the issue. It is not so easy to create a law - which has to be black and white once case law is created. Any grey areas just create loopholes and tax avoidance.

So, if you say that a lot more 'product' and 'sales' work goes on in the other countries - then is this the definition in law? Every country that has more customers than the parent company has to be set up for local taxes on all customers in that country?

Not exactly fair though is it. If, the UK for instance, has 1million customers of company x and they are based in Ireland which has 900,000 customers then they pay corporation tax to the UK? However they have a push and get 1.01 million customers in Ireland and now they can stop paying tax altogether in the UK? What about smaller countries with a lower user base, will they never get tax from any business that isn't based in their boundaries?

Maybe it goes on company size? Well Google employ 3000 people in Ireland but only 1,300 in the UK. Therefore they would be right to HQ in Ireland, surely?

Maybe everywhere you have a customer you have to pay tax on that customer? Well this isn't corporation tax, it's duty and VAT.

So do you split their profits among all the countries based on a factor - but what? Customer size, Customer revenue, staff numbers? This would be a loophole any decent accountant could drive a truck through. You are likely to kill off the super-widget maker's dreams of European sales mentioned above. What if the customer buys goods from the internet in a country that doesn't actively market there?

In reality in a free market in Europe a company should be allowed to choose when to set up their headquarters. The same way that Wales or Scotland might reduce taxes for the Amazon warehouse in Swansea or Edinburgh. The same way you can choose to buy something from France if it is cheaper and you live in the UK.

It's not straight forward, if it was then there'd be legislation already.

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Re: Is it so easy?

The answer to most of your questions is:

you get an expert in to advise. And obey the law!

The answer to your last is;

don't be so effing thick, the uk gov is not responsible for collecting taxes for other countries

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Re: Is it so easy?

The same way you can choose to buy something from France if it is cheaper and you live in the UK.

try doing that with a truck load of fags - see how far you get.

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Re: Is it so easy?

No, but if Super Widgets UK Ltd is trading in France, they have to pay French taxes on the profits they make there. The French division of the company would "buy" the widgets at factory gate prices, pay for shipping to France, pay for the French staff, get money from selling them, and pay tax on the profit. You would have to negotiate a factory gate price if you don't also sell the widgets in bulk to other distributors.

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