Tax Avoidance and Multinational Companies

Baroness Hodge of Barking Excerpts

Wednesday 3rd February 2016 Commons Chamber

[Dame Margaret Hodge (Barking) (Lab)]

The most bizarre feature of the row over the past 10 days is that both Google and the Chancellor thought they had landed a public relations coup. Frankly, the arrogance of Google and the hopelessness of our Government take some beating. Just look at Google’s results announced this week. It now claims to be the world’s most valuable company. It claims with pride that it has cut its tax rate from 18% to 5%. If we look at Eric Schmidt’s own earnings—the man at the top is very proud of Google’s tax structure, saying “it’s just capitalism”—he was paid £76 million in 2014 alone. That is the equivalent of well over half of what Google paid the British public for all the money it has made out of the British public over 10 years.

[Joan Ryan]

Is my right hon. Friend concerned that the Google agreement could present a threat to future tax revenues by setting a very dangerous precedent?

[Dame Margaret Hodge]

I agree entirely. The Minister talks about the work done by the Public Accounts Committee. The law is not a complete ass. I do not believe that. When the National Audit Office looked at, I think, 10 cases—I will be corrected if I am wrong—it found three where HMRC had not abided by its own rules. Every time something like this happens, it damages British jobs and British businesses—nobody else. We have definite proof that a sweetheart deal was entered into with Goldman Sachs.

[Mr Gauke]

It was five cases, and in every single case Sir Andrew Park concluded that the amount collected was reasonable and the overall result for the Exchequer was good. Those are the facts.

[Dame Margaret Hodge]

No. With the greatest respect, those are not the facts. The judge looked at five cases. The NAO looked at 10 cases and found in three of them that HMRC had not abided by its own rules.

The reason the Chancellor and his team do not get it is the people they talk to about tax. A small army of tax professionals and multinational companies are the only people with whom they converse. I have to say to the Minister that there is a difference between good working relationships, which I applaud, and undue influence and preferential treatment, which I do not. Talking to stakeholders is a good thing. Being captured by stakeholders is a bad thing.

We just have to look at the evidence—and not just the 25 meetings held with Google. If we look at the Tax Professionals Forum, its members are KPMG, Ernst and Young, Grant Thornton and so on. There is nobody from any of the tax campaigning organisations. There is nobody from any of the charities and no academic with a different view. Ernst and Young made £250 million in recent years by advising Google, Apple, Facebook and Amazon.

Let us look at what the Minister has done. He appointed David Heaton from Baker Tilly to the Government’s advisory panel on the general anti-abuse rule, which was supposed to look at closing loopholes. That particular gentleman was captured on video describing

“ways to keep the money out of the Chancellor’s grubby hands”.

Let us look at what happened to Dave Hartnett—within six months he was going to work at HSBC and within a year he was going to work at Deloitte. Let us look at Edward Troup, who is now our commissioner on taxation. He wrote in the Financial Times that “Taxation is legalised extortion.” This is a small bunch of people who all have the same interests.

I want to make two other brief points. The Government say they want companies to pay proper tax, but the Government are obsessed with tax competition. That means far from tackling tax havens and so on, they are trying to make the UK an alternative best tax haven in the world. We only have to look at three changes the Government brought through on the control of foreign company rules, Eurobonds and the infamous patent box tax relief to see that that is right.

We do not know whether the Google settlement is fair, because under the existing law—the Minister is right—we cannot see it. I personally do not accept that HMRC properly challenged Google on the evidence the Public Accounts Committee collected, which demonstrated that it engages in economic activity here in the UK. I personally do not think the whistleblowers were listened to properly. Google does sell here. It does complete sales here. It does research and development here. Its economic activity is here. What on earth is that massive complex in King’s Cross for if not to undertake economic activity?

I have to say to the Minister that he has lost the argument on transparency. He ought to cave in gracefully and open up the books of these multinational companies so we can restore confidence.