As has been widely reported in the press the Public Accounts Committee (PAC) held a session on corporate tax on Thursday 11 February, where representatives from Google and HMRC were quizzed by MPs. This hearing is the latest development in the ongoing public debate on the taxation of multinational enterprises.
Following the widely reported Google tax settlement the PAC called both Google and HMRC to give evidence as part of their enquiry. The committee were interested to understand the breadth of the tax enquiry and the constituent parts of the tax settlement.
The Google executives explained the size of the UK business relative to the global market outside of the US, where value was created and why its current structure did not impact materially on the tax profile in the UK.
They emphasized the need for increased simplicity in the international tax regime and were supportive of the OECD’s base erosion and profit shifting (BEPS) project. On the subject of transparency, Google explained that the information they had supplied in relation to the UK tax audit was far in excess of what was typically provided by corporate taxpayers.
HMRC went on to explain some of the complexities around conducting a tax audit in the digital sector, which is rapidly changing and experiencing exponential growth. These factors in particular make it difficult to extrapolate results for future years in the same way as can be done for certain more mature sectors.
In responding to challenges as to the treatment of large businesses compared to other taxpayers, Jim Harra, Director General of Business Tax, confirmed that at any one time approximately 67 percent of large businesses will have open enquiries with HMRC, the figure for small businesses being approximately 12 percent.
Lin Homer, Chief Executive of HMRC and Ed Troup, Tax Assurance Commissioner, who also attended the session, responded to questions on the six Commissioners and the internal governance processes around tax settlements.
As part of the session, the Committee explored the sharing of information between tax authorities and whether the UK could do more to work with other jurisdictions in tackling some of the issues particular to international tax. HMRC explained the current collaboration that goes on between the UK and five other jurisdictions to build up knowledge and expertise (the E6 group).
Ahead of the hearing, HMRC published a factsheet on their dealings with multinationals. The factsheet is intended to "help dispel myths which have arisen about how HMRC ensures compliance among multinationals”, and contains information on HMRC’s approach to ensuring that large companies remain compliant. It also highlights new measures planned for Finance Bill 2016 including the proposed requirements for large businesses to publish their tax strategies, and ‘special measures’ for those engaged in “aggressive tax planning”.
Readers may also be interested in a recent blog post for Responsible tax for the common good, an independent project curated by the think tank CoVi and supported and sponsored by KPMG in the UK, by Jane McCormick, Global Head of Tax at KPMG, which takes a look at the recent tax settlement debates in the media, the taxation of multinational corporations, and tax transparency.