Tax evasion is in the news again. This time, due to Google agreeing to pay £130m in back-taxes on profits earned in the UK. The Conservatives have praised the multinational for agreeing to the demands, following a 6-year investigation by HM Revenue and Customs, but others are somewhat skeptical as to the sum.
John McDonnell, the Labour Shadow Chancellor, has ridiculed the ‘new sweetheart deal’ between HMRC and Google, estimating the £130m sum to equate to only a 2.77% tax on Google’s UK-based profits over the last decade, amounting to £7.2bn. Bearing in mind that tax-paying citizens of the UK typically pay around 20% tax on everything from shopping to income taxation and beyond, this figure quickly appears paltry, but no doubt a step in the right direction, moving forward.
Google’s back-tax payment was seen to polarise the debate surrounding tax evasion within the EU. George Osborne, the Chancellor of the Exchequer, praised Google for paying the sum, saying that it was ‘a huge step forward’. Others, even within the Conservative party, have questioned the size of the back-payment and John McDonnell – the Shadow Chancellor of the Exchequer – labelled the deal ‘derisory’ and that it was merely another form of ‘sweetheart deal’.
On Monday, the House of Commons Treasury Committee launched an investigation into the state of the UK’s tax system, in light of the Google backtaxes payment, and will question whether UK tax should be quantified by revenue instead of profits. Andrew Tyrie, the committee’s chairman, stated that UK tax law has become ‘too elastic’ and that more should be done to tackle tax evasion.
Step into the fray, Margrethe Vestager, the EU Commissioner for Competition. Taking up the role in 2014 after a nomination from then Prime Minister of Denmark, Helle Thorning-Schmidt, Vestager was quick to begin investigations into a host of multinationals for tax and antitrust reasons; Apple, Starbucks and Google for tax evasion, Gasprom, the controversial Russian oil conglomerate, for unfair market pricing practices and Google – again – for antitrust reasons, are just a few of the many companies investigated. Among her key responsibilities to the EU Commission lies the need to ‘effectively enforce competition rules in the areas of antitrust, cartels, mergers and state aid’. She has often labeled the ‘sweetheart deals’ of Apple, Starbucks, Google and Amazon within the EU, as ‘state aid to the extreme’ and as such, has raised serious concerns as to these such practices.
Before she became Competition Commissioner, her political career lay in Denmark and is impressive to say the least. Vestager has a ‘no-nonsense’ approach to politics and – as such – has had few qualms targeting high profile companies or fighting policy decisions of the previous Thorning-Schmidt Social Democrats coalition government. Vestager was leader of the Social Liberal Party – the second largest party in the coalition at that time. Not to say she is not diplomatic in her approach. Her tenacity and political track record has garnered huge support in Denmark and the rest of the EU and she is often compared to the U.S’s Attorney General, Loretta Lynch – Lynch was the driving force behind the widely-publicised FIFA corruption investigation that gained traction in the media back in 2015, ultimately leading to FIFA President, Sepp Blatter – amongst others – resigning after continued pressures.
But, naturally, by the sheer scale and direction of her investigations, Vestager is not without critics. Most recently it was the turn of the Conservative’s Mayor of London, Boris Johnson, to criticise Vestager and EU policy in general. Johnson, in his regular Telegraph column, stated that it was ‘not up to the EU Commission to target tax evasion by companies such as Google’, but that it lies with individual states and their respective governments to set policy.
Many in politics and the media, however – as well as EU citizens, with 8/10 agreeing that more must be done to fight tax evasion – feel that the Google back-payment implies that the tax evasion trade winds are changing.
This change is something that should not only be trumpeted, but should also be identified as due to the continued work and efforts of Margrethe Vestager.