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Not Being Evil: Defending Google

Margaret Hodge is wonderful. The way she has turned the public accounts committee into the most effective campaign group in British politics today is deeply impressive. And most of the time, I agree with her. This time though, I share her ire but not its subject.

Google is a company operating in a well defined capitalist system of shareholders and markets. Its primary responsibility is to those shareholders and markets. I’m not saying that’s right or that I agree with the system. But that is the framework within which Google and all other companies operate.

The UK and international tax system currently does not oblige Google to pay more than the £10m tax it does on its estimated £11bn revenues in the UK. If it did, the company would: it’s not like it would walk away from a profitable business.

But until the law says that is the case, it’s very hard to see how Google can pay more tax. Imagine the script for the chief exec at an investor meeting:

“Next on the agenda, I’d like to give £100m of our profits to the UK taxpayer.”

“Why — have we not met our obligations?”

“No. It’s just that they think morally we ought to pay more.”

No investor — individual, pension fund manager, venture capitalist — is going to give up their return on investment. Because when someone has invested their money with you to manage, your moral — and legal — imperative is to look after it and maximise returns. Certainly I would be disappointed if the person managing my pension went around handing my money out to people who argued they had a moral case, because that is the money I hope to live on in old age. I think I have a pretty strong moral case to see my investment grow. If any CEO did this the investors would immediately and understandably be concerned about who was shepherding their investments.

Should Google pay more tax? Yes — by some orders of magnitude. But the law needs to compel it to do so. The UK and international tax codes are impossibly complex, riddled with loopholes and desperately in need of reform. Not just so that we can make Google and the rest pay their fair share of tax. But so that it is easier and cheaper for small businesses to open and operate.

This is where Margaret Hodge and the PAC should be directing their ire and efforts.

Tom Cheesewright