Nothing is certain, it used to be said, except for death and taxes. But if death goes the same way as Google’s tax bill, then there will soon be no certainties at all. Instead, the grim reaper will extend a hand, and open a chat about whether and when you might like to die. That is not the way that the reaper, or indeed the taxman, approaches any ordinary mortal. Which is why ordinary mortals are roundly cheesed off about the behind-closed-doors deal between the revenue and the tech giant, which ended in an amicable agreement to graciously pay an arbitrary and inadequate amount.
George Osborne, normally a shrewd tactician if nothing else, gauged the public mood all wrong when he hailed the £130m contribution as a “major success”. It may represent an effective tax rate of something like 5% on the decade of profits it covers, some suggest considerably less. Nobody can say with precision, since the detailed information required to check the sums remains, predictably, veiled in secrecy. But when regular firms face a corporation tax rate of 20%, and when individual taxpayers pay a marginal rate of 20% or 40% with national insurance on top, sketchy numbers are enough to confirm that financial might and some byzantine, border-straddling structures combine to put Google in a privileged place. Corporation taxes used to attract no interest beyond the corporate world. But after years of austerity – and years, too, of energetic campaigning by forensic specialists, dogged parliamentarians and the agitprop activists of UK Uncut – every day men and women glance at big companies’ cosy tax arrangements and their own more rigid affairs, and howl at the contrast.
No 10 grasped what the chancellor had failed to, and distanced David Cameron from the Osborne boasts about the Google deal, a rare case of these close political friends spinning in different ways. In place of grating triumphalism, grudging pragmatism – “some money is better than none, and this was the best we could get” – is a more appealing sell. It is infuriating to see a democratic state rendered a supplicant by corporate power. One could forgive the exchequer for grabbing what it can, if this were the only option. But there is a better alternative – if only the will could be found. Rhetorically, the government is signed up to the OECD-led initiative to rationalise tax architecture, by tying the tax base in every economy to the real economic activity and associated revenues accruing to companies in every state. Already, that is in essence the way that the rules work in the US, which is how we know – courtesy of the reality-based tax returns Google has to file over there – that its sales from billing addresses in the UK reached a substantial $35.5bn over the years 2005 to 2014. But in Britain itself, corporate artifice is indulged: many sales to UK addresses are notionally assigned to entities in Bermuda and Ireland. Instead of urgently closing every last loophole, the government too often prefers to keep playing by the existing flawed rules.
This latest deal brings back memories of the similarly unsatisfactory bargain struck with Vodafone five years ago, and has some echoes, too, of another unprincipled deal that Mr Osborne once heralded, to draw a line under years of income tax dodging by wealthy individuals with Swiss bank accounts in return for a one-off levy. Inadequate tax demands in respect of the past also store up troubling precedents for the future. Now that Google has its deal, other transnationals, haggling with the authorities for similar treatment, will surely be strengthened. But as Britain drifts towards its familiar cringe with the begging bowl, there are more hopeful signs in Brussels, with the European commission recently showing itself ready to deem not only subsidies but also tax breaks to be unlawful state aid. If London can’t bring itself to get to grips with tax, the EU may yet force its hand.