Google's £130m tax deal not a 'lower special rate', says minister

The Government has been forced to deny that Google's deal to pay £130 million in taxes owed over the last 10 years amounted to a "lower special rate" for the internet giant.

Treasury Financial Secretary David Gauke was ordered to come to the House of Commons to answer questions from MPs on the deal, which he hailed as "solid evidence" that firms are responding to strengthened rules.

His defence of the agreement came after London mayor Boris Johnson hit out at the "derisory" sums paid in tax by some technology giants.

Mr Gauke insisted the UK does not agree "special deals with any taxpayer" but caused frustration among MPs by insisting he was limited in what he could say about the Google agreement.

Asked directly whether Google had "broken any laws", Mr Gauke said: "I cannot comment, in large part because I'm not privy to information that is not in the public domain. I cannot comment on that.

"What I can say is there is an inquiry that has been in place for some years. That inquiry has now reached a conclusion. The consequences Google has stated of the conclusion of that inquiry is that an additional £130 million is being paid to the Exchequer.

"I think Google has also made it clear that they have made changes in the way they structure some of their arrangements and that will have an implication for future tax liability."

He insisted: "The statement made by Google at the end of last week is solid evidence that companies are changing their models and reviewing their structures because we have strengthened the rules."

Mr Gauke was forced to respond to questions in the Commons from shadow chancellor John McDonnell, who said the deal had caused "confusion" among the Tories, with Chancellor George Osborne initially hailing it as a "major success" but Downing Street describing it merely as a "positive step forward" and Boris Johnson labelling it "derisory".

Mr McDonnell said there were a number of unanswered questions about the deal, including whether Google's "effective tax rate" was 3% for the last 10 years and whether the internet firm was changing its structures.

Google's sales were valued at £3.8 billion in Britain during 2013 but it paid just £20.4 million in UK taxes that year.

Between 2006 and 2011 the company's revenue in the UK hit around £12.6 billion but its corporation tax payments for the period totalled £11.2 million.

Mr Gauke dismissed suggestions that Google was paying a 3% effective tax rate, stressing that corporation tax is not based on profits relating to sales.

In his column for the Daily Telegraph, Mr Johnson said he largely agreed with calls for tax dodges to be halted and said multinationals must hand over more to UK coffers, but stressed firms are not to blame for taking advantage of loopholes.

He wrote: "It has never seemed fair that some of these companies - no matter how wonderful the service they provide - should be paying so much less in tax than the high-street tea rooms and bookshops they have pulverised.

"It would be a good thing, both for the UK finances and for the image of these great companies, if they paid more."

Mr Johnson said the "problem does not lie with the firms", insisting: "We should recognise that the fault in the whole affair lies with our national arrangements - our own system for not getting a fair whack from the tech giants."

He added: "George Osborne has made progress. The Google payback is a start. We now need to go further. We want, need and deserve these companies somehow to pay more tax in the UK."

Google reached the agreement with HM Revenue and Customs over taxes it has owed since 2005 and will also start to pay tax "based on revenue from UK-based advertisers, which reflects the size and scope of our UK business".

It comes after years of criticism of multinational firms over their arrangements in the UK and across Europe.