Britain has been privately lobbying the EU to remove the tax haven through which Google funnels billions of pounds of profits from an official blacklist, the Observer can reveal.
Treasury ministers have told the European commission that they are “strongly opposed” to proposed sanctions against Bermuda, a favoured shelter for Google’s profits and one of 30 tax jurisdictions in Brussels’s sights.
The disclosure is made in a memorandum circulated among Tory MEPs in Brussels that describes potential “countermeasures” against blacklisted tax havens as “unhelpful”.
Google is expected to announce on Monday that it has amassed £30bn of profits from non-US sales in Bermuda, where companies are not liable to pay corporation tax. The UK is Google’s largest non-US market, accounting for 11% of its global revenues, according to documents filed in America.
The revelation follows widespread condemnation of the “sweetheart” deal struck between HMRC and Google that saw the internet giant agree to pay only £130m in back taxes on the estimated £7.2bn that it earned in profits over the past decade.
Despite the outcry, chancellor George Osborne has insisted that the settlement is a “major success” and denied being soft on tax avoidance.
However, an investigation by this newspaper can reveal:
■ Britain has complained to the European commission about an EU blacklist designed to hit tax havens, including Bermuda, describing it as “misleading and deeply unhelpful” and rejecting suggestions of “countermeasures”.
■ Tory MEPs were instructed on six different occasions last year to vote against proposals that would clamp down on multinationals that engage in aggressive tax avoidance.
■ A transcript of an interview from 2006 with Real Business magazine has emerged in which David Cameron says he believes Google has “headquartered” elsewhere because “we’re no longer tax-competitive”. Osborne warned in the same year that Gordon Brown’s government was “pricing Britain out of the future” with its tax demands on the search company.
The shadow chancellor, John McDonnell, said that the revelations marked out government ministers as “hypocrites”. He said: “The mask has finally slipped. The Tories have been saying they want to clamp down on tax avoidance to the British people, but when they think our backs are turned they are telling their MEPs to oppose any measures to make it happen.
“The truth is they run a ‘don’t know, don’t care’ approach to tax avoidance.”
Liberal Democrat MEP Catherine Bearder said: “It is shameful that the government talks tough on tax avoidance at home, while secretly opposing the measures needed to tackle it abroad.
“This hypocrisy has got to end. Britain must start being part of the solution to tax avoidance, not part of the problem.”
The government’s reaction to the EU blacklist, drawn up last summer in an effort to protect member states’ revenues, is contained in a briefing note for Tory MEPs written by officials under instruction from Treasury minister David Gauke. Bermuda is one of 10 British Overseas Territories on the list.
The Treasury officials’ note, circulated in June, informs MEPs: “The UK has taken up with the commission that this list is misleading and deeply unhelpful. The communication also suggests that the commission might coordinate member state blacklists and a range of countermeasures. The UK is strongly opposed to this. It would extend competence and not provide a proportionate, tailored response to improve global tax transparency.”
On six occasions in the past year, Tory MEPs opposed proposals designed to squeeze more money out of big companies, including a vote last month on imposing sanctions on companies using tax havens. In November, Tory MEPs also voted against mandatory country-by-country reporting on tax receipts and the automatic exchange of information on tax rulings across borders.
In October they opposed the automatic cross-border exchange of information relating to companies’ tax planning within the EU.
And Tory MEPs voted in July against giving assistance to tax administrations in developing countries to tackle tax evasion. In March and January, Conservative and Ukip MEPs voted against a report calling for action to tackle tax avoidance, tax evasion and aggressive tax planning and a motion calling for the commission to commit to clamping down on tax fraud through legislation.
The MEPs’ voting record will have been a boost to Google which regards many initiatives emanating from the EU as a major risk to its business.
According to the latest accounts filed with the EU’s register of transparency, Google has 10 employees lobbying in Brussels, where it spent £2.7m on promoting the goals of the company in 2014.
The internet giant also held 67 meetings with members of the European commission last year, including with a senior official who works with the European commissioner, Pierre Moscovici. Moscovici last week announced plans to clamp down on “aggressive tax avoidance”.
A Treasury spokesperson said: “The government has led the way in the G20 to strengthen international rules that counter aggressive tax planning by multinational companies, and supported global tax transparency through the automatic exchange of information, which will help HMRC to crack down on tax evasion.”