Corporate tax has hit the headlines again, in a big way. US internet giant Google has reached an agreement over its tax affairs between 2005 and 2011 and has settled with a £130 million payment. A row has erupted over whether this is enough or not.
The problem is that we will never know how the deal was arrived at. Rightly so: everyone's tax affairs are a matter of privacy between HMRC and the individual concerned. That includes companies, although companies are required to publish their accounts and a publically listed company like Google has further disclosure requirements. Whilst it is extremely frustrating that we cannot see details of this arrangement - as a member of the Treasury Select Committee I am very interested indeed in this - I would never want private individuals living in Wyre Forest to find their private affairs published on an HMRC website. Moreover, no ministers get to see this either. HMRC is known as a non-ministerial department. This means that the Treasury has no day to day oversight of the work done in HMRC, rather it sets policies and ensures that HMRC's objectives - to maximise tax revenue for the UK - are met. The reasons for this ensure ministers cannot give political favours (reducing a friend's tax bill) or put undue pressure on opponents (launching a tax enquiry against the Leader of the Opposition in the lead up to the general election, for example).
Google (and other's) tax affairs are a matter of international tax law and this is a fiendishly complex area. This country, however, leads the charge in tackling this problem. We chair the OECD and G20 Base Erosion and Profits Shifting Action Plan. We have also introduced a UK diverted profits tax of 25% for companies shifting UK profits offshore to tax havens. For aggressive tax schemes for UK residents, we have introduced the general anti abuse rule. These are measures that will dictate the tax regime going forward, but we can do nothing about the total lack of engagement by our predecessors who failed to bring in such rules between 2005 and 2010, the period when HMRC has secured the £130 million payment.
So whilst we can try to guess if this is a good deal, we can't know for sure. However, the French authorities are doing their own investigation and if they get a better deal, we have done badly; a worse deal and we have done well.