Premier defends island in Google tax row

WEDNESDAY, AUGUST 15: Bermuda last night hit back after a UK row over tax avoidance by search engine giant Google turned the spotlight on the island.

A war of words broke out after a member of the UK parliament’s Treasury Select Committee warned that Google executives are likely to be called to Westminster to explain their ‘tax avoidance schemes’, and demanded Bermuda change its tax laws.

Labour backbencher John Mann, quoted in the in UK newspaper Independent on Sunday, said the firm’s channelling of cash through Ireland to Bermuda to avoid tax was “entirely improper and immoral”. And he called on Bermuda to tighten up its tax rules, which eats into the amount of cash flowing to the UK Treasury.

Mr Mann said: “This sort of scheme is running, meanwhile we are providing a legal base and defence for Bermuda because it is a British dependency.

“Firstly, we should be ensuring first of all that this is not possible across the EU. There is no point in being in if you can tax dodge.

“Secondly, if Bermuda or any other British dependency wants our help with defence, then it should stop operating this sort of tax policy. We are paying twice because we are paying for Bermuda.”

‘We pay our bills’

But Premier and Finance Minister Paula Cox hit back: “We have no intention of changing our centuries-old tax laws which continue to serve the needs of our people.

“I would also like to take this opportunity to remind Mr Mann that Bermuda pays all of its own bills, including the bill for Bermuda’s Governor.”

She added that Bermuda was an acknowledged leader in tax transparency and the country was vice-chairman of the Global Forum on Transparency and Exchange of Information for Tax Purposes.

And Ms Cox vowed to continue to attract new business to the island.

While Bermuda is represented by the UK in forums like the UN and EU and guarantees external security, the only tangible contribution to the island’s defence is occasional visits by the Atlantic Patrol Task (North) ship, formerly known as the West Indies Guard Ship.

The patrol takes part in anti-drugs operations and assists in humanitarian roles like hurricane relief. It was announced in 2005 that the warship usually deployed to the area would only be on station in the high-risk months between July to October, with a Royal Fleet Auxiliary (RFA) ship – part of the Navy’s inhouse Merchant Marine – being used for the rest of the year.

The UK House of Commons was told at the time that the normal warship would be back on station year-round from 2006, but an RFA ship was being used as late as last year.

According to the Independent on Sunday, Google minimizes tax in the UK — where it pays $6 million a year on a turnover of $395 million — employs its UK operation as an agent of its Irish subsidiary.

The proceeds of sales made in the UK go to Ireland and commission of around 10 per cent is paid back to the UK operation, which is taxable once costs have been deducted.

Google Ireland then pays much of the money it makes to its Bermudian operation as a licensing fee, ensuring a large proportion of its cash ends up on the island. The process is completely legal under current UK tax laws.

Mr Mann said: “It is entirely immoral, this is a company avoiding its obligations and we are letting them get away with doing it.”

He added that it is likely that Google chiefs would be called before the Treasury Committee before next Easter.

Reports of Google’s tax arrangements have sparked anger in the UK, with a petition demanding the company pay more tax reaching 45,000 signatures in just four days.

The IoS reports a Google spokesman as saying: “We make a substantial contribution to the UK economy through local, payroll and corporate taxes.

“We also employ over a thousand people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in East London. We comply with all the tax rules in the UK.”