Google's auditors Ernst & Young were adamant before the Public Accounts Committee today that they would not be drawn on the affairs of their client, Google.
The firm was put on the spot by PAC chair Margaret Hodge, who demanded they speak frankly about Google's tax affairs in relation to questions as to why the global internet company paid so little corporation tax.The company's UK sales, which are routed through Dublin, are worth £3.2bn but in 2011 Google paid £6m in CT.
'We warned you in advance that we cannot talk about Google,' John Dixon, head of tax at E&Y told Hodge when pressed.
Dixon later said that 'hypothetically' the situation was that of an Irish-resident company, and that the question was whether it traded in the UK.'
'The test is a permanent residency test in the context of whether the UK company provides services in the UK. For sales, do the UK employees get so close to the point of sale - concerning the labels, the names you use and essentially what you do - and whether that lines up with the generation of profit through the sale. That line is the one you're grappling with,' said Dixon.
Dixon contended further that what Google was engaging in was common with companies with foreign headquarters - but the PAC argued that just because this was 'common' did not make it right.
Earlier, the PAC accused Google's vice president for sale and operations in northern and central Europe, Matt Brittin, of being 'misleading' in his previous evidence before the Committee in November.
Referring to several whistleblowers who had since presented documents to the PAC chair Margaret Hodge and National Audit Office head Amyas Morse, Hodge asked Brittin whether he wished to reconsider his evidence.
According to Hodge - who refused to provide Google with sight of the whistleblower's evidence - the PAC had been approached by several whistleblowers in Google's UK sales team whose evidence included their payslips and invoices, detailing commissions for sales as well as invoices for sales.
'The information gleaned from the whistleblowers shows a discrepancy between the evidence you gave and what happens with Google on the ground. This is an opportunity to explain yourself,' said Hodge.
Brittin contended that the evidence he had provided was for the period before he joined Google.
'I stand by what I said. I described very clearly how we operate. People in the UK talk to businesses and encourage them to spend money but nobody in the UK has rights to close a transaction with an advertiser. This is important because over 90% of the money spent by companies is by auction process - the prices are set by competition of the auction and not by our teams.
The committee had seen an invoice sent to clients by Google from a London address, as well as a presentation describing steps of the selling process involving UK-based staff.
Hodge said the PAC had also been contacted by a senior salesman who she said was paid a 'modest' salary, but three or four times that in commission for sales he made and for 'closing deals'.
Brittin persisted, saying, 'What's very clear is no one in the UK team can execute a transaction. There's very good reasons for this - firstly, the rights to what we sell are owned by Google Ireland and is not a product on a shelf, but rather advertising on a platform built outside the UK.'
Britten admitted he was unaware that case law existed in the UK and US stipulating that the place of a sale is the place where the customer is and not where the technology platform is.
Commenting on this morning's PAC committee, Frank Haskew, head of the ICAEW's tax faculty, said that greater political scrutiny of tax policy must be accompanied with a serious effort by politicians to update tax laws.
