Google's tax avoidance makes adland look bad too
A view from Gideon Spanier

Google's tax avoidance makes adland look bad too

Google's payment of £130 million in back taxes to HM Revenue & Customs should make everyone in UK advertising pay attention.

Let’s leave aside for a moment the question of whether the chancellor, George Osborne, got a good deal (he certainly did not because Google’s UK profits would have run into billions over the ten-year period).

Instead, let us ask whether UK advertisers could have done anything to challenge Google’s tax avoidance.

It has hardly been a secret that Britain’s biggest media owner has been booking most of its ad sales in Ireland.

Yet few, if any, British advertisers demanded that they were billed by Google in the UK – just as they won’t have asked Facebook and other tax-avoiding tech companies that process their ad sales offshore.

But why not? Many advertisers pride themselves on being British, sourcing their supplies locally, paying their taxes responsibly and reinvesting in the UK economy. Buying advertising ought to be no different.

The problem is that many multinational advertisers and agencies have complex tax arrangements that make it difficult for them to take a stand. As a result, trade bodies such as the Advertising Association, the IPA and ISBA have been mute.

The UK ad industry, which prides itself on being a beacon of best practice on issues such as self-regulation and diversity, should be braver about speaking out.

But let’s be clear: it is the tech companies that are chiefly to blame because they chose to exploit the tax system aggressively with their offshore ad sales. They insist it was legal, but the fact Google has paid £130 million in back taxes suggests, at best, that it bent the rules. 

Even now, the search giant looks arrogant and the HMRC supine because of their cosy settlement.

It may be too much to hope that the backlash that has greeted Google will make others think twice about trying to negotiate similar retrospective deals on the cheap.

Tax avoidance by the tech giants is a global problem, not just a British one, but the UK still has an important role because it can set the tone. Britain is one of the most important ad markets in the world and Google’s largest outside the US.

Things are changing. Osborne’s new diverted profits tax imposes a charge on economic activity, regardless of where sales are processed, and it is likely that the tech giants will have to pay more UK corporation tax in future. But judging by their past behaviour, Google, Facebook and the rest will pay up reluctantly.

How ironic that companies that make so much money from advertising, and invest heavily in their own brands, fail to see how they are giving this industry a bad name.