Last year, a Google executive defended its low British tax bill
by telling parliament the company does not have sales operations
in Britain. A Reuters examination raises questions about that.
By Tom Bergin
LONDON, May 1 In November 2012, Google's vice
president for Northern and Central Europe was called to an
oak-panelled conference room overlooking the Thames to testify
to a parliamentary committee about how companies like his reap
billions in revenue in Britain but pay very little corporate
Matt Brittin, dressed in a fitted blue suit and open-necked
white shirt, smiled confidently as he explained that Google Inc.
was not liable for taxation on British sales because these were
all handled from its European headquarters in Dublin, Ireland.
"Nobody (in the UK) is selling," Brittin told the Public
Accounts Committee (PAC).
That's not how Simon Andrews, founder of advertising agency
Addictive, has experienced Google UK. "All the people you tend
to deal with are in London," said Andrews, whose business plans
and buys advertising campaigns on behalf of clients. "You would
never know about the Dublin thing apart from if you looked
closely at the address on the invoices. All the people are based
The difference is important. For tax purposes, Google, which
is headquartered in Mountain View, California, says it does not
have a British presence. From 2006 to 2011, Google generated $18
billion in revenue from Britain, according to statutory filings,
and paid just $16 million in taxes. If the British tax authority
were to decide that Britain-based employees do sell to British
clients, UK law could consider Google to have a tax residence,
lawyers and academics say.
Google UK Ltd. employed 1,300 people at the end of 2011, of
whom 720 were engaged in "the provision of marketing services"
to Google Ireland, according to its accounts. Google's chairman,
Eric Schmidt, defended the Internet search giant's low tax bills
in Britain last month, saying the company's arrangements are
within the law.
A Reuters examination of Google's activities in Britain
shows many roles that actually target, negotiate and close sales
of Google's advertising products to its customers. Research
included interviews with more than a dozen customers and former
staff, job advertisements, CVs and endorsements on networking
There may be a fine line between marketing and sales, but
the idea that Google does not sell in Britain raised a chuckle
from Andrew Johnson, a manager at digital marketing agency
Stickyeyes who is based in the northern city of Leeds. His
company, which has annual turnover of around 15 million pounds
($23 million), buys a range of services from Google and he has
had meetings with account managers in London. "I suppose it goes
back to the famous quote that we're all sales people ultimately
because we're all trying to sell something," he said. "But they
do lots of sales pitches. That's how we view them. They view
them as new product pitches, we call them sales pitches."
On its corporate website, Google UK says London is home base
to "a number of EMEA sales & marketing leaders," adding, "Most
offices outside Mountain View focus on engineering or sales; we
In late March and early April, the website advertised dozens
of London-based sales jobs, whose responsibilities included
"negotiating deals," closing "strategic and revenue deals" and
achieving "quarterly sales quotas."
The LinkedIn profiles of around 150 London-based employees
said they were involved in formulating sales strategy, managing
sales teams, closing deals or other sales work. Some employees
describe how they meet - or exceed - sales targets.
David Smith is Strategic Partner Lead at Google in London,
according to his LinkedIn profile in late April. His profile
said his role involves "selling Media Platforms Solutions to
existing Publishers, Agencies and Marketers" and noted that "I
constantly exceed target." His former boss endorsed this claim,
posting a recommendation saying he "demonstrated his ability to
grow clients at exponential rates taking one agency from $50k a
year to over $1MM annually." Smith, like other Google employees
named in this story, did not respond to requests for a comment.
Google customers also endorse its London-based sales staff
on LinkedIn, at least six profiles show. "An outstanding sales
professional" is how David McLeman described Koert Holtgreve,
Regional Sales Lead for Britain, Ireland & Benelux at Google UK,
from the time they worked together. McLeman did not respond to
requests for a comment.
Lawyers and academics say that if Google's British staff did
agree to sales with British customers, that could open the
possibility of much bigger tax bills. The tax authority in
France has already challenged a similar structure that the
company used in relation to its French subsidiary. But questions
of tax often sit in a legal gray area, where a country's tax
authority and the courts ultimately decide.
Google's Director for External Relations Peter Barron said
if British customers want to buy advertising from Google, the
company's British marketing staff would encourage them to do so;
but only staff in Ireland sold to British clients. "We comply
with all the tax rules in the UK," he said.
Google has not been accused of violating Britain's tax laws.
Britain's tax authority, Her Majesty's Customs and Revenue
(HMRC), and Google's auditor, Ernst & Young, declined to
comment, citing taxpayer and client confidentiality.
Margaret Hodge, chairwoman of the Public Accounts Committee,
which heard Brittin speak in November, said the fact Google told
parliament it does not sell in Britain while advertising
London-based jobs for salespeople is a "very serious" matter.
The discrepancy raises questions about whether Google does
operate within the law, she said, and whether it misled
parliament - a rare offence which in the past has cost
government officials their jobs.
"It's difficult to reconcile the statements made by the
witness (Brittin) and the evidence Reuters has uncovered," Hodge
said. She said she plans to recall Brittin to appear before her
committee. "We will need to very quickly call back the Google
executives to give them a chance to explain themselves and to
ensure that actually what they told us first time around is not
being economical with the truth."
Google director Barron said Brittin firmly rebutted any
suggestion he misled the committee. But Barron declined to say
whether British-based employees do actually negotiate terms with
clients, or why job advertisements told candidates they would be
required to perform such tasks.
"Our advertisements for UK staff sometimes refer to sales
skills and many of the roles include Sales in the title as we
are seeking to attract people with those skills and that
background," he added. "We accept that the wording of some job
adverts may have been confusing and we are working to make it
Google makes almost all its money from Internet advertising
- selling space on its own website, arranging ads on those run
by others and offering services, such as tools to monitor
Internet traffic. Most British employees work in a multicolored
office block just off Oxford Street - the capital's main
shopping area - fitted out with exposed air conditioning pipes,
buttoned fabric walls, floral wallpaper, outsized lampshades and
cafeterias offering free food and drinks.
Brittin told the parliamentary Public Accounts Committee
Google declares hardly any taxable profit in Britain because all
its profits are derived from the computer codes developed in
He said Google employs "a couple of hundred" staff in Dublin
who are responsible for selling to British clients. The London
employees are "digital consultants" who simply educate potential
clients about how its products work and direct them to Dublin if
they express an interest to buy anything.
The British unit's accounts show it does not receive revenue
from sales, but fees from Google Ireland and Google Inc, which
are supposed to cover costs and include a small premium. Google
UK Ltd reported losses every year between 2006 and 2011, which
allowed it to build up tax credits - used to offset future tax
bills - of almost $20 million.
Google Ireland Ltd. reported sales of 12.5 billion euros
($16.4 billion) in 2011, but profits of only 24 million euros,
and an Irish corporation tax bill of 8 million euros. The low
profit comes from the fact it pays most of its turnover to an
affiliate in Bermuda, which levies no income tax on
foreign-controlled corporations, for the right to use the
Chairman Schmidt has said he is "very proud" of Google's
corporate structure. "It's called capitalism," he told Bloomberg
News in December. "We are proudly capitalistic. I'm not confused
Matt Brittin's comments to parliament sit uneasily with the
recruitment section of Google's website.
There, the company makes a clear distinction between
marketing and sales. It divides its roles into three main
categories: "Build cool stuff," which includes technical and
research roles, "do cool stuff," which includes marketing and
administrative functions, and "sell cool stuff."
"Sell cool stuff" includes four sales sub-categories: Sales
& Account Management covers revenue-generating roles. Product &
Customer Support helps "improve user experience" and collects
feedback; Partnerships covers business development; Sales
Operations involves supporting sales people. Google's website
says the London office is home to teams in all four areas.
In mid-April, the corporate website advertised 39
London-based positions within the sales team. It offered 21 jobs
in Sales & Account Management and nine with Partnerships
sub-categories - roles for which the ads tell candidates they
will need to be involved in negotiating and closing deals. Only
seven London-based jobs were advertised within the "Marketing
and Communications" subcategory.
The way Google staff describe their work also differs from
Account Manager Indi Burton, for example, outlines her role
on her LinkedIn profile: "From the initial first call to
establish the right contact, I pitch clients over the phone and
face to face. Once the client is on board I manage and grow the
account and client relationship." None of the people whose
LinkedIn profiles are cited in this story responded to attempts
to contact them; Google declined to comment on the profiles.
Adrian Joseph, Google's London-based Head Of Search
Advertising Solutions for Northern & Central Europe, who
describes himself as a black belt in judo and cites table tennis
and investing in fine wine among his interests, says on his
LinkedIn profile that he has "responsibility for driving all
Search advertising revenue."
Jerome Beauguitte, a Senior Account Executive, said his role
was to "develop a strategic client acquisition plan targeting
top accounts in Europe ... Identify and close enterprise and
subscription-based sales opportunities."
Peter Lorant, as Head of Channel Partners (EMEA), said he
was "Responsible for channel revenue" and "Over-achieved New
Business Quota in 2011 & 2012."
Johnson, the Google customer at Stickyeyes, said that
"smaller spending clients" go through the Dublin call center,
but those spending more than 250,000 pounds a year receive
dedicated support from Google representatives in Britain. The
culture is "very, very salesy," he said. "Anything they've got
new that they want you to spend more money on, it's all about
selling you their new products."
Two former London-based sales staff also told Reuters the
larger customers were dealt with by London.
Marcos Steverlynck worked as a sales and business
development professional at Google in London from 2007 to 2011.
He said the focus was on closing deals. "It could be either
contacting potential partners directly or partners contact you
and basically, negotiating the deals with them."
When large, strategic deals had to be escalated for
approval, they went to U.S. offices rather than to Ireland, said
Steverlynck, who now runs an online art dealership. Google
declined to comment on how decisions on big deals were handled.
WHAT IS SELLING?
Google's practice of not reporting sales from British
clients to be assessed for income tax in Britain is based on the
legal assumption that it does not have a taxable presence in the
country, a "permanent establishment" known as a PE, lawyers and
academics say. Tax lawyer Miles Dean, founder and partner of law
firm Milestone, said the company can avoid having a taxable
presence if all sales to British clients are made directly with
Google Ireland Ltd.
Google declined to say what its staff in Ireland do with
contracts agreed with British clients. When asked if they send
out contracts to British clients that have been agreed upon in
principle by British sales staff, Barron declined to comment.
A sales contract carrying the name of Google Ireland is not
enough to ensure that Google Ireland has no taxable presence in
Britain, said Angharad Miller, senior lecturer in tax at
Bournemouth University, who worked for 13 years with large
accounting firms before becoming an academic.
"It can be enough (to establish a taxable presence) that the
contract is in substance made in the UK," she said. "If they're
closing deals (in the UK), they are living quite dangerously."
Google declined to comment on what impact negotiating sales
in Britain would have on its tax status.
Dean, the tax attorney, said it was impossible to tell
whether Google's activities were in line with the law without
seeing the contract for services between Google Ireland and
Google UK, but that negotiating deals could be problematic. "The
best advice, in order to avoid a PE, is that negotiation can't
take place in the UK," he said.
"Because the more of that decision-making process that you
bring into the UK, that management process, and negotiation, is
obviously of some relevance in the formation of contracts. That
would generally be outside the scope of an agreement between the
head office in Ireland and the UK subsidiary or the marketing
company," he added.
In France, the tax authority is investigating the company's
claim that its French unit conducts limited support activities
on behalf of Google Ireland. A source close to Google has
confirmed news reports that France has demanded 1.7 billion
euros in back taxes from the company on the grounds that it is
really engaged in sales, not just marketing, in the country.
French tax officers raided Google's Paris offices in 2011 on
a "presumption of fraud," according to court documents seen by
Reuters and reported in French and international press. That was
based in part on evidence including testimony from a Google
customer who said advertising contracts came in Google Ireland's
name, but were processed by Google representatives in Paris and
that he had only had contact with Google France employees. The
French tax authority and Google declined to comment on the
The British authority has taken a less aggressive approach
to big international companies. HMRC declined to say when it
last raided the premises of a multinational seeking evidence of
tax avoidance or evasion.
Some lawmakers said they were surprised the British tax
authority has not yet challenged the structures used by internet
companies such as Google to avoid paying taxes on profits earned
from British customers.
"HMRC has to be much more assertive and aggressive on behalf
of the UK taxpayer to ensure that we really do get the proper
tax back for the economic activity that takes place in this
country," Hodge said.
British Prime Minister David Cameron has responded to
concern about corporate tax avoidance by saying he wants a
change in international rules to ensure companies pay their fair
share of tax. HMRC said it used a wide variety of information
sources to ensure companies pay the right amount of tax.
($1 = 0.6455 British pounds)
($1 = 0.7634 euros)
(Additional reporting by Natalie Huet in London and
Jean-Baptiste Vey in Paris; Edited by Sara Ledwith and Simon