Watchdog asked to probe Google tax deal

In a letter to the public spending watchdog, Shadow Chief Secretary to the Treasury Seema Malhotra said the deal had “implications for the funding of public services”.

Earlier David Cameron had been forced to defend the deal in the Commons as Labour leader Jeremy Corbyn claimed the internet giant was effectively paying taxes at a rate of just three per cent.

The Labour leader suggested there was one rule for major companies and another for ordinary taxpayers.

Don Valley MP Caroline Flint joined in the criticism, suggesting Google was using its “loose change to cover its tax liabilities” and called on the Prime Minister to back the idea of companies publishing their tax returns.

But Mr Cameron insisted it was Labour that should be answering questions over the faulure to address tax avoidance.

He said: “We’re talking about tax that should have been collected under a Labour government, raised by a Conservative government.

“I do dispute the figures that he gives. It’s quite right this is done independently by HMRC, but I’m absolutely clear that no government has done more than this one to crack down on tax evasion and aggressive tax avoidance.

“No government and certainly not the last Labour government.”

Mr Corbyn, who pointed out that the inquiries into Google had started under Labour, said ordinary taxpayers would be angry that such firms were getting special treatment.

But Mr Cameron said the new Diverted Profit Tax would mean companies would “pay more tax in future”.

He said the coalition had raised £100 billion extra from business in the last parliament by closing loopholes.

Mr Cameron insisted he was “genuinely angry” about the situation with Google, which he said had been allowed to pay “zero percent” under Labour.

Asked later whether Mr Cameron would support changes to require companies to publish their tax returns, the Prime Minister’s official spokeswoman said: “There is a long-standing issue of taxpayer confidentiality. That’s something that’s reflected in many countries around the world.

“So as you look at how to increase transparency, you need to think how you are driving an international, global approach, so that other countries are taking similar action to you. That’s what the Prime Minister did during the course of the last Parliament when he put this issue front and centre of the G8 agenda.”

The deal with Google was also coming under increasing scrutiny from the UK’s European neighbours concerned that they may struggle to attract large companies if multinational firms believe they can enjoy better tax privileges in Britain.

Italy is said to be about to seal an agreement which will see Google pay a higher proportion of its profits, while Mr Cameron and other senior figures are under close scrutiny over their links to the internet giant.

French MEP Eva Joly, vice chairwoman of the Special European Parliamentary Committee on Tax Rulings, said it wanted Mr Osborne to answer questions about the “very bad deal”.

She told the BBC: “This bad deal is very bad news for everybody because it shows that the UK prepares itself to become a kind of a tax haven to attract the multinationals.”