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Google crosses borders. The tax collectors should too

Jonathan Freedland

You can picture the meeting. George Osborne in his suite at Davos, surrounded by aides and room service debris, debating how to spin the Google tax deal. There’d have been the usual talk of “framing” the issue, the need to be on “the front foot”. But I suspect the clinching argument would have been the one lifted from the standard political practitioners’ playbook: “Declare victory and move on.”

Of course the chancellor could have grudgingly described Google coughing up £130m for 10 years’ worth of taxes – at an estimated rate of 3% – as no more than a necessary first step. But where’s the kudos in that? Surely better to hail it as a great triumph and hope that no one looks too closely at the figures.

Which is how this week’s headlines came to be dominated by the story of Google’s less than complete tax return. At first glance it may seem like a simple enough tale of grotesque double standards, with the corporate titans allowed what you and I are not: to negotiate with the taxman and all but set their own rate. But it works on several levels, this one.

Start small. This is a blow to Osborne’s previous standing as certified strategic genius. His future candidacy to succeed David Cameron will rest on the claim that, while he may lack the telegenic charisma and vote-getting reach of Boris Johnson, he is a master of the political game, regularly able to outwit his opponents. Trouble is, he keeps messing up.

The omnishambles budget of 2012 shook him, as did the backlash against his attempt last year – eventually abandoned – to strip the working poor of the tax credits many rely on. Now his description of Google’s decision to chuck a token few quid at the Treasury as a “major success” – a phrase No 10 has pointedly refused to repeat – has backfired on him. The chancellor failed to see how this would look to those members of the public who face their own non-negotiable rendezvous with Her Majesty’s Revenue and Customs on Sunday. And to think he used to insist we were all in it together.

But Osborne is the least of it. Google’s sweetheart deal has provided an unusually clear glimpse into the working methods of the corporate-political establishment that sits at the heart of our national life.

For if Google gets the right to decide how much tax it wants to pay and when, that’s partly because it enjoys an extraordinarily close relationship with government. Downing Street and Google HQ may look worlds apart – chintzy chairs in one, space hoppers and table football in the other – but they are linked by a well-oiled revolving door. The same man can be Cameron’s head of strategic communications one moment, only to reappear as Google’s “senior director, communications” the next. A former Google executive was godmother to one of Cameron’s children. The current minister for internet safety and security is a peer who used to work for …why not Google it?

This surely is the lens through which to view Rupert Murdoch coming over all UK Uncut on Twitter this week, denouncing “Tech tax breaks facilitated by politicians easily awed by Valley ambassadors like Google chairman Schmidt eg, posh boys in Downing Street”. Put simply, he’s jealous. And not only of the ability of Google, Facebook and Apple to get away with tax rates that have eluded him. There was a time when Murdoch was the most frequent of No 10 frequent fliers, visiting so often they all but kept his slippers by the front door – a time when Downing Street’s revolving door opened out not on to Silicon Valley but Wapping. There can be few crueller confirmations of print’s eclipse by digital than old man Murdoch watching Eric Schmidt receive the Cameron hugs that used to be his.

And it’s not just politicians who are on unhealthily cosy terms with the biggest of big business. The taxmen themselves can be rather chummy with those they’re meant to police. Witness the former HMRC permanent secretary Dave Hartnett, once anointed as the most “wined and dined” civil servant in the country when it emerged that he had been a corporate guest 107 times in three years, supping with the accountants KPMG 10 times in that period. Hartnett now works for Deloitte: having tired of guarding the henhouse, he now advises the foxes. It’s into this cesspit that public opinion has peered this week, stirring up yet another wave of the emotion increasingly shaping politics in Europe and across the Atlantic: raw loathing for a political-corporate-media establishment that seems to be all in it together, scratching each other’s backs while everyone else struggles to get by – and leaving those who follow the rules and pay taxes at the regular rate feel like chumps for doing so.

What’s remarkable is how long it’s taken for the tech giants to be on the receiving end of this outrage. That delay surely owes something to what distinguishes these companies from the corporate behemoths of the past. For one thing, we feel ourselves dependent on them in a way that was rarely true of a Shell or General Electric. As John Harris argued in the Guardian, Google is so “tightly woven” into our lives that a consumer boycott is almost unimaginable. It’s hard to be outraged when you know you can’t break away.

What’s more, consumers have been conditioned to see these companies differently. Just as Richard Branson’s long hair and goatee miraculously preserved Virgin’s image as the rebel upstart long after it had in fact become a vast conglomerate, so a company such as Apple has been able to keep persuading people it’s too edgy and cool, too associated with youth culture, to be a corporate monster that has now piled up $200bn in what the FT calls its “minimally taxed pot of overseas cash”. Google, with its “Don’t be evil” motto, has fed a similar assumption.

But the heart of the matter is that these companies are truly global. They are supranational, able to wriggle away from one national jurisdiction and find another that’s more congenial. Yet the tax collectors are still national, chasing these dazzling, ingenious corporate butterflies with nets that are the wrong size. We are tackling a 21st-century problem with 20th-century tools.

We need a supranational answer to this supranational question. It’s heartening to see the EU limbering up to act. It’s also a reminder of why it would be absurd for Britain to head for the EU exit at the very moment our most severe problems require the clout of many nations rather than one standing alone. But even the EU might not be strong enough. Not if, as some forecast, a global tax war ensues between a united Europe and the US.

It’s clear who the winners would be in such a clash: the big companies with their smart lawyers and endlessly resourceful accountants. To make these truly global firms pay, governments will have to be just as global. Otherwise these mega-firms will always find a place to hide their cash – somewhere even the most powerful search engine cannot find it.