Google Google, tax and George Osborne and you’ll see why the past seven days have been something of a headache for the Chancellor. Though you don’t really need to. HM Treasury’s £130m tax deal with Google has made all the headlines this week and it’s the story that just won’t go away. Everyday, something new has given this flame the bit of oxygen it needs to stay alive – yesterday it was the EU Commission speculatively suggesting it might investigate the deal – and every day the Government has failed to effectively put a lid on it. It’s been the first issue of 2016 that Labour have managed to get on the front foot with (apart from at PMQs, which was pretty disastrous for Corbyn) and though far from perfect, John McDonnell has been strong on the issue when doing his rounds of the studios.
On this one, George Osborne got it strategically wrong on two, pretty key, fronts – timing and tone. Triumphantly presenting the deal as a major victory for taxpayers seems now like madness; whilst it might be indeed a victory to get anything out of Google and their complex corporate structures and well-resourced in-house tax team, the numbers quite patently don’t tell that story. The value of its sales in Britain in 2013 alone was £3.8bn, but £130m in back-taxes for a ten year period is victory? Labour’s soundbite that this amounted to an effective 3% rate of tax was practically written for them. Secondly timing – announcing this deal in the week preceding the tax self-assessment deadline was unwise. It helped the opposition to paint the Tories and their friends in big business in stark contrast to the ordinary people that follow the rules.
Where does Osborne go from here? Whilst No. 10 and Osborne’s fellow Ministers quickly began to distance themselves from the story, Osborne is still maintaining that this is a good deal for the UK. At this point, he may have no other choice but to stick with his original line. The story will recede from the headlines eventually. But, if the EU Commission does decide to investigate, it will be the gift that keeps on giving for the opposition.