Google Inc (GOOG) Telling Fibs to Dodge Its Fair Share?

Google Inc (NASDAQ:GOOG) is at it again, it appears. The Internet giant, which has had a number of various clashes with authorities in the EU over taxation , privacy and user consent issues, is embroiled in another imbroglio, this one involving the company’s “fair share” of its revenues going into the U.K. treasury. The question doesn’t seem to be whether Google is using a loophole to lower its tax bill – there is a suggestion that Mountain View may be telling little white lies in order to implement the loophole.

Bugger, as the Brits might say.

Google Inc (NASDAQ:GOOG)A high-powered committee in the U.K. may take action to recall Google Inc (NASDAQ:GOOG) before a public-accounts body to answer for a report that seems to contradict Google’s long-standing claim that its U.K. sales operations are solely in Ireland and not in the U.K., which has a higher tax rate. EU taxation rules say that companies who have a sales base in an EU-member country are only required to pay taxes in that country and not in all EU countries in which it does business.

Google has its EU headquarters in Ireland, and it has maintained that all of its sales presence is in Ireland, and those employees who work elsewhere in the Union are “marketing” staffers and were not selling advertising space. However, in a random act of journalism, Reuters ran a report that seemed to point to a number of Google employees outside of Ireland who have advertising sales  roles with Google Inc (NASDAQ:GOOG), using information gathered from interviews with clients  and employees, referring to profiles on the professional-networking site LinkedIn Corp. (NYSE:LNKD), as well as the Google U.K. web site.

“There does appear to be an inconsistency between what the committee was told about Google’s activity in this country and the evidence that has now been uncovered by Reuters,” said public-accounts committee chair Margaret Hodge. “Clearly Google has questions to answer and we will want to get those answers from them as soon as possible.”

Of course, Google Inc (NASDAQ:GOOG) and its auditor, Ernst & Young, stand by their initial report, saying they are willing to return before the PAC to explain itself, calling the Reuters piece “misleading.” Google is not the first company to face skepticism about its U.K. and EU operations – it’s just the largest. Starbucks Corporation (NASDAQ:SBUX) and Inc. (NASDAQ:AMZN) have also recently faced scrutiny.

What do you think about this story? Do you think Google Inc (NASDAQ:GOOG) needs to explain itself, or is this a legitimate use of the U.K. taxation loopholes? How much of an effect do you think this will have on Google? How big o a tax bill do you think we’re talking about here? Let us know your thoughts in the comments section below.