Google to pay $185 mln UK back taxes, critics want more

Britain’s finance minister welcomes a deal for Google to pay back tax, but his political opposition says the amount to be repaid is “derisory”.

MOUNTAIN VIEW, CALIFORNIA, UNITED STATES (REUTERS) – Google has agreed to pay 130 million pounds ($185 million) in back taxes to Britain, prompting criticism from opposition lawmakers and campaigners who said the “derisory” figure smacked of a “sweetheart deal”.

Google, now part of Alphabet Inc, has been under pressure in recent years over its practice of channeling most profits from European clients through Ireland to Bermuda, where it pays no tax on them.

In 2013, the company faced a UK parliamentary inquiry after a Reuters investigation showed the firm employed hundreds of salespeople in Britain despite saying it did not conduct sales in the country, a key plank in its tax arrangements.

Google said late on Friday (January 22) the 130 million pounds would settle a probe by the British tax authority, which had challenged the company’s low tax returns for the years since 2005. It said it had also agreed a basis on which tax in the future would be calculated.

British Chancellor of the Exchequer (finance minister) George Osborne welcomed the deal.

He said: “This is a real vindication of this government’s approach. When I became chancellor there were some companies that paid little or no tax, and that rightly caused a lot of public anger. We said we’d take action; now we have companies like Google paying tax and I want the message to go out that in Britain taxes are low, but they have to be paid and I expect more companies to follow suit.”

John McDonnell, finance spokesman for the opposition Labour party, said the tax authorities needed to explain how they had settled on the figure of 130 million pounds.

“I have been looking at what independent commentators have been calling it and I think many have been saying, actually this is a derisory amount and hardly a victory. What I’m calling for the chancellor to do is come to parliament next week and be completely open and transparent and tell us about the details of this deal. How much was back taxes, how much was penalties and how much it’s cost HMRC itself to actually get this money in. Most independent commentators now are saying that actually they were expecting anything between seven to ten times this amount to be paid. And the rate of tax that’s come out of this deal looks like about three percent, when other companies are paying 20 percent and individuals are paying much more than that.”

Between 2005 and 2013, Google had UK turnover of 17 billion pounds and its main UK unit reported a tax charge of 52 million pounds, filings showed. In 2014, it had UK revenues of around 4 billion pounds, according to its annual report, but has not yet published its UK tax charge.

The deal comes as governments around the world seek to clamp down on multinational companies shifting profits overseas to reduce their tax bills.

EU competition authorities have investigated arrangements used by Amazon and a unit of Fiat in Luxembourg, Apple in Ireland and Starbucks in the Netherlands, and may start new probes.