Google agrees to pay £130m in back taxes in UKWednesday 27 January 2016 10.12
Google has agreed to pay £130million (€170m) in back taxes to Britain, prompting criticism from opposition politicians and campaigners who said the "derisory" figure smacked of a "sweetheart deal".
Google has been under pressure in recent years over its practice of channelling 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 yesterday evening that the £130m 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.
"The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result. This settlement reflects that shift," a Google spokesman said in a statement.
The deal comes as governments around the world seek to clampdown on multinational companies shifting profits overseas to reduce their tax bills.
EU competition authorities have investigated arrangements used by Apple in Ireland, Amazon and a unit of Fiat in Luxembourg and Starbucks in the Netherlands, and may start new probes.
British finance minister George Osborne welcomed the deal, saying on Twitter it reflected new rules that he had introduced, but others were less impressed.
John McDonnell, finance spokesman for the opposition Labour party, said the tax authorities needed to explain how they had settled on the figure of £130m, which he described as relatively insignificant.
"It looks to me ... that this is relatively trivial in comparison with what should have been made, in fact one analysis has put the rate down to about 3%, which I think is derisory," he told BBC Radio.
"This looks like another sweetheart deal."
Prems Sikka, professor of accounting at Essex University, agreed.
He said that for a company that enjoyed UK turnover of around £24 billion over the period and margins of 30%, the settlement represented an effective tax rate in the low single digits for Google.
Between 2005 and 2013, Google had UK turnover of £17bn and its main UK unit reported a tax charge of £52m, filings showed.
In 2014, it had UK revenues of around £4bn, according to its annual report, but has not yet published its UK tax charge