Google’s overseas tax bill rises sharply

Google said its overseas tax bill rose sharply last year, while sales in Britain, its biggest foreign market, hit a record $5.64bn (€4.12bn).

Google said in its annual report filed on Wednesday, that its overseas tax charge, including deferred taxes, was $743m in 2013.

While this was up from $432m for 2012, its tax rate on foreign earnings was just 8.6% in 2013 — around a third the headline rate in its main non-US markets.

A spokesman declined to comment but Google previously said it complies with the tax rules of all the countries in which it operates. Google earned 60% of its profits outside the US last year, even though foreign sales were just 55% of revenues.

Britain is the only market for which Google breaks out separate sales figures. In recent years the discrepancy between the firm’s high UK revenues and low tax bill have prompted criticism.

Google reduced its non-US tax bill by having customers across Europe transact directly with its Irish subsidiary which minimises its taxable profit by paying royalty fees to an affiliate in Bermuda, where there is no corporate income tax.

However, in recent years Google’s effective tax rate on non-US earnings has inched up. Last year’s 8.6% rate was up from 5.3% in 2012. In the previous four years, the rate oscillated between 2% and 3%.

Google declined to say why its tax rate was rising outside the US but the company’s increasing sales in emerging markets could be a factor.

Nikesh Arora, Google’s president for global sales operations, said last month the group enjoyed “particularly strong growth in Asia Pacific” last year.

Google’s global revenue growth slowed last year, to 19% from 32% in 2012.

— Reuters