Google has agreed to pay £130m (€172m) in back taxes to Britain, prompting criticism from opposition politicians 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 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 probe showed the firm employed hundreds of salespeople in Britain despite saying it did not conduct sales in the country.
Google said 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.
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. British finance minister George Osborne welcomed the deal, saying on Twitter it reflected new rules he had introduced, but others were less impressed.
John McDonnell, finance spokesman for the Labour party, said the tax authorities needed to explain how they arrived at the figure.
“It looks to me that this is relatively trivial in comparison with what should have been made,” he told the BBC.
Essex University professor of accounting Prem Sikka agreed. He said for a company with UK turnover of around £24bn over the period and margins of 30%, the settlement represented an effective tax rate in the low single digits for Google.
“This is a lousy number and we need to know more,” he said.
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