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 Google, now part of Alphabet Inc <GOOGL.O>, 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 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.
"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 clamp down on
multinational companies shifting profits overseas to reduce their
tax bills.
EU competition authorities have investigated arrangements used by
Amazon <AMZN.O> and a unit of Fiat <FCAU.N> in Luxembourg, Apple
<AAPL.O> in Ireland and Starbucks <SBUX.O> 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 130 million pounds, 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 percent, which I think is derisory," he told
BBC Radio on Saturday.
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"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 pounds over the period and margins of 30 percent, 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. Richard
Murphy, a tax expert who has advised the Labour leader, Jeremy
Corbyn, on economic policy, said the deal was “a disaster” and that,
based on the turnover and margins Google enjoyed, “They should have
been paying 200 million pounds a year.”
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.
(Additional reporting by Steve Trousdale in San Francisco and Kate
Holton in London; Editing by Dale Hudson)
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