Google said on Friday it agreed to pay the UK tax authority GBP 130 million (roughly Rs. 1,253 crores) in back taxes, prompting criticism from campaigners and academics
who said the UK tax authority had agreed 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 investigation
showed the company employed hundreds of sales people in Britain despite
saying it did not conduct sales in the country, a key plank in its tax
Google said the UK tax authority had challenged the
company's low tax returns for the years since 2005 and had now agreed to
settle the probe in return for a payment of GBP 130 million.
(Also see: UK 'Google Tax' Will Target Inter-Company Payments)
It said it had also agreed a basis on which tax in the future would be calculated.
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.
finance ministry spokeswoman welcomed the deal saying,"This is the
first important victory in the campaign the Government has led to ensure
companies pay their fair share of tax on profits made in the UK and is a
success for our new tax laws".
However, Prems Sikka, Professor of Accounting at Essex University said the settlement looked like a "sweetheart deal."
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.
is a lousy number and we need to know more," he said. Richard Murphy, a
tax expert who has advised the opposition 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 GBP 17 billion and its main UK unit reported a tax charge
of GBP 52 million, 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.
Labour's finance spokesman John McDonnell said the government should publish more information about the Google deal.
© Thomson Reuters 2016