Google agreed to pay £130 million in UK back taxes, settling a probe by Her Majesty’s Revenue and Customs which began six years ago over how much tax the US tech giant paid on its profits in the country.
In addition, Google will begin paying tax on revenue from UK-based advertisers.
Between 2005 and 2013 Google reported a UK turnover of £17 billion, while its main UK unit only reported a tax charge of £52 million.
“We have agreed with HMRC a new approach for our UK taxes and will pay 130 million pounds, covering taxes since 2005,” Google said in a statement Friday, referring to the British tax authority.
A Google spokesperson said in a statement: “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,”
George Osborne called the deal a “victory” for the British government.
Good to see #Google paying more tax on past profits. We want successful businesses in UK – but they should pay their taxes.
— George Osborne (@George_Osborne) enero 23, 2016
“We’ve got Google to pay taxes and I think that is a huge step forward and addresses that perfectly legitimate public anger that large corporations have not been paying tax. I think it’s a really positive step,” Osborne said.
“I hope to see more firms follow suit and of course I’ve introduced a diverted profits tax which will require this going forward. So I think it’s a big step forward and a victory for the government.”
— Sky News (@SkyNews) enero 23, 2016
However, many MPs are not at all happy with the deal, which has been labelled by some as a “sweetheart deal”.
Shadow chancellor, John McDonnell, has said he’s going to be pressing George Osborne for details of the deal in the Commons on Monday. McDonnell criticised the UK tax authority for letting Google pay a “relatively small amount”.
“It looks to me from all the independent analysis that this is relatively trivial in comparison with what should have been paid, in fact one analysis has put the rate down to about 3 percent, which I think is derisory,” he told BBC Radio 4’s Today programme.
Richard Murphy, a tax export who has advised Jeremy Corby, leader of the Labour party, said that the deal was a disaster, adding that given the turnover Google enjoyed it should have been paying “200 million pounds a year”.
Meg Hillier, the chair of the Commons public accounts committee, said in a tweet: “Bet individual taxpayers wouldn’t get off as lightly as Google on back tax.”
Bet individual taxpayers wouldn’t get off as lightly as Google on back tax. Cosy deal. Will call HMRC and Google to @CommonsPAC to explain.
— MegHillierMP (@Meg_HillierMP) enero 23, 2016
“The news that Google is paying 10 years’ back tax vindicates the public accounts committee’s vigorous pursuit of international companies that were running rings around tax officials.
“We were shocked to learn of workarounds of the tax system that were considered normal behaviour by big corporations, but which appalled the individual taxpayer.
“HMRC now needs to assure taxpayers that it will keep up the pressure to tackle whatever the next emerging issue is in real time, rather than years later.”