Google to pay $265 million in UK back taxes

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Google to pay $265 million in UK back taxes

But critics want more.

Google has agreed to pay £130 million ($265 million) in back taxes to Britain, prompting criticism from opposition lawmakers and campaigners who said the "derisory" figure smacked of a "sweetheart deal".

Google, now part of Alphabet, 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.

In 2013, the company faced a UK parliamentary inquiry over its employment of hundreds of salespeople in Britain despite saying it did not conduct sales in the country, a key plank in its tax arrangements.

Google said the £130 million 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.

The Australian Tax Office late last year revealed Google had reported a total Australian income of $358 million and a taxable income of $91 million, and paid only $9 million in tax.

British finance minister George Osborne welcomed the deal, saying 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, 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.

"This looks like another sweetheart deal."

Prem Sikka, professor of accounting at Essex University, agreed.

He said that for a company that enjoyed UK turnover of around £24 billion 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 a year.”

Between 2005 and 2013, Google had UK turnover of £17 billion and its main UK unit reported a tax charge of £52 million, filings showed.

In 2014, it had UK revenues of around £4 billion, according to its annual report, but has not yet published its UK tax charge.

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