Google Agrees £135 Million in UK Back Taxes

25 January 2016

Google has agreed to pay the United Kingdom government £135 million in back taxes. The company, whose headquarters are in Mountain View, California, United States, is a leader in internet search and a key player in the cloud arena. The company – which recently changed its name to Alphabet Inc. – was subject to an enquiry after it was revealed that it employed a significant number of sales staff in the United Kingdom, but claimed not to generate sales within the country.

Her Majesty's Revenue and Customs (HMRC) had been looking into Google’s low tax returns since 2005. It has been criticized for the practise of using Ireland and Bermuda as the tax base for its European activity. Google made a statement that its £135 million payment would end HMRC’s investigation. HMRC had also agreed a formula on which Google’s future UK revenues would be taxed, it said. Although welcomed in some quarters, the UK’s opposition party suggested the deal was "derisory" and claimed that Google should be taxed at a rate of £200 million per year based on the profits it generates.

"The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result,” explained a Google spokesman on the company’s website. “This settlement reflects that shift.”

"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," explained the opposition Labour party’s finance spokesman, John McDonnell, who asked for details from the government on how the £135 million had been arrived at. Google is reported to have generated 17 billion pounds in the UK from 2005 to 2013.

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