Written by: Keith Tully
Reviewed: Monday 25th January, 2016
The internet search engine and services giant Google has agreed to pay £130 million in back taxes to HM Revenue & Customs (HMRC) following a six-year inquiry into its tax affairs.
Google has been widely criticised for paying relatively little tax in the UK despite making billions of pounds in revenues from activities in the country.
HMRC has welcomed the deal with Google as a “successful conclusion” to what turned out to be a lengthy inquiry process and described the company’s intention to pay £130 million in back taxes as a “substantial result”.
However, the government and HMRC have been criticised by the Labour Party’s shadow chancellor John McDonnell who told the BBC he views Google’s new tax agreement as a “sweetheart deal” and £130 million as a “relatively trivial” amount of money in the context of its UK operations.
“We want to ensure that we pay the right amount of tax,” said Matt Brittin, Head of Google Europe, after the HMRC deal was announced.
“The rules are changing internationally and the UK government is taking the lead in applying those rules so we'll be changing what we are doing here.”
Google generated sales worth a total of roughly £3.8 billion in the UK over the course of 2013 but paid only £20.4 million in taxes for that period.
The tax strategies that allowed the company to pay so little tax in the UK have been called “devious”, “calculated” and “unethical” by Labour MP Margaret Hodge, formerly the chairwoman of the Parliamentary Public Accounts Committee.
Mr Brittin though has defended his company’s actions with regard to its historic UK tax payments.
“We were applying the rules as they were and that was then and now we are going to be applying the new rules, which means we will be paying more tax,” he said.
“The facts are we are an American company and that is where we pay the majority of our taxes, that is where we make the majority of our profits.
“But what is changing is outside the US, in international markets, we will be paying now in respect of our sales, not just our profits.”