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Google deal on tax "derisory"

Jan 25

Written by:
25/01/2016 15:41  RssIcon

Company pays 3% of what it is said to owe 

An agreement that will see US tech firm Google pay £130m in UK back taxes has been labelled as "derisory" and a "sweetheart deal" by critics.

The payment covers money owed since 2005 and follows a six-year inquiry by Her Majesty's Revenue and Customs. 


Backlash from critics 

Richard Murphy, from the Fair Tax Mark, estimated Google should be paying £200m every year in Corporation Tax. He said the figure was based on the firm's declared profit margins and sales in Britain in 2014 of £4.5bn.

Speaking to BBC Radio 4's Today programme, Labour's Mr McDonnell called for greater transparency, saying it looked like a "sweetheart deal".

"HMRC seems to have settled for a relatively small amount in comparison with the overall profits that are made by the company in this country. And some of the independent analysts have argued that it should be at least 10 times this 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%, which I think is derisory," he added.

Tax avoidance

Google paid £20.4m in UK taxes in 2013. The value of its British sales that year was £3.8bn. Google makes most of its UK profits through online advertising.

Google knows that the Diverted Profits Tax (known as the "Google Tax") which came into force last year will mean it will have to pay more to HMRC. On top of that, the OECD has come up with much stricter international rules for 'Base Erosion and Profit Shifting' or aggressive tax avoidance. Taxes on profits should soon be paid where the economic activity takes place rather than where the company is domiciled or registered.

Google currently routes its UK sales through Ireland which it will no longer be able to do.

Google scores a worst Ethical Consumer rating for the likely use of tax avoidance strategies with a number of subsidiaries in tax havens. This includes, subsidiaries in Hong Kong, Bermuda, Switzerland, Delaware and Singapore.


Matt Brittin, head of Google Europe, told the BBC:

"Today we announced that we are going to be paying more tax in the UK. 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. We want to ensure that we pay the right amount of tax." 


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