2016-365

Questions remain as Google agrees to pay back UK tax

Questions Remain As Google Agrees To Pay Back UK TaxGoogle has agreed to pay 130 million in UK back taxes following a long investigation by HM Revenue and Customs.

The agreement, however, has met with cynicism from those who say the authorities have accepted a settlement which is not enough. The US-based internet search engine, now part of Alphabet Inc, has faced criticism over its practice of channeling most profits from European clients through Ireland to Bermuda where it pays no tax on them. In 2013 it faced a parliamentary inquiry after a Reuters investigation showed the company employed hundreds of sales people in Britain despite saying it did not conduct sales in the country, a key plank in its tax arrangements.

In fact Google paid 20.4m in UK taxes in 2013 on sales in Britain of 3.8 billion. Over about ten years it has enjoyed income of 24 billion and a margin of 30%, raising questions as to whether the agreed payback deal is insufficient. Critics have pointed to earlier tax agreements with the company which amount to a corporation tax rate of just 2.6%.

Matt Brittin, head of Google Europe, told the BBC on Friday: 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. Prems Sikka, Professor of Accounting at Essex University said the settlement looked like a sweetheart deal .

He said the settlement represented an effective tax rate in the low single digits.