Following an audit of its accounts, Google has agreed to pay £130 million ($185m) in back taxes in the UK. The company says that it wants to make sure that it pays the right amount of tax after it faced criticism for not paying its fair share and for having a complicated tax structure.
HMRC (Her Majesty's Revenue and Customs) has been investigating Google for six years. It is one of many large companies to have been criticised for using offshore operations to funnel funds and reduce tax bills. The £130m covers ten years' of underpayment, and Google says it will continue to pay more tax in the UK.
Google is one of several tech companies to have offices in Ireland to help reduce tax bills. In 2014, the value of Google's sales in Britain was £3.8bn, but the company paid just £20.4m in taxes. Moving forward, more sales activity will be registered in Britain rather than Ireland, but the company denies that the back tax payment is an admission of having avoided tax in the past.
A Google spokesperson said: "We will now pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our UK business. 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 and is in line with recent OECD guidance."
While the tax payment will come as something of a windfall for the UK government, the figure is already being questioned. Tax experts suggest that Google should be paying many times more tax than it currently does, even once the new arrangement is taken into account.
UPDATE: As reported by Reuters, a British parliamentary committee will call Google to testify about the back tax payment, with Labour party chairwoman of parliament's Public Accounts Committee Meg Hillier calling it a "cosy deal."
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