It comes after Britain’ revenue service, Her Majesty’s Revenue and Customs’ (HMRC) six-years of inquiry, as controversy over the low level of taxes paid by big companies that run in Britain but have headquarters outside this country.
According to reports, in 2013, Google only paid 20.4 million pounds in taxes, while its sales in Britain, the biggest market outside the United States in that year, reached 3.8 billion pounds.
It makes most of its profits in Britain through online advertising. But its European headquarters are located in Ireland, Google needs to pay a lower corporation tax rate there than in Britain. In addition, it also has company structures in Bermuda to shelter profits, where the corporation tax rate is zero.
Google agreed with HMRC to change its accounting system so that more sales activities could be registered in Britain rather than Ireland, and pledged to pay more tax in the future.
“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,” said Matt Brittin, head of Google Europe.
The deal could also lead Google to pay more tax in other European countries where it is under scrutiny of tax avoidance.
Meanwhile, other U.S. companies such as Facebook, Amazon and Starbucks have also faced heavy criticism for their tax affairs in this country, local media said.
“The successful conclusion of HMRC enquiries has secured a substantial result, which means that Google will pay the full tax due in law on profits that belong in the UK,” said a spokesman of HMRC.
British government also hailed the agreement as “the first important victory” and “a success”.
However, critics said the deal is “derisory”, a “sweetheart deal” and a”cosy deal”. John McDonnell, Labour’s shadow chancellor, called for HMRC to publish details of what Google had owed.
Members of parliament from the Labour Party and Conservative Party also pointed to the amount of money that Google would pay was “small” compared with its profits in Britain. Enditem