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Google To Pay £130 Million In Back-Dated UK Taxes

The search giant has faced scrutiny over relatively low UK tax payments since 2005.

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Google has agreed to pay £130 million in back-dated UK taxes after facing scrutiny over contributions paid for its profits in Europe.

Peter Power / Reuters

The deal will cover underpaid tax dating back to 2005 after the multinational company was criticised for avoiding payments, despite making a vast amount of money in the UK, one of its biggest markets.

On £3.8bn the company made in the UK in 2013, it paid £20.4m in tax, according to the BBC.

As well as the back-dated payment, Google will pay £46.2 million worth of tax on profits of £106m for the 18 months to June 2015, 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,” Google said in a statement on Friday.

Google has faced criticism for channeling European profits through accounts in Bermuda and its European headquarters in Ireland, where corporation tax is much lower.

While the company was keen to highlight that it had operated entirely within legal guidelines, a spokesperson admitted that "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".

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

A spokesperson for HM Revenue and Customs (HMRC) 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.

"Multinational companies must pay the tax that is due and we do not accept less."

A Treasury spokesperson called the deal, "the first important victory in the campaign the government has led to ensure companies pay their fair share of tax on profits made in the UK and is a success for our new tax laws,” according to Reuters.

Their sentiments were echoed by chancellor George Osborne, who called the deal a "victory for the action we've taken," on Twitter, adding that he hoped to see other corporations follow suit.

Good to see #Google paying more tax on past profits. We want successful businesses in UK - but they should pay their taxes.

#Google tax bill is a victory for the action we've taken.I introduced Diverted Profits Tax.We now expect to see other firms pay their share

But some said the tax paid by Google still wasn't enough, with Prems Sikka, professor of accounting at Essex University, calling the move a "sweetheart deal".

"This is a lousy number and we need to know more," he said, suggesting to Reuters that the amount still only represented a small fraction of Google's European revenue.

Tax expert and adviser to Jeremy Corbyn Richard Murphy agreed that the settlement was not enough. "They should have been paying £200 million a year," on an estimated turnover of £24 billion, he said.

Labour shadow chancellor John McDonnell called the settlement a "relatively trivial" amount of money, speaking to BBC Radio 4's Today Programme on Saturday.

Labour shadow chancellor John McDonnell.
Neil Hall / Reuters

Labour shadow chancellor John McDonnell.

He said that he would raise the issue in parliament and called for HMRC to publish exact details of what Google owed.

Mark Garnier, a Conservative MP and member of the Treasury select committee also called the amount "relatively small", while Labour MP and former chair of the Parliamentary Public Accounts Committee Margaret Hodge accused Google of avoiding paying its fair share of tax.

According to the BBC she called tax structures "devious, calculated and, in my view, unethical".

Laura Silver is a reporter for BuzzFeed News and is based in London.

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