The deal has been dismissed by the opposition Labour party has described as derisory.
Meg Hillier, the Labour party chairwoman of parliament’s Public Accounts Committee, tweeted at the weekend she would call Google and the UK tax authority (HMRC) to explain the “cosy deal”.
Google said it was a fair deal because it had complied with all tax rules. HMRC said the deal now meant Google “will pay the full tax due in law” which is a little odd because if it was paying under the rules before we doubt it is going to be paying much more now.
Finance minister George Osborne said the agreement represented a victory for the action the government had taken against corporate tax avoidance. Although we can’t see how letting big corporates avoid tax for a decade and then deciding they only have to pay small change back is a victory.
A study conducted by accountants PricewaterhouseCooper for the 100 Group, a lobby body representing around 100 of the biggest UK companies, showed their combined corporation tax bill was half 2010 levels in 2015, despite rising profits.
Osborne could fix this, but we guess he is too busy taxing middle income earners and poor people.
However businesses say they benefit the exchequer in other ways such as collecting VAT (sales tax) on behalf of the government and employing staff who pay income taxes.
Google’s tax deal brings its total UK tax bill over the period to around 200 million pounds.
During that period, it earned 24 billion pounds in UK revenues would have generated a tax bill of almost 2 billion, if the UK unit reported taxable profits in line with group margins of around 30 percent.
Google’s tax bill is reduced because profits from its European sales are channelled to Bermuda. Google claims its Bermuda operation does not impact the tax it pays in the UK, so that must be true.
In 2013, the company faced a parliamentary inquiry after a Reuters investigation showed the firm employed hundreds of salespeople in Britain despite saying it did not conduct sales in the country, which was part of its tax arrangements.