(Bloomberg) Google parent Alphabet Inc. has agreed to pay 130 million pounds ($185 million) in a tax settlement with U.K. authorities, setting off a backlash as opposition politicians questioned the government’s handling of the case.
Google will adopt a new approach for U.K. taxes, and the settlement covers taxes going back to 2005, the company said Friday in an e-mailed statement. Alphabet, which owns the Google search engine, has been criticized for paying a fraction of the taxes due on sales in the U.K. For example, the tech giant paid $16 million in U.K. corporation tax from 2006 to 2011 on $18 billion of revenue, according to a panel in 2013.
The pact divided politicians in the U.K. While Chancellor of the Exchequer George Osborne said on Twitter that it was a “victory” for the government’s policies, Shadow Chancellor John McDonnell told the BBC that the bill was “derisory” and looked like a “sweetheart deal,” and that he would call for it to be investigated by the public sector watchdog.
Alphabet has faced sharp rebukes from critics and regulators in Europe for using innovative tools to keep its tax rates lower in some regions. Separately, Apple Inc. is facing a European tax investigation that could force the iPhone maker to pay more than $8 billion in back taxes. European officials have accused the company of using subsidiaries in Ireland to avoid paying taxes on revenue generated abroad.
“We have agreed with HMRC a new approach for our U.K. taxes and will pay 130 million pounds, covering taxes since 2005,” Google said Friday in a statement, referring to the British tax authority. “We will now pay tax based on revenue from U.K.-based advertisers, which reflects the size and scope of our U.K. business.”
Google has avoided billions of dollars of income taxes around the world by using a pair of shelter strategies known to lawyers as the “Double Irish” and “Dutch Sandwich,” as reported by Bloomberg in October 2010.
Her Majesty’s Revenue and Customs said it enforces tax rules impartially—regardless of a company’s size.
“The successful conclusion of HMRC inquiries has secured a substantial result, which means that Google will pay the full tax due in law on profits that belong in the U.K.,” HMRC said in a statement. “Multinational companies must pay the tax that is due and we do not accept less.”
As a result of the disclosures, Parliament’s Public Accounts Committee summoned Google and the tax authority to explain their practices and the settlement to lawmakers.
“We were shocked to learn of workarounds of the tax system that were considered normal behavior by big corporations but which appalled the individual taxpayer,” Meg Hillier, the Labour Party lawmaker who leads the committee, said in an e-mailed statement. HMRC “is effectively admitting it pulled in too little tax from Google for nine out of ten years. This is not a great success rate.”
—With assistance from Simon Kennedy.
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