A British parliamentary committee will ask Google to testify about a back tax deal under which it will pay 130 million pounds ($185 million) to settle claims covering a 10-year period — an amount 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, now part of holding company Alphabet Inc, and the UK tax authority (HMRC) to explain the “cosy deal”.
Google said it was a fair deal and that it complied with all tax rules. HMRC said the deal meant Google “will pay the full tax due in law.”
Finance minister George Osborne said the agreement represented a victory for the action the government had taken against corporate tax avoidance.
Prime Minister David Cameron’s spokesman described it as “a step forward” but acknowledged there was more to do to ensure companies paid their fair share.
Corporate tax avoidance has prompted anger in recent years among citizens who question whether the burden of paying the cost of combating the financial crisis was evenly shared.
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.
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.
Over the period, its total of around 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, according to Reuters calculations based on Google filings.
Google’s tax bill is reduced because profits from its European sales are channeled to Bermuda. Google says its Bermuda operation does not impact the tax it pays in the UK.
Executives say the reported UK profit margins are far below the group average because most of its algorithms and codes, which drive the company’s profits, are developed outside the country.
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, a key plank in its tax arrangements.
