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January 25, 2016updated 31 Aug 2016 9:41am

UK MPs to grill Google over £130m back taxes

News: The deal follows a six year investigation by HMRC.

By CBR Staff Writer

A UK parliamentary committee is set to question Google about its £130m back-tax agreement with Revenue and Customs (HMRC).

The deal covers money held by the company since 2005 and follows a six year investigation by HMRC on concerns that Google was not paying its share of tax fairly.

Google Europe head Matt Brittin told the BBC: "Today we announced that we are going to be paying more tax in the UK.

"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."

The search giant has now agreed to modify its accounting system so that a larger proportion of its sales are registered in the UK rather than Ireland, where the corporate tax rate is lower.

Google UK, and its other subsidiaries across mainland Europe, have been paying smaller sums of tax because they are assigned as marketing services providers to Google Ireland.

HMRC’s probe into whether Google avoided tax by shifting profits to Ireland found that the company did not dodge taxes.

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Brittin said: "We are paying £130m in respect of previous years when the rules were to pay in respect of profits you make in a country and then going forward we will also be paying in respect of sales to UK customers."

The HMRC expects that the deal will be followed by similar agreements with other internet firms.

However, Labour chancellor John McDonnell has criticised the agreement, saying that it looked like a sweetheart deal. McDonnell urged the National Audit Office to launch an investigation into the agreement.

Google and other US firms like Amazon, Facebook, and Starbucks, have been criticised heavily in recent years over their tax arrangements in the country, as many allege that some companies are shifting their sales to lower tax havens to avoid paying taxes.

In 2013, Google paid $55m in corporate tax in the UK for 2012 sales of nearly $5bn. The company was twice probed in 2012 by a parliamentary committee on its tax practises.

The company paid a tax rate of 2.6% on $8.1bn in non-US income during 2013, after channelling all its foreign earnings to its Bermuda-based affiliate.

Google has been alleged of shifting $9.8bn in revenues to its Bermuda subsidiary to avoid paying the global income tax of about $2bn in 2011.


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