Google Agrees To Pay Millions In UK Back Taxes

Google has reached a deal with the British taxman to pay £130m in back taxes in a move welcomed by the Chancellor who said it could see other big firms follow suit.

The agreement covers payments dating back to 2005 and means the internet giant will have paid around £30m extra tax a year.

However, critics have said compared to the profits Google has made in the UK in the last decade, the amount is "trivial" and should be around seven to ten times more than that.

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Labour has dismissed the amount as "derisory" and has called for a "full report" on the deal from the Chancellor George Osborne.

The shadow chancellor John McDonnell told Sky News said the payment amounted to around 3% taxation, which was "unacceptable when most people in this country pay much more".

He said it was another "sweetheart deal" like the one done with Vodafone, which had been criticised by parliament.

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Mr McDonnell said: "I have been looking at what many independent commentators have been saying about how trivial this amount is.

"It (Other OTC: ITGL - news) is over 10 years and we are not sure if it is back payments or fines or what is content is of the payment and if you look at the amount of profits this company has made in the last 10 years, some commentators have said they would have expected the payment to be something like seven to 10 times more than what they have actually paid."

The agreement with the HMRC does mean that from now on the firm will pay higher tax and they have not been fined for punished for tax avoidance.

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Mr Osborne has welcomed the agreement and suggested that it could see other large firms reaching similar deals with the taxman.

In March's Budget Mr Osborne announced the introduction in April (LSE: 0N69.L - news) of a so-called "Google tax" targeting firms that move their profits overseas.

The "diverted profits tax" is designed to discourage large companies from taking earnings out of the UK to avoid tax.

Mr Osborne also said he would close tax loopholes that enabled businesses to take account of foreign branches when reclaiming VAT on their overheads, with the new tax measures expected to raise £3.1bn over the next five years.

The Chancellor tweeted: "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."

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A Google spokeswoman said: "We will now pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our UK business.

"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 and is in line with recent OECD guidance."

An HM Revenue and Customs (HMRC) spokesman 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."

Google paid just £20.5m in tax in 2013, despite raising $5.6bn in revenues in the UK, according to FT Weekend.

HMRC has been investigating if Google avoided paying tax by allocating profits to Ireland (Other OTC: IRLD - news) , the home of its European operations.

In September shadow chancellor Mr McDonnell told the Labour conference that if elected in 2020 the party would launch an "aggressive" drive to ensure multinational corporations pay "their fair share of taxes" as part of a bid to balance the nation's books fairly.