Google settles decade-long tax dispute in UK
Thu 11 Feb 2016
Alphabet, Inc., parent company to Google, has agreed to pay $185 million to settle UK taxes going back to 2005. The company has also agreed to adopt a new approach to taxes in the UK going forward. While this is a sizeable figure, many believe it is too little, and constitutes a sweetheart deal between the government and Google.
Part of the controversy arises from the numbers: for half of the time covered by the settlement, the period between 2006-2011, Google paid only $16 million in corporation taxes on over $18 billion in reported revenue. In addition, the company was required to pay only a settlement for actual taxes, with no penalties applied. HMRC head of business taxation, Jim Harra, defended this by saying that Google wasn’t required to pay additional fines because of the difficulties inherent in proving insufficient care was taken to reach the original amount owed.
Dame Lin Homer, the head of HMRC, said that Google was accountable to the same tax laws as any other business, and that if the tax laws need to change it is the duty of the nation’s politicians to make those changes.
Matt Brittin, the President of EMEA Business and Operations for Google, was a participant in a televised hearing today in which UK lawmakers questioned the $185 million settlement. He stated, “We find ourselves in the position where we are paying the tax that the tax authorities told us to pay.”
In an article published today in the Telegraph, Brittin called for a simplification of international tax laws. He said that the current tax rules, “require that our corporation tax bill is based on the value contributed by our teams in the UK, not on the sales Google makes to UK customers.” Brittin also clarified that Google pays UK corporation tax at a standard 20% rate, the same as any other business, and while he agrees that tax codes should be revised, that change must come from governments rather than from the companies subject to those rules.
This tax settlement comes at a time when many US companies are under scrutiny for their international tax payments. Just last month, Apple paid $346 million in back taxes in Italy. US multinational giants Amazon, Apple and Facebook have all been accused of underpaying UK corporation taxes; and even in Russia, Putin’s advisers are considering increasing tax responsibility for Google and Apple to help level the playing field for Russian companies.