Google has struck a deal with UK tax authorities to pay £130 million in back taxes. The move comes after a six year investigation by the British government and recent increasing clamp-down on tax avoidance by multinational companies.
The admittedly low £130 million ($185 million) figure comes from Google agreeing to change its accounting practices so that more sales are processed through Britain rather than Ireland, where corporate taxes are much lower. This deal covers earnings made from 2005 to 2015. In addition, Google has promised to pay more taxes in the future. The UK is already one of Google’s biggest markets where it paid £20.4 million ($29 million) in taxes on £3.8 billion ($5 billion) of revenue in 2013.
In an interview with the BBC, Matt Brittin, head of Google’s European operations, firmly denies that Google has been avoiding paying taxes. He frames the deal as a broader shift in international tax rules set by the Organisation for Economic Cooperation and Development (OECD). The OECD has recently come out and said that multi-national companies should not move profits around in order to pay less taxes.
Google bases its European headquarters in Ireland which has a lower tax rate than the UK. In addition, Google, like many other companies, have company structures in Bermuda where the tax rate is nearly zero for companies. Google says such strategies are legal and that they have always followed international tax rules.