Last week, the Wall Street Journal reported that Google was negotiating with France and other European governments to settle long-running disputes about tax liability. This morning, Bloomberg is reporting that Google has agreed to pay the equivalent of $185 million in UK taxes, covering a five-year period from 2006 to 2011.
Google has also agreed to pay future taxes in the UK more commensurate with UK revenue. “We will now pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our UK business,” Google said in a statement.
The company had been paying most of its taxes through its Irish subsidiary, where corporate tax rates are lower. This practice produced an outcry in the UK and other European countries. In recent years, government officials sharply criticized Google, Apple, Amazon and other US tech companies for “tax avoidance” strategies.
Bloomberg reported that during the disputed time frame, Google paid only $16 million in UK taxes on roughly $18 billion in revenues. Google had defended the practice, arguing that it was in compliance with UK tax law and, beyond that, was contributing significantly to the economy in the UK.
Based on the fact that multiple countries have “tax claims,” I would expect more settlement announcements like this in the coming weeks or months. Apple is in an arguably much tougher position than Google, with potential tax liability in Europe of more than $8 billion.
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