The UK’s HM Revenue and Customs on February 9 denied that Google received a “sweetheart deal” in a settlement that allowed the company to pay £130 million (USD 185 million) to resolve ten years of back taxes.
The settlement, announced by Google on January 22, has generated a firestorm of criticism in the UK, with some claiming that the deal allowed Google to pay UK tax at a three percent effective rate.
The UK’s Public Accounts Committee will hold a hearing on the settlement on Thursday and has called HMRC and Google representatives to testify.
According to HMRC, though, Google has paid the full tax due on its UK profits.
The settlement announced by Google is not the company’s entire tax liability; rather, it is a payment is over and above tax that was already paid for past years, HMRC said in a statement.
Moreover, echoing comments made by UK Treasury Secretary David Gauke before Members of Parliament on January 25, HMRC said that those that claim that Google paid an effective tax rate of 3 percent have done so by applying Google’s group profit margin to its sales to UK customers.
“This calculation does not reflect how tax law works,” HMRC said. UK tax is based on economic activity carried on in the UK not on profits from sales to UK customers, the agency said.
“Many elements contribute to a multinational business’s economic activity and thus generate the profits, including the work that staff do, the technology driving and used by the business, intellectual property and other assets as well as where those assets are developed and actively managed,” the agency said.
Related MNE Tax articles:
Be the first to comment