Reports coming out of the UK on Friday seem to indicate that Google has agreed to pay £130 million ($185 million) in back taxes in the country, having struck a deal with the nation's tax authorities. This comes after a multi-year investigation into the company's alleged tax-avoidance policies, which culminated in the country's government, last year, introducing new legislation to plug the loophole that has apparently been exploited by many multinational corporates over the years to conveniently route their profits to tax havens, thereby saving them millions of Pounds in UK taxes. Colloquially termed 'Google Tax', the new policy to start charging a levy on company profits was introduced last year after a six year long inquiry into Google's tax practices by Her Majesty's Revenue and Customs (HMRC), the UK equivalent of the IRS (Internal Revenue Service).
The controversy regarding Google and other foreign-headquartered companies not paying taxes on even a fraction of the profits they make in the country has enraged sections of the general population over the past few years and provoked strong responses in support for the tax loopholes in the country to be plugged. The search giant, along with other American companies such as Facebook, Amazon and Starbucks, has been widely criticized by commentators in the UK for the lengths to which they've gone to avoid paying taxes in the country. In Google's case, the company's European headquarters are in Ireland - a country which imposes a lower rate of tax than the UK. To shelter its profits from the taxmen, the company also routes its profits to Bermuda - a controversial tax haven with zero percent corporate tax rate.
While such moves have been described as "devious, calculated and, in my view, unethical" by MP and former chairwoman of the Parliamentary Public Accounts Committee, Ms. Margaret Hodge, Google itself, has vociferously defended its practices. The company, however, has agreed to change those long term habits in light of the new developments. Defending the company's previously-held position, Mr. Matt Brittin, the head of Google Europe, said, "we are an American company and that is where we pay the majority of our taxes, that is where we make the majority of our profits". He, however, assured that the company intends to start paying more to the UK Government coffers from now on. According to him, "The rules are changing internationally and the UK government is taking the lead in applying those rules so we'll be changing what we are doing here. We want to ensure that we pay the right amount of tax".