Just days after reports emerged that Google has struck a deal with the tax authorities in the UK, the opposition is apparently questioning the 'cozy deal' the company was given. Ms. Meg Hillier, the current Chairwoman of the Public Accounts Committee, let her displeasure be known in no uncertain terms, when she expressed her ire through social networking platform, Twitter, over the weekend. According to her and the left wing Labor party that she represents in the British Parliament, the £130 million ($185 million) deal that the American tech company struck with Her Majesty's Revenue and Customs (HMRC), is derisory. Which is exactly why, Ms. Hillier says that she would summon both Google as well as the HMRC to explain why the company wouldn't be paying more on its cumulative 10-year profits in the country.
Google has apparently made about £24 billion in revenues in the UK since the year 2006, which is when the current investigation dates back to. According to a back of the envelope calculation being talked about, Google's taxable income should come to about eight million dollars over the past decade, should the company's reported thirty percent global profit margins hold true for the UK as well. In which case, Google's tax liabilities should be around ten times what the company is currently acknowledging, at £2 billion and not the £200 million odd, which is what Google's tax bill comes to, including the amount already paid by the company as part of its yearly returns.
As a little back story, Google on Friday, reportedly struck a deal with the HMRC, to pay £130 million ($185 million) in back taxes in the country, after a multi-year investigation into the company's controversial tax practices found that it had been avoiding paying taxes in the country by channeling its profits to tax havens like Bermuda, which has a zero percent corporate tax rate; and it's not just Google either. Many overseas companies like American companies, Facebook, Amazon and Starbucks, are also under the scanner for having allegedly failed to declare their true profits in the country, thereby getting by with paying nominal taxes, if at all. Meanwhile, a PWC study, commissioned by industry lobby 100 Group, showed that the hundred largest companies in the country, together, paid half as much in taxes last year as they did back in 2010. Just about all companies on the list, meanwhile, earned more revenues and made more profits than what they did five years back, though.