An agreement for US firm Google to pay £130m in UK back taxes has been labelled as “derisory” and a “sweetheart deal” by critics.
The payment covers money owed since 2005 and follows a six-year inquiry by Her Majesty’s Revenue and Customs.
George Osborne hailed it as “a victory” for the government, but Labour’s John McDonnell said the sums were “trivial”.
Meg Hillier, chair of the Commons Public Accounts Committee, said it was “a small amount of money” for Google.
The tax agreement comes after years of criticism of Google and other multinational firms over their tax arrangement in the UK and across Europe.
Mr Osborne told the BBC the agreement was “a real vindication of this government’s approach”, but he added that details of the deal were “confidential”.
“These are taxes paid on profits when there was a Labour government,” the chancellor said.
“Not a single penny was collected and now to have Labour politicians complaining about it is a bit rich.”
However, speaking to BBC Radio 4’s Today programme, Labour’s Mr McDonnell called for greater transparency, saying it looked like a “sweetheart deal”.
“HMRC seems to have settled for a relatively small amount in comparison with the overall profits that are made by the company in this country. And some of the independent analysts have argued that it should be at least 10 times this amount,” he said.
Mr McDonnell said he would raise the issue in Parliament next week and called for the deal to be investigated by the public spending watchdog.
“It looks to me from all the independent analysis that this is relatively trivial in comparison with what should have been paid. In fact one analysis has put the rate down to about 3%, which I think is derisory,” he added.
Spotlight on tax
Google is not the only company to have been named for avoiding paying taxes on its British sales:
Starbucks, which runs 843 coffee shops in the UK, came under fire after it was revealed the company paid £8.6m in corporation tax in its 14 years of trading in Britain, despite sales worth billions of pounds. In 2014 it paid more than £8m in tax on the back of record profits of £34.2m.
Facebook paid £4,327 ($6,643) in corporation tax in 2014, according to its latest UK results. It showed the company as making a pre-tax loss of £28.5m last year, but the firm also paid its 362 UK staff a total of £35.4m in share bonuses. It means Facebook’s UK corporation tax bill was less than the tax the average UK employee paid on their salary.
Amazon attracted anger after it emerged that the UK arm of the business paid £11.9m in tax in 2014, despite taking £5.3bn in sales from British shoppers.
Conservative MP Mark Garnier, a member of the Treasury select committee, said the agreement represented a “relatively small” amount of money compared with Google’s UK profits.
Richard Murphy, from the independent Tax Justice Network, estimated Google should be paying £200m every year in Corporation Tax.
He said the figure was based on the firm’s declared profit margins and sales in Britain in 2014 of £4.5bn.