Google Deals: Will Pay Back Taxes; Critics Says It's Not Enough

Google is in trouble. Most tech giants are accused of avoiding paying taxes they owe by using legal loopholes, and Google is one of them. The tech giant, however, is now taking a step towards tackling that issue. Alphabet, the search engine's parent company, has reached a deal with the UK to pay £130 million GBP or about $185 million USD in back taxes that dates back from 2005 to make up for the past 10 years.

The settlement reached reflects a new and more direct way that bases its payout on revenues from UK-based advertisers, meaning a company's taxes will reflect the actual size of its UK business. The move would in no doubt be welcome, though the government might argue that it is long overdue.

It could be recalled that Google has been under pressure over its practice of channelling most profits from European clients through Ireland and Bermuda, where it pays no tax to them. Then in 2013, it faced a UK parliamentary inquiry after it was revealed that the tech giant employed hundreds of salespeople in Britain despite saying that it did not conduct sales in the country.

The search engine company also has made $18 billion USD in UK revenue just from 2006 and 2011, but it has only paid $16 million USD in corporate tax for the said period of time, which clearly shows that the calculations are a bit amiss. With the move of Google to pay the £130 million GBP to cover the tax for the past ten years, most likely it would be the end of their troubles.

This Friday, the search engine giant has also said that the £130 million GBP would settle with a probe by the British tax authority, who has challenged its low tax returns since 2005. Google also agreed to a basis on which tax in the future would be calculated.

A spokesperson for the company said that the way multinationals is taxed has been debated for many years and the international tax system is changing as a result. The settlement reflects that shift. The deal made by the firm comes as governments around the world seek to clamp down on multinational companies shifting profits overseas to reduce their tax bills.