Google is to pay about US$140 million in British back taxes in a concession driven by a shift in how the Internet company measures its success in the UK.
The accord disclosed on Friday comes amid mounting criticism that Google and other major US companies have been scrimping on their tax bills with a variety of accounting maneuvers that have rankled governments around the world.
In the UK, for instance, Google has been facing accusations that it has not been paying its fair share of taxes in a nation that represents its second-largest market outside the US. Similar complaints have been leveled against at Facebook Inc, Amazon.com Inc and Starbucks Corp in the UK.
Google has been minimizing its tax bill for years in the UK by keeping its headquarters in Ireland, where rates are lower. The strategy has helped Google boost its profits and its stock price and boost its bank accounts. Google and its recently formed parent company, Alphabet Inc, have about US$73 billion in cash.
The tax-reduction tactics spurred a six-year inquiry into Google’s practices by an arm of the British government, Her Majesty’s Revenue and Customs (HMRC).
Although Google insists it never broke any laws, the company said it agreed with the HRMC on a change that reflects the “size and scope” of its UK operations.
The accounting switch, retroactive to 2005, requires Google to base its UK tax bill on advertising revenue generated in the nation instead of just profit.
The company’s UK ad revenue totaled US$5.1 billion through the first nine months of last year, that a 7 percent increase from the same time in 2014. That accounted for 10 percent of Google’s revenue during the period.
Separately, an attorney for Oracle Corp said that Google has itself to blame that sensitive information about its profit from Android and its revenue-sharing agreement with Apple Inc was aired in open court.
Oracle’s lawyer fired back at the search engine giant after it criticized her for disclosing “highly confidential” information last week during a hearing in the database maker’s lawsuit in which it accuses Google of using Java software without permission.
Attorney Annette Hurst said the statements she made about Android generating US$31 billion of revenue and Google paying Apple US$1 billion in 2014 to keep its search bar on the iPhone, were in response to questions from a magistrate judge and Google’s own lawyer.
Hurst’s defense of her disclosures came hours after Bloomberg News reported on them, citing a transcript from the Jan. 14 hearing posted in the court’s electronic docket.
“Oracle’s improper disclosure has resulted in confidential information being leaked to the press, with confidential financial information relating to Android serving as the headline in Internet press reports,” Google said in a filing.
Hurst said that this would not be the last time Oracle cites Google’s financial information to make its case that the search engine company owes damages for exploiting Java to develop the world’s most popular smartphone platform.
“The magnitude of Google’s commercial exploitation of the Java APIs through Android is at the core of the dispute, both in connection with fair use and in connection with monetary remedies,” Hurst said on Thursday in a filing in San Francisco federal court.
Additional reporting by Bloomberg
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