In a break through development, Google has agreed to pay 130 mn pound taxes demanded by the authorities in UK. The tax attracted global attention at a time when most digital companies were shifting profits to tax havens after reaping revenues in one jurisdiction.
According to UK tax authorities, Google paid only £20.5 mn in tax in 2013 out of its UK revenues of $5.6 bn. As per the agreement, Google will start paying tax for its advertisement revenues from UK including a part of the profit.
Google’s action will have wide implications as several other countries have initiated similar measures as UK. Similarly, the OECD has launched BEPS (Base Erosion and Profit Shifting) project that targets companies shift taxes from source countries to tax havens by using different arrangements.
UK has introduced the famous ‘Google Tax’ to counter the tax shifting practices by MNCs.