SAN FRANCISCO—Google will pay about $140 million in British back taxes in a concession driven by a shift in how the Internet company will measure its success in the United Kingdom. The amount translates into 130 million pounds.
The accord disclosed Friday comes amid mounting criticism that Google and other major U.S. companies have been scrimping on their tax bills with a variety of accounting maneuvers that have rankled governments around the world.
In the United Kingdom, for instance, Google has been facing accusations that it hasn’t been paying its fair share of taxes in a country that represents its second largest market outside the U.S. Similar complaints have been leveled against at Facebook, Amazon.com and Starbucks in the U.K.
Google has been minimizing its tax bill for years in the U.K. by keeping its headquarters in Ireland, where rates are lower. The strategy has helped Google boost its profits and its stock price and fatten its bank accounts. Google and its recently formed parent company, Alphabet Inc., have about $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, or HMRC.
Although Google insists it never broke any laws, the company says it agreed with the HRMC on a change that reflects the “size and scope” of its U.K. operations.
The accounting switch, retroactive to 2005, requires Google to base its U.K. tax bill on ad revenue generated in the country instead of just profit.
Google’s U.K. ad revenue totaled $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.
The agreement in Britain may foreshadow similar concessions in other overseas countries.
“The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result,” Google said in its statement.
Google has rankled U.S. lawmakers by keeping most of its cash overseas so it won’t be taxed, a practice that the company has given no indication that it’s ready to abandon. As of Sept. 30, Google kept 50 percent of its cash — $42 billion — in overseas accounts.