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Google may face U.K. parliament over tax-avoidance strategies

A U.K. report suggests that a Google executive could face questioning over the company's complex tax-management efforts by the end of March.

Don Reisinger
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger
2 min read

Google has found a way to avoid paying boatloads in taxes. And U.K. parliament members are not too happy about it, according to a new report.

By the end of March, a Google executive could be brought before parliament members to explain how the company saves so much in taxes, despite generating massive profits each year, the U.K. newspaper The Independent is reporting, citing a discussion with a member of the parliament's Treasury Select Committee.

The Independent claims that Google paid only 6 million pounds ($9.4 million) in U.K. taxes last year, despite generating a profit of 395 million pounds.

In order to save so much, the company's Ireland-based subsidiary has an agency agreement with Google UK that ensures 90 percent of profits are transferred to Ireland. From there, the Ireland-based Google subsidiary pays a host of fees, including licensing charges to a Google-owned Bermuda firm. The result? Precious few of those profits stay in the U.K. to be taxed.

Of course, the U.K. is by no means the only country losing revenue to tax-avoidance strategies. Many major U.S. companies have found a way to avoid American taxes via loopholes in the tax code. In Google's case, its U.K. strategy, often called the "Double Irish" technique, is perfectly legal.

Back in 2010, a report detailed the ins and outs of Google's savings scheme and found that the company saved $3.1 billion in taxes over three years.

Still, taxes are just one piece of what companies deliver to a country's economy. And in a statement to CNET, a Google spokesperson made that abundantly clear.

"We make a substantial contribution to the UK economy through local, payroll and corporate taxes," the spokesperson told CNET. "We also employ over a thousand people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in East London. We comply with all the tax rules in the UK."