• U.K. business chief says deal will change corporate behavior
  • Javid says Osborne's `victory' was `not a glorious moment'

Google Inc. denied it reached a “sweetheart deal” with British tax authorities as a dispute continued over the 130 million-pound ($185 million) settlement, which was called a victory by the U.K. Treasury and dismissed as "derisory" by opposition lawmakers.

Sajid Javid
Sajid Javid
Photographer: Leon Neal/WPA Pool/Getty Images

U.K. Business Secretary Sajid Javid separately said the agreement “wasn’t a glorious moment” and he shares “the sense of unfairness” felt by small businesses that are unable to use the tools available to multinational corporations to keep their taxes low. “Work needs to be done” to ensure they pay the correct share, he said.

“It’s not a sweetheart deal, it’s a settlement with HMRC,” Peter Barron, Google’s U.K. head of communications, told BBC TV’s Andrew Marr Show on Sunday, referring to Her Majesty’s Revenue and Customs. “Government puts the laws in place, HMRC enforces the laws and we follow the laws. If the laws change, of course we would follow them.”

Past Taxes

Google parent Alphabet Inc. agreed to pay tax going back 2005 after talks with U.K. tax authorities, while across Europe the company was criticized for using innovative tools to keep its tax rates low. HMRC has been faulted for not securing more money after reports that France and Italy are demanding higher settlements from the Mountain View, California-based company. The U.K. agreement was announced Jan. 23.

Separately, the Sunday Times reported that six of the 10 biggest companies in the benchmark London Stock Exchange index, including Royal Dutch Shell Plc, SABMiller Plc and AstraZeneca Plc, paid no U.K. corporation tax for 2014. The companies told the newspaper that losses, minimal revenue in the U.K. revenue and expiring drug patents meant the company didn’t have to pay the taxes.

Javid defended the context of the U.K. deal, which Chancellor of the Exchequer George Osborne described as “a victory” for the government. It has been criticized by lawmakers, including Conservative Mayor of London Boris Johnson and the opposition Labour Party, which said the company’s effective tax rate was as low as 3 percent.

“It wasn’t a glorious moment when people look at these issues, but it is important to talk about what the government is doing,” Javid said on Marr’s program. “The government has taken a huge amount of action to try and deal with just this kind of problem.”

The U.K. has closed more than 40 tax loopholes, signed information exchange deals with other countries and pressed for changes in international rules, Javid said, and that work needs to continue. The Google deal will help in the drive to change companies’ attitude to taxation, he said.

“The way in which it was a success is that it helps change behavior,” he said. “It’s clear to me that when other companies look at this and they see that HMRC, no matter how long it takes, will not give up, they will come after you if they feel you’re not paying your fair share in taxes.”