Google, Inc. (GOOG) Subsidiary Will Pay How Little in UK Taxes? On How Much?

Google, Inc. (NASDAQ:GOOG) is back on the hot seat across the pond when it was revealed that the company’s U.K. subsidiary, based in Ireland, will pay 6 million pounds in taxes to the British government on 39 billion pounds in revenue in 2011 – a tax rate that computes to 1.5 percent. However, that number is a large jump from the previous year,  when the company paid 935,000 pounds on about 2.4 billion in revenue. Over a six-year span up to 2010, the company paid just 8 million pounds in total tax, according to filings with the U.K.’s Companies House.

Sergey Brin

Google Inc. (NASDAQ:GOOG) has dealt with this criticism before. Britain is one of the company’s largest markets, but its Britain subsidiary is based in Ireland, which has lower corporate tax rates. Also, the company has been criticized for easing its tax burden in Europe by paying billions of euros in licensing fees to its Bermuda subsidiary.

In its defense, a Google Inc. (NASDAQ:GOOG) spokesman said, “We comply with all the tax rules in the UK. We make a big contribution to the UK economy by employing over a thousand people, helping hundreds of thousands of businesses to grow online and investing millions supporting new tech businesses in East London.”

Google CEO Eric Schmidt adknowledged the tax bill and said he would love to contribute more – if he could.

“We could pay more, but it would be very hard to say to our shareholders ‘we feel very sorry for these British people, so we’re going to pay millions of dollars in extra taxes that we’re not required to do’. There are probably laws against that,” he said.

Google, Inc. (NASDAQ:GOOG) did report, however, an after-tax loss of 24 million pounds in 2011, which went along with losses i Australia and New Zealand. But when a company increases its revenue by nearly 20 times in a region over the course of a year despite criticism about taxes, it does lend to the power of the brand in that it holds up well to any reputational scrutiny.