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Google did not strike a 'sweetheart deal' with the UK government over the tax it owes, a senior executive has insistedReuters

A controversial tax structure that has allowed Google to store billions in profits from non-US sales in Bermuda "has no bearing" on the amount of tax the company pays in the UK, a senior executive at the internet giant has insisted. Peter Barron, Google's head of communications for Europe, Middle East and Africa, said it was about "a relationship with the US".

Figures from financial analysts suggest that the company is poised to confirm that its offshore tax holdings total more than $43bn (£30bn). Google's parent company Alphabet, will report its 2015 earnings in February 2016 and is expected confirm that offshore cash funds have grown by about $4bn (£2.8bn) in just 12 months.

The UK is Google's largest non-US market, accounting for 11% of its global revenues, according to documents filed in the US. But Barron insisted it had "no bearing" on the amount of tax the company pays in the UK.

"This is a relationship with the US," he told the BBC's Andrew Marr Show. "The US has a very, very high corporate tax rate and the Bermuda structure is there because of the way that America deals with its taxation of global companies and that it leads to high incentive to keep profits from returning to America."

Peter Barron
Peter Barron, Google's head of communications for Europe, Middle East and AfricaPeter Barron/Twitter

He added that the company did not strike a "sweetheart deal" with the British government but had instead reached a "settlement" with Her Majesty's Revenue and Customs (HMRC) to pay £130m in back taxes on an estimated £7.2bn it earned in profits between 2005-2014 in the UK.

"The government sets the law, HMRC enforces it and we follow that," he said. "So it's HMRC that we follow."

Praised by Chancellor George Osborne as a "victory" for the government, the settlement was condemned by critics.

Calling it a "sweetheart deal" the Labour Party urged the National Audit Office to investigate the agreement, while the European Commission has said it is considering a letter of complaint from the Scottish National Party about it.

The row intensified after it emerged that the internet giant was preparing to hand over €150m (£113m, $162.5m) in back taxes to the Italian government, equating to 15% of its €1bn (£760m, $1.08bn) revenues in the country.

Ireland tax dodge

But Barron said that anybody buying advertising from Google in Europe, does not buy it in the country where they are based, but "from the company's European headquarters" in Ireland's capital, Dublin.

"What Google UK does is we contract our services to the parent company, to Google Inc and Google Ireland because we are subsidiary," he said. "They sell their services, they contract their services to them and that accounts for their revenue."

He admitted the company had chosen to base itself in Ireland because the corporate tax rate is lower than most EU countries, sitting at just 12.5%. Rates across Europe vary depending on turnover with UK corporate tax at 20%, while in France it is 33.33%, Italy 27.5% and Germany's rate is between 30-33%.

However, all the revenues that pour into Google from sales across Europe, including the UK, end up being taxed at just 12.5% in Dublin.

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