Google’s UK sales hit record $5.6bn

Google said its overseas tax bill rose sharply in 2013, while sales in Britain, its biggest foreign market, hit a record $5.64 billion.

Google said in its 10-K annual report that its overseas tax charge, including deferred taxes, was $743 million in 2013.

While this was up from $432 million for 2012, its tax rate on foreign earnings was just 8.6% in 2013 – around a third the headline rate in its main non-US markets.

A spokesman declined comment but Google previously said it complies with the tax rules of all the countries in which it operates.

Google earned 60% of its profits outside the United States last year, even though foreign sales were just 55% of revenues.

Britain is the only market for which Google breaks out separate sales figures. In recent years the discrepancy between the company’s high UK revenues and low tax bill have prompted criticism from politicians.

Tax bill

Google reduces its non-US tax bill by having customers across Europe transact directly with an Irish subsidiary which minimises its taxable profit by paying royalty fees to an affiliate in Bermuda, where there is no corporate income tax.

However, in recent years Google’s effective tax rate on non-US earnings has inched up.

Last year’s 8.6% rate was up from 5.3% in 2012. In the previous four years, the rate oscillated between 2% and 3%.

Google declined to say why its tax rate was rising outside the United States but the company’s increasing sales in emerging markets could be a factor.

Nikesh Arora, Google’s president for Global Sales Operations said last month the group enjoyed “particularly strong growth in Asia Pacific” last year.

Tax campaigner John Christensen of the Tax Justice Network noted that tax authorities in some Asian countries have a tougher reputation in relation to tax avoidance than European countries.

Google publishes its British tax bill in a separate UK filing later in the year. In 2012, the company had a tax bill of £35 million, including a £24 million charge in relation to previous years, on sales of $4.9 billion to British customers.

Google’s global revenue growth slowed last year, to 19% from 32% in 2012. The 16% rise in the company’s UK sales compares to 20% growth in 2012 and 22% in 2011.