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Google faces possible EU investigation into its UK sweetheart tax deal

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EU competition commissioner compared tax deals to 'illegal state aid'

Pier Marco Tacca/Getty Images

Google and the UK government are facing a barrage of complaints over the tech giant's recent £130m ($185 million) settlement with British tax authorities. Critics say the deal is too easy on Google and undermines international efforts to extract greater taxes from corporations. The European commissioner for competition, Margrethe Vestager, said this morning that the EU is willing to investigate the settlement, telling BBC Radio 4 that these sorts of "sweetheart deals" can amount to "illegal state aid," and that they benefit established companies at the expense of newer businesses.

"If we find that there is something to be concerned about, if someone writes to us and says, well, this is maybe not as it should be, then we will take a look," said Vestager. Shortly after this, the deputy leader of the Scottish National Party, Stewart Hosie, said he'd written a letter asking for exactly such an investigation. Hosie said in a statement: "Working people and small and medium businesses do not have the luxury of negotiating down the amount of tax they have to pay — and we must now have independent verification that Google has not been extended that luxury." This morning, an EU official confirmed to Reuters that the Commission will "look at [the letter] and issues raised."

"Why is there one rule for big multinational companies and another for [everyone else]?"

The UK's leader of the opposition, Jeremy Corbyn, told the House of Commons yesterday that Google's deal equated to a tax rate of roughly 3 percent — compared to the UK's standard corporate tax rate of 20 percent. "Why is there one rule for big multinational companies and another for ordinary, small businesses and self-employed workers?" said Corbyn. The Verge noted earlier this week that, using 2013 as an example, Google earned close to £760 million in UK profits that year but paid only £20.4 million in tax — far less than the £152 million that would be expected under a 20 percent rate.

Pressure to extract fair taxes from international corporations continues to build, with the OECD this week agreeing on new rules to share tax information making it harder for companies to disguise profits. This morning, Italian tax authorities reportedly claimed that Google owes 227.5 million euros ($248 million) in back taxes, and Apple is also facing challenges over its financial arrangements, with analysts suggesting that the EU's ongoing probe into the company's back taxes could see the firm liable for several billion dollars in repayments. Apple CEO Tim Cook travelled to Brussels last week to lobby the EU personally, with a decision in the investigation expected in late February.

Read more: Google’s UK tax deal is a joke at our expense

Updated January 28th, 06:33AM ET: Updated to include demands from Italian authorities for Google back taxes.

Updated January 28th, 07:00 AM ET: Updated to include confirmation from EU about a possible investigation.