It was reported late yesterday that Google, parent Alphabet Inc., has agreed to pay 130 million pounds (US$185 million) in a tax settlement with U.K. authorities. Google has avoided billions of dollars of income taxes around the world using a pair of shelter strategies known to lawyers as the "Double Irish" and "Dutch Sandwich." According to Wikipedia, the double Irish tax structure was pioneered by Apple and other companies in the late 1980s.

BloombergBusiness noted in their report that Meg Hillier, the Labour Party lawmaker who leads the committee, said in an e-mailed statement that "We were shocked to learn of workarounds of the tax system that were considered normal behavior by big corporations but which appalled the individual taxpayer."

The Wall Street Journal provided one example of a workaround by Google: "The Company doesn't generate much corporate profit in Ireland because that unit pays hefty royalty fees that end up in a unit based in Bermuda, where there are no corporate income taxes. In 2013, Google used the structure to send €9.84 billion (US$10.62 billion) in royalties to a Bermuda-based company registered in Ireland."

Google will now adopt a new approach for U.K. taxes and the settlement covers taxes going back to 2005, the company said in an e-mailed statement Friday.

Alphabet has faced sharp rebukes from critics and regulators in Europe for using innovative tools to keep its tax rates lower in some regions. Separately, Apple Inc. is facing a European tax investigation that could force the iPhone maker to pay more than $8 billion in back taxes. European officials have accused the company of using subsidiaries in Ireland to avoid paying taxes on revenue generated abroad.

The Wall Street Journal added that the deal with the U.K. is likely only the beginning of settling taxes in Europe. "Google is, for instance, in discussions with other European countries to settle tax disputes, a French government minister said Friday. A Google spokesman said the Mountain View, Calif., company remains in conversations in France and elsewhere.

The Organization for Economic Cooperation and Development last fall issued a series of recommendations aimed at stopping large companies in many industries from using complex but legal structures to avoid paying hundreds of billions of dollars in corporate income taxes every year.

On Thursday Apple's CEO met with the EU's antitrust chief over the looming tax judgement that dues this spring. Considering that Apple was noted as being one of the companies who devised the "Double Irish" tax structure, a structure that got Google and other U.S Companies into trouble, perhaps the EU will try to make an example of Apple.

While it's highly unlikely that Apple will end up paying the full $8 Billion in back taxes as most have surmised, they're still likely to face a very harsh penalty. I'm sure that Tim Cook's recent bombastic in-your-face view that the political witch hunts led by the U.S. Congress and EU Commission are pure "political crap," won't be taken kindly by those in authority. Will that come back to bite Apple's CEO? Only time will tell.

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