Alphabet Inc.’s (NASDAQ:GOOG) Google has been slapped with an hefty 1.6b euros ($1.76b) tax bill in France and lambasted for its penchant of using tax avoidance to reduce its tax bill. However, the French tax body generally releases an initial tax assessment report before it issues the final one, which is open to a contest in a court of law.
None of the spokespeople for both Google and the French tax authority was available for comments on the issue, Reuters reported.
France’s Finance Minister Michel Sapin early February dismissed the possibility of negotiating the tax amount with Google like it happened recently with the UK tax authority, arguing the money involved in France is way too high than that in Britain.
Google agreed to a 130m pound ($181.18m) tax settlement with Her Majesty Revenue & Customs for the 10-year tax period starting 2005, a figure that was criticized as being “too small” by British members of Parliament on Wednesday.
Google Reps Expected to Appear Before UK PAC
British MPs who form the public accounts committee (PAC) have summoned Google today to explain its tax affairs. It is expected to be represented in the meeting by Matt Brittin, the head of Google Europe; and Tom Hutchinson, head of international tax.
HM Revenue & Customs’ chief executive officer, Lin Homer, is expected answer questions fielded by the PAC members. Most politicians, business leaders, tax activists and trade unions have long criticized Google’s tax deal.
The Guardian reported that the meeting is expected to cover Google’s $130m settlement with the UK tax authority, among other tax issues, such as its tendency to channel all of its revenues to Google Ireland.
Britain, France and other European countries have always complained that Yahoo! Inc. (NASDAQ:YHOO), Google and other tech firms earn huge revenues in their respective jurisdiction but shift their taxes to countries like Ireland, where they enjoy lower corporate tax rates.
However, such complaints have never materialized into something useful and tangible, mainly due to the fact that the European Union tax code shields businesses from paying taxes in countries where they don’t have what is called “a permanent establishment”.
The growing anger over this loophole forced leaders drawn from 60 countries that contribute 90% of the world’s economy to ratify an OECD treaty to reform international tax in Oct. 2015. The treaty covers investigation into artificial arrangements made by multinational companies to evade permanent establishment.
Google’s main premise that it dutifully pays the fair tax that is due to the countries it is operating in is likely to be challenged. This is due to the fact that it isn’t lost to most observers that employees in Google Ireland are usually drawn in from around Europe due to their language skills. Most of these workers do simple jobs that can be handled in their respective home country offices such as answering email from advertisers based in their home nations
Such jobs are therefore not expert sales or IT roles. Google itself recently acknowledged that most of the sales discussions between its Irish subsidiary and advertisers are automated.
Google’s average global tax rate was 17% in 2015, compared with corporate tax rates of 35% and 20% in the U.S. and UK, two of its biggest markets.