Google has settled a fiscal fraud probe in France after years of fighting with tax authorities over the matter. As part of the settlement, Google agreed to pay more than a billion dollars to French authorities, comprising a $549 million fine and $510 million in back taxes. In return, French authorities are dropping charges against Google in France. The settlement covers activities from 2005 to 2018.
French investigators have been investigating whether Google was avoiding paying its proper taxes to France by failing to declare parts of its activities in the country. Google, part of Alphabet Inc. (NASDAQ: GOOGL), pays little tax in most European countries because its European headquarters are based in Dublin, Ireland, which offers corporations low tax rates. A loophole in international tax law allows Google to report almost all their sales in Ireland because staff in Dublin concludes all sales contracts.
As a result, European countries have struggled to tax the profits of multinational tech companies derived in their jurisdictions. France has pushed for a digital tax to cover European Union member states, but was rebuffed by Ireland, Denmark, Sweden, and Finland. The French government came up with its own unilateral tax to ensure that big tech companies that generate significant revenue in France are taxed on their revenue generated in France. If the company generates more than €750 million in global revenue and €25 million in France, they are required to pay 3 percent of their French revenue in taxes.
A Google spokesperson said the deal between France and Google brings an end to tax and related disputes that have “persisted for many years.” The settlement may create a legal precedent for other large tech companies present in the country. Budget Minister Gerald Darmanin said that talks were underway with several other companies, big and small, but did not specify their names.
