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Google May Be $1 Billion Behind In Tax Payments To France 199

Posted by Soulskill
from the maybe-run-a-search-to-see-where-it-went dept.
An anonymous reader writes "Ars Technica reports, 'Technology giant Google has been delinquent on its tax payments in France for the past few years, to the tune of more than $1 billion in missed payments, and it now may be hit with a sizable tax penalty by the French government.' Google asserts that it has operated within the law in France, but the French government has reason to believe that in order to avoid French taxes, Google has been passing off some of its business contracts as Irish rather than French."
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Google May Be $1 Billion Behind In Tax Payments To France

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  • $1B? That's nothing! (Score:5, Informative)

    by Anonymous Coward on Saturday April 26, 2014 @08:29PM (#46850489)

    Ever heard of the Double Irish and a Dutch sandwich [wikipedia.org]?
    The City of London [wikipedia.org] has established [theguardian.com] a world-spanning network of tax heaven states, mostly consisting of former parts of the english empire. Big corporations use this system to not pay taxes, and the sums involved exceed 1$B by far.

  • Re:Same as UK (Score:1, Informative)

    by Anonymous Coward on Saturday April 26, 2014 @09:17PM (#46850655)

    There is nothing shady about the penalties dealt by the EU. The whole penalty process always has to follow established EU law, and thus it's the same for everyone.

    If you want to look at some shady stuff, take a look at Indian officials slamming Western corporations with huge billion scale taxes retroactively.

  • by whoever57 (658626) on Saturday April 26, 2014 @09:37PM (#46850725) Journal
    Google has played the same tricks in the UK. Google claims that the sales are made in Ireland, while employing many people in the UK whose job titles includes sales. I expect there are Google employees in France and UK (and most other European countries) who get sales commissions for sales "made" in the Ireland.
  • Re:So few (Score:4, Informative)

    by kesuki (321456) on Saturday April 26, 2014 @09:50PM (#46850771) Journal

    you didn't provide links verifying your points. without links it is too hard for the people who regularly get mod points to mod positive, because if you want a soap box on slashdot you should use their journal system. having read the definition of austerity measures it is clear that the usa is also using austerity measures... the world is a complex place, though.

    "After the french government committed to economic suicide with austerity policies" http://en.wikipedia.org/wiki/Austerity [wikipedia.org] In economics, austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. These policies may include spending cuts, tax increases, or a mixture of the two.[1][2][3] Austerity policies may be attempts to demonstrate governments' fiscal discipline to their creditors and credit rating agencies by bringing revenues closer to expenditures; they may also be politically or ideologically driven.

    In macroeconomics, reducing government deficits generally increases unemployment in the short run.[4] This increases safety net spending and reduces tax revenues, partially offsetting the austerity measures. Government spending contributes to gross domestic product (GDP), so reducing spending may result in a higher debt-to-GDP ratio, a key measure of the debt burden carried by a country and its citizens. Higher short-term deficit spending (stimulus) contributes to GDP growth particularly when consumers and businesses are unwilling or unable to spend. This is because crowding out (i.e., rising interest rates as government bids against business for a finite amount of savings, slowing the economy) is less of a factor in a downturn, as there may be a surplus of savings.[5][6]

  • Re:So few (Score:5, Informative)

    by PopeRatzo (965947) on Saturday April 26, 2014 @11:00PM (#46850963) Homepage Journal

    In some countries, maybe there's some blame to be had for escaping taxes...but France is a whole other argument. I mean shit, 75% tax on the wealthiest has resulted in a lot of them just flat out leaving that country. It got so bad that their dear leader is now lobbying against his own tax plan; the same plan that put it there to begin with.

    What do personal tax rates have to do with a corporation paying corporate taxes? There are no "75%" corporate taxes in France?

    A corporation has a choice in whether or not to do business in a country. Google has no problem doing business in countries with regimes with a lot worse policies than a 75% top personal tax rate.

  • Re:So few (Score:4, Informative)

    by flyingfsck (986395) on Sunday April 27, 2014 @01:52AM (#46851517)
    Sure, but Google (and others) are obviously trying to pass off work done in France (or other EU countries) as work done in Ireland, while the Ireland office obviously has very few staff and cannot possibly do all the work they are purported to be doing. This is a very obvious tax fraud and it is quite amazing that these mega corps think that they will get away with it forever. They should get audited and double taxed. Simple as that.
  • Re:So few (Score:3, Informative)

    by the grace of R'hllor (530051) on Sunday April 27, 2014 @04:28AM (#46851793)

    For much of the 20th century, the United States has had >70% tax on the wealthiest as well, with at some point >90%. Apparently, that did not seems to hurt the US.

    Not that various American ultra-rich folks are calling for higher taxes on the wealthy too. Instead, they get tax breaks.

    A few rich people being a bit upset that their income from labor gets taxed heavily, which they don't feel because the vast bulk of their income comes from investment, won't hurt them. It's the desire to spend spend spend that really gets Hollande. Actual socialists do more harm than good.

  • Re:So few (Score:5, Informative)

    by davester666 (731373) on Sunday April 27, 2014 @05:11AM (#46851845) Journal

    Actually, it really appears that Google was blatantly NOT following the law.

    Apple sells an iPhone and says X% of the value of it is for patents to be paid to an Irish company [or something like that], which is completely legal, even if it is also completely arbitrary [as Apple owns said patents] so they basically shift most profits out of the country. Everybody and their dog does this, Apple just headlines this because they are a relatively new company [vs say, petroleum companies] and they make highest amount of profit [or thereabouts] worldwide.

    Google has a large office of employee's in France, that were involved with negotiating and signing advertising contracts with french companies, then claiming those contracts were actually signed IN IRELAND. This is the part that the tax collectors are taking issue with. To be legal and not have to pay taxes in France for those contracts, Google would basically have to close their french offices and get everyone to directly deal with their Irish division.

    And I believe I saw a similar story about the UK also investigating Google doing this in the UK as well. And I'm sure all the other tax collection agencies in the EU have perked up their ears and started taking a look at this...

  • Re:So few (Score:2, Informative)

    by IamTheRealMike (537420) <mike@plan99.net> on Sunday April 27, 2014 @05:51AM (#46851947) Homepage

    Google has a large office of employee's in France, that were involved with negotiating and signing advertising contracts with french companies, then claiming those contracts were actually signed IN IRELAND. This is the part that the tax collectors are taking issue with.

    There are so many problems with this, where to begin?

    Firstly, this is not some spontaneous action by a bunch of bottom rung tax collectors. Politicians in France got elected by promising things the country could not afford and have been desperately searching for things they can tax to raise revenue, or at least be seen to be doing something. Hence 75% tax on the rich, and so on. Wealthy non-French tech companies are of course a juicy target so top politicians in France have been threatening Google with retroactive tax "re-evaluations" for some time. This is 100% a politically motivated action, what's more, it directly contradicts EU law which France signed up for. It's not at all clear that the EU courts would let such an action stand.

    But secondly, and more problematically, you are trying to argue that a contract is not signed with the people it's signed with. There's a very simple way to find out who a contract was actually made with - look at who signed it. If these contracts were signed by an Irish company, they're with a company in Ireland and it doesn't matter what language they're written in (seriously, who comes up with this crap, does the French government expect to tax transactions in Canada now?).

    Countries that have a beef with salespeople promoting products that are actually sold elsewhere, will either have to get real, or start cracking down on any kind of affiliate network or company that has a mobile salesforce at all. Attempting to redefine where revenue accrues according the job titles of people who worked on the sale is a losing proposition and can never work - either companies will rename the people who are doing the selling to avoid ad-hoc rules, or they'll just increase the independence of the subsidiaries so they qualify as independent affiliates etc, or if governments get really draconian they'll go to entirely online selling - not exactly a hard thing for a company like Google. There's no way to make this kind of thing stick, which is why EU law does not work that way.

    To be legal and not have to pay taxes in France for those contracts, Google would basically have to close their french offices and get everyone to directly deal with their Irish division

    No, what they're doing is entirely legal, though whether they choose to fight this in the courts is an open question. But does France really want Google to shut up shop and leave? The entire point of the EU that France is so enthusiastic about is the common single market, which means anyone in it can sell to anyone from anywhere inside it. If France starts trying to undermine that system they're signing up for a whole world of pain far beyond any tax they could gain from Google.

  • by gbjbaanb (229885) on Sunday April 27, 2014 @07:03AM (#46852049)

    No, Google is an Irish company. If you look at which of the many companies that comprises Google worldwide, it is Google Ireland that does the majority of business with all the other countries in fact, this individual country's operation actually does all the selling of product in all the other countries too - that's why the tax bill is so low.
    See, if in France, a French salesman sells an advertising campaign to a French company, it is the Irish company that does it - otherwise the sale would (obviously) count as a French sale by French people to Frenchmen, and thus then be liable for all those taxes. But if the Irish company did the selling (nudge, nudge, honest) then the tax bill is massively reduced, especially as the licensing for this sale is managed by a different Irish company (only this one is registered in Bermuda.... hence the term "double Irish" - it requires 2 Irish companies, one registered elsewhere. These are Google Ireland Ltd and Google Ireland Holdings. One does all the sales, the other does all the licencing of IP to the other. Between them, I could happily say they do all of Google's business). A simple explanation [thejournal.ie]

    That's the problem - not some 'grey area' where you have to draw lines over which company does business in which country, or some amorphous global company doing business everywhere. Google is an Irish company that just happens to have a "subsidiary" in California where the CEO lives.

    So Google Ireland acts as a conduit - in 2009 it turned over nearly â8bn, yet profits were only â45m.

    Maybe the US system of allowing related companies be treated individually for tax purposes should be scrapped. Then Google Ireland, Google Bermuda, and Google would be considered together for taxation by the US taxman...and the US would start to receive tax that is currently held outside US borders.

  • by jemmyw (624065) on Sunday April 27, 2014 @12:21PM (#46853169)

    No, it will hit the poor harder. It doesn't matter the amount of money, it matters the proportion. If a less well off person spends 100% of their earnings on rent, food, water, etc. then they'll be taxed the full amount, and for the basics they have no choice. A very well off person won't be spending 100% of their income even if they buy that luxury yacht, and they don't even need that yacht so they could choose not to make the purchase and invest instead.

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