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

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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  • by Anonymous Brave Guy ( 457657 ) on Saturday April 26, 2014 @09:40PM (#46850739)

    Giving the benefit of the doubt, and assuming this a genuine question and not a troll...

    The problem is that it is surprisingly difficult to objectively distinguish between legitimate activities in an international business that operates in under multiple tax regimes and the activities which are "obviously" just tax avoidance.

    It's hardly a secret that some businesses set up a legal entity that is little more than an administrative formality in a country with a very low corporation tax rate, and then their legal entities in other countries with higher corporation taxes pay some sort of fees/royalties to their low tax counterpart, thus shifting the tax burden and saving them money (as well as changing which country is the beneficiary of the corporation tax they do pay).

    The trouble is that the same rules about international payments and taxes have to cover businesses that really do operate, for example, a crucial R&D lab in one country (perhaps with a good reason, such as having close ties to a good university nearby) but still sell the end product to customers internationally. More than that, you also have to allow for the fact that it might be two completely separate legal entities doing that, which may or may not be owned by some of the same interests. After all, if a business in one country spends a lot of time and money hiring smart people to design products, but then sells the IP rights to completely independent manufacturing businesses in other countries that make and sell the physical products, I don't think many people would argue that it's silly to have the money for the rights shifting across international borders back to the people who did the research, and for each individual company involved to pay the appropriate tax in their own country on the money they make in that country.

    So where do you draw the line, and on what basis? After all, the businesses in question almost certainly do still pay substantial amounts of money to the countries where they really are selling things, such as sales, property and employment taxes. The "obvious" thing to do is to adjust the tax rates so corporation tax is universally low and more government revenue comes from these other forms of taxation that can't be so readily shifted, but that has a lot of knock-on effects for your entire national tax system, and it's also susceptible to various other kinds of manipulation unless there is a lot of international co-ordination to mitigate those dangers. And remember, the people who are making all this money typically have a lot more to spend on professional tax advice -- and get excellent returns on that investment -- than the governments in question have to spend on challenging them in extended tax-related lawsuits that will drag on for years at great cost to all concerned.

    I think there is sufficient public opinion turning against the more egregious examples of corporate tax avoidance now that we really will see such international co-ordination starting to get results within the next few years. France is definitely not the only place concerned about this, at either government or guy-in-the-street level. But for now, the above is (a grossly simplified explanation of) how they get away with it, and why it's neither breaking any laws nor easy to make laws it would break without unintended and potentially very nasty side effects.

  • by mlts ( 1038732 ) on Saturday April 26, 2014 @09:52PM (#46850779)

    In cases like this, I wonder about just moving to a VAT entirely and dispensing with income taxes.

    In a perfect world where companies paid what they earned, an income tax would be better in theory, as consumption taxes tend to slow down purchasing and movement of money.

    However, in the real world, we read all the time about the stashing of income. A VAT is better because it is a lot harder to get around (as of now... I'm sure there might be loopholes.)

    tl;dr... Income can be hidden. Hiding that factory, Lear Jet, or Maybach, not so much.

Love may laugh at locksmiths, but he has a profound respect for money bags. -- Sidney Paternoster, "The Folly of the Wise"