France is seeking €1.6bn in back taxes from Google, the US Internet search giant, according to a source at the finance ministry in Paris, reported by Reuters on Wednesday. In London also on Wednesday, the House of Commons' Public Accounts Committee (PAC) said in a report that a settlement by Google with the HMRC (Her Majesty's Revenue and Customs) that was announced last month "seems disproportionately small when compared with the size of Google's business in the UK, reinforcing our concerns that the rules governing where corporation tax is paid by multinational companies do not produce a fair outcome."


Michel Sapin, French finance minister, earlier in February, rejected doing a deal with Google as the UK authorities did for the period since 2005, agreeing a sum of £130m in back taxes, which was criticised by both government and opposition MPs.

Sundar Pichai, Google's new chief executive, who is a native of India, was in Paris Wednesday to address a conference held by Sciences-Po university and its School of Journalism.

Pichai had also an appointment Wednesday evening with Emmanuel Macron, France's economy minister, and today he will be in Brussels for a meeting with Margrethe Vestager, the European competition commissioner. The Commission has been involved in a long-running investigation on allegations that Google abuses its dominant position in online search.

Last month Tim Cook, Apple's chief, met Vestager to argue that Ireland didn't agree special tax deals with the electronics giant.

Finfacts: US giant firms and Europe's new response to tax fraud

The House of Commons' PAC noted on Wednesday that the previous PAC's Report on Google's tax affairs in June 2013 concluded that Google used an artificial tax structure which served to avoid UK taxes rather than to reflect the substance of the way business is actually conducted.

The Committee noted that the "UK is a key market for Google but the enormous profit derived is out of reach of the UK’s tax system."

It also found that to avoid UK corporation tax Google relied on "the deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes places in the UK."

The latest report in its recommendations to government the Committee calls on HMRC to "lead the way in pressing for changes in international tax rules to prevent aggressive avoidance by multinational companies".
HMRC should consult for rule changes

It says HMRC should consult widely on the case for changing rules that protect corporate taxpayer confidentiality "to make the tax affairs of multinational companies open to public scrutiny."

The Committee also expects HMRC to "monitor the outcome of other tax authorities' investigations into Google, and re-open its settlement with Google if relevant new evidence becomes available."

The lack of transparency about tax settlements makes it impossible to judge whether HMRC has settled this case for the right amount of tax. Taxpayers’ legal right to confidentiality means that HMRC cannot explain how it has arrived at this or other settlements, or demonstrate that the rules have been applied correctly. [ ]
Multinational firms such as Google have made a choice to avoid tax, despite any claims they make to the contrary. Google told us that international tax rules are complex and that it just follows them. This is disingenuous. There is nothing in the rules that says you must set up two companies in Ireland and send large royalty payments, via the Netherlands, to a company that is tax resident in Bermuda. Multinational companies seem to be able to control how much corporation tax they pay in each country by the way they structure their business and allocate profits between their overseas entities. The fact that companies can do this within the rules shows that the corporation tax system is in urgent need of reform. We welcome the ongoing work by the OECD which is taking a fundamental look at how tax avoidance by multinationals can be addressed through international cooperation. Google’s business model is not novel. Many multinational companies are internet based companies making online sales and the tax system needs to catch up.

Google Ireland shifted €28.7bn of profits tax-free, related to the three years 2012-2014, via its letterbox/ shell company in the Netherlands to its Irish shell companies in Bermuda.

Google Bermuda Unlimited and Google Ireland Holdings are registered at the address of Conyers Dill and Pearman, a law firm with offices at Clarenden House, 2 Church Street, Hamilton, Bermuda.

Last week Jeremy Kahn and Jesse Drucker of Bloomberg News reported that for 2015, Alphabet, Google's parent, had an average tax rate outside the US was just 6.3%, according to a calculation using the income from foreign operations and the foreign income tax reported in its US Securities and Exchange Commission filings. Figures for 2015 revenue moved through Google’s Dutch subsidiary aren’t available.

Pic above: The offices of the Conyers, Dill & Pearman law firm in Clarendon House in Bermuda, where Google's Irish shell companies are based. Google has no presence here but it has assigned its intellectual property (IP) here and Google's staff in California create accounting transactions, using the Double Irish tax dodge to save the group paying billions in taxes.