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News : Innovation Last Updated: Apr 29, 2014 - 10:14 AM


France's Double Dutch-Irish tax bill for Google of up to €1bn
By Michael Hennigan, Finfacts founder and editor
Apr 27, 2014 - 3:09 PM

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Dr Eric Schmidt, chairman of Google, meeting François Hollande, French president, at the Élysée Palace, Paris, Oct 29, 2012

Google revealed this week that France's tax authority has hit it with a tax demand in respect of underpayments arising from the Double Dutch-Irish corporate tax avoidance scheme. The search engine giant didn't give an estimate of the liability but It may have to pay as much as €1bn.

Google disclosed the assessment in a securities filing Thursday - - the story was first reported by The Financial Times.

Google said in its Form 10Q filing with the US Securities and Exchange Commission:

In March 2014, we received a tax assessment from the French tax authorities. We believe an adequate provision has been made and it is more likely than not that our tax position will be sustained. However, it is reasonably possible that resolution with the French tax authorities could result in an adjustment to our tax position."

In February several French media outlets reported that the tax authorities were preparing an assessment worth between €500m and €1bn.

Google claims that staff across Europe provide services to Google's operation in Dublin where sales are closed.

However, the structure is widely seen as an abuse of the European Union's internal market to minimise tax.

Google France in 2012 had almost 400 employees and it declared revenue of only €193m, and paid €6.6m in corporate tax while Google Ireland reported revenue of €15.5bn in 2012 and it paid €33m in corporate tax in 2012.

Earlier this month Pascal Saint-Amans, the director of the Organisation of Economic Co-operation and  Development's (OECD) tax centre - - which is working on a project to develop new international business tax rules for the Group of Twenty (G-20) leading developed and emerging countries -- said that the think-tank will propose the axing of the Double Dutch Irish Sandwich tax dodge scheme.

Read: The Finfacts submission to the OECD on taxing the digital economy

Google UK

The Public Accounts Committee of the House of Commons last June published a report [pdf] which charges Google with massive tax avoidance in the UK.

It said:

To avoid UK corporation tax, Google relies 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 place in the UK. The big accountancy firms sell tax advice which promotes artificial tax structures, such as that used by Google and other multinationals, which serve to avoid UK taxes rather than to reflect the substance of the way business is actually conducted. HM Revenue & Customs (HMRC) is hampered by the complexity of existing laws, which leave so much scope for aggressive exploitation of loopholes, but it has not been sufficiently challenging of the manifestly artificial tax arrangements of multinationals. HM Treasury needs to take a leading role in driving international action to update tax laws and combat tax avoidance."

Margaret Hodge MP, chair of the committee, commented:

Google generates enormous profits in the UK. But despite an $18bn turnover between 2006 and 2011 it paid the equivalent of just $16m in taxes to the UK government.

“Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. It claimed that its advertising sales take place in Ireland, not in the UK.

“This argument is deeply unconvincing and has been undermined by information from whistleblowers, including ex-employees of Google, who told us that UK based staff are engaged in selling. The staff in Ireland simply process the bills. Google also conceded at this second hearing that its engineers in the UK are contributing to product development.

“The company’s highly contrived tax arrangement has no purpose other than to enable the company to avoid UK corporation tax.

“Google’s reputation has been damaged by these revelations of aggressive tax avoidance. That damage will not be repaired until the company arranges to pay its fair share of tax in the country where it earns the profits from the business it conducts."

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© Copyright 2011 by Finfacts.com

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