Google May Be Taxed By The French Government
November 1, 2012

Newspaper Claims French Tax Authorities Are Going After Google For 1 Billion Euros

Michael Harper for — Your Universe Online

According to French newspaper Le Canard Enchaîné, search giant Google is being asked to pay the French tax office 1 billion euros, or $1.3 billion. The newspaper claims the tax authorities are planning on using the payment to make up for revenues from France routed through Google Ireland. So far, neither the tax office nor Google have much more to say about the matter.

According to the AFP new agency, the newspaper hit newsstands Wednesday and claims this pressure for payment concerns the transfer prices set between Google´s Irish and French holding companies, and dates back 4 years. The newspaper hasn´t disclosed their sources and the French tax authorities told the AFP they don´t comment on specific cases, citing taxpayer privacy.

Google, on the other hand, claims they´ve received no such tax claim from the French authorities.

“Google has not received any tax assessment from the French tax administration,” the company said in a statement to Bloomberg.

“We have and will continue to cooperate with the authorities in France.”

Eric Schmidt was in France this week and had a meeting with French President Francois Hollande to talk about job creation. According to Bloomberg, Hollande did mention taxes, saying a new, digital economy calls for a change in the way companies are taxed. Many companies who sell digital content set up offices in areas and countries with cheaper tax rates, side-stepping more expensive rates. Other companies, including rival Apple, have also been accused of sidestepping similar taxes.

According to Bloomberg, the meeting between Hollande and Schmidt had been set up months ago. The French government is currently looking for new ways in which to tax Internet companies, like Amazon, Google and Facebook so they can no longer sidestep these payments. One new French plan would require these companies to pay taxes on ads, video-on-demand, and other forms of e-commerce. This new tax plan is set to be debated in the French senate early next year, January 31.

This new law would also allow the French government to settle an argument between Google and French Web sites, who are upset with the search giant for not paying a percentage of the ad revenue they earn from directing users to their sites.

"If the negotiations between Google and the media publishers don't result in a deal by the end of the year, Google already knows what awaits it from a tax point of view: one billion,” reads the Canard Enchaine.

"Otherwise, there will no doubt be room to negotiate."

According to UK tax law, companies pay tax only where the company is registered, and not where their customers are located.

By these standards, Google selling ads to France from their Irish office is perfectly legal.

According to the HMRC, “Non-resident trading companies which do not have a branch in the UK, but have UK customers, will therefore pay tax on the profits arising from those customers in the country where the company is resident, according to the tax law in that country. The profits will not be taxed in the UK. This is not tax avoidance: it is simply the way that corporation tax works.”

According to the AFP, Google generated between $1.621 and $1.815 billion in revenue last year, paying only $6.483 million in taxes.