Business / Corporate

Google pays France over $1 billion to settle tax fraud probe

AP, Reuters

Tech giant Google said Thursday it had paid over $1 billion to French authorities to settle a yearslong dispute over allegations of tax fraud.

A Paris court approved a penalty of €500 million ($551 million) from the digital giant over charges of tax evasion, and Google said it paid a further €465 million ($513 million) in “additional taxes.”

French investigators have been investigating Google’s tax arrangements since 2015. The company, like many multinationals, declares profits from activities across the EU in one country — usually a low-tax state.

Google, part of Alphabet Inc, declares most of its earnings in Ireland, a move that is possible thanks to a loophole in international tax law but which hinges on staff in Dublin concluding all sales contracts.

“(The agreement allows us) to settle once for all these past disputes,” said Antonin Levy, one of Google’s lawyers, at a hearing in the Paris court.

The action against Google comes as the French government steps up its effort to more fairly tax the digital operations of companies. In July, it put a pioneering 3 percent tax on tech giants like Facebook, Amazon and Google.

Still, the combined taxes Google paid were less than the €1.6 billion France’s finance ministry had been seeking from the company after its Paris offices were raided in 2016. At the time, the ministry had ruled out settling with the company.

Budget Minister Gerald Darmanin told Le Figaro newspaper on Thursday the settlement would create a legal precedent, and added that talks were underway with several other companies, big and small. He did not specify their names.

European countries have struggled to tax the profits of multinational tech companies derived in their jurisdictions.

France has pushed hard for a digital tax to cover European Union member states, but ran up against resistance from Ireland, Denmark, Sweden and Finland.

The French government eventually imposed its own unilateral tax, prompting U.S. President Donald Trump to brandish the menace of a retaliatory tax on French imports such as wine.

The French said the tech tax will be withdrawn only if a global deal is forged on how to better tax digital businesses — a diplomatic gamble that aims to maintain leverage with the U.S.

At this year’s Group of Seven finance ministers’ meeting in Chantilly, France, officials said that the countries aim to draft the outlines of a global agreement on taxing digital business by January, and to create an arbitration forum.