Google To Pay France $1 Billion To Settle Tax Dispute

Google is to pay French authorities nearly 1 billion euros (or $1.1bn) to settle a fiscal fraud probe that began four years ago.

The payment could create a legal precedent for other large tech companies that operate in the country.

It comes after France at the start of the year imposed a digital tax on tech giants such as Google and Facebook, amid growing outrage at the levels of tax these firms pay in local markets. That decision prompted US President Donald Trump to threaten a retaliatory tax on French wine.

Google settlement

France’s so-called GAFA tax targets major digital firms and hopes to raise €500 million (£451m).

The tax has long been championed by French president Emmanuel Macron as a way to show that governments are capable of taking action to rein in large tech companies, which are seen as paying minimal tax in Europe due to their use of accounting loopholes (US tech firms tend to base their European HQ in low tax regions such as Ireland, and report most sales in Ireland).

A European wide digital tax had been defeated in its previous form, due to opposition by Ireland, Scandinavian countries and Luxembourg. It needs unanimous approval by member states.

A number of countries, including the UK, have proposed their own national digital taxes with a broader base.

But now according to Reuters, France had been investigating Google to establish whether it failed to pay its dues to the French state by avoiding to declare parts of its activities in the country.

The settlement comprises a fine of 500 million euros and additional taxes of 465 million euros, Google reportedly said in a statement.

Google and other tech firms utilise a loophole in international tax law to record sales in low tax countries, but this hinges on staff in Dublin concluding all sales contracts.

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

Legal precedent?

The French finance ministry had been seeking 1.6 billion euros from Google, ever since Google’s Paris offices were raided in 2016.

Budget Minister Gerald Darmanin reportedly told Le Figaro newspaper on Thursday the settlement would create a legal precedent and added that talks were underway with several other unnamed companies, big and small.

G20 finance ministers have already placed large tech firms on notice over their tax arrangements going forward, with changes promised by 2020.

For their part, tech companies have previously defended their tax structures, and insist they abide by tax laws as they’re currently written.

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Tom Jowitt @TJowitt

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

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