Google pays $1.1B to settle French tax dispute; Apple and others may be next

Google has agreed to pay almost €1B ($1.1B) to settle a French tax dispute. The amount comprises €465M in underpaid taxes, and a fine of €500M.

Google said in a statement that it ‘agreed’ to pay the tax …

Reuters reports.

Google said on Thursday it agreed to pay 465 million euros in additional taxes to French authorities, boosting the total settlement to end a fiscal fraud probe in the country to nearly 1 billion.

France’s financial prosecutor office earlier said Google had agreed to pay half a billion euros in fine to settle the four-year old investigation.

Engadget reports a statement by Google.

We have now settled tax and related disputes in France that have persisted for many years. The settlements comprise a €500 million payment that was ordered today by a French court, as well as €465 million in additional taxes that we had agreed to pay, and that have been substantially reflected in our prior financial results.

We continue to believe that the best way to provide a clear framework for companies that operate around the world is co-ordinated reform of the international tax system.

Google used a measure known as the Double Irish. Essentially, Google funnelled European sales through a shell corporation based in Ireland, which is in turn controlled by an offshore company. The US considered the company’s European operations to be tax-registered in Ireland, with no US tax payable, while Ireland considered it to be resident in the offshore company, meaning no tax due there either. In that way, Google paid almost no tax on its European sales up until 2014.

The Double Irish was banned by the European Union in 2014, so the disputed taxes predate this. The arrangement sits in a murky area which some consider to be legal tax avoidance, while others take the view that it is a fraudulent arrangement and thus illegal tax evasion.

French tax dispute could target Apple and others next

Apple used a variant on the Double Irish which relied on part on a ‘sweetheart deal’ with the Irish government. That deal was later declared illegal, though it was the Irish government, rather than Apple, which broke the law.

Although Apple was not accused of behaving illegally itself, it did mean that its tax bills were substantially lower than they should have been, and the company was ordered to pay €13B ($14.4B) in underpaid taxes. That ruling is currently being appealed by both Apple and the Irish government, a case which is scheduled to be heard next week.

However, France’s claim would be a separate one from the Irish ruling. France would be arguing that Apple should never have transferred French sales revenue to Ireland in the first place without first paying tax on it locally. If the country makes the same claim against Apple, it would be demanding both back taxes and a fine for what it would consider tax evasion rather than avoidance. Apple already agreed to pay tax in Italy under similar circumstances, back in 2015.

Amazon and Facebook use similar arrangements, and it seems likely France will target them too.