Google to pay $1.1billion settlement to France in fiscal fraud case

Google Inc
Visitors pass by the logo of Google at the high profile startups and high tech leaders gathering, Viva Tech, in Paris, France.

Google agreed to pay close to 1 billion euros (an equivalent of $1.10 billion) to French authorities to settle a fiscal fraud probe that began four years ago in a deal that may create a legal precedent for other large tech companies present in the country.

French investigators have been seeking to establish whether Google, whose European headquarters are based in Dublin, failed to pay its dues to the 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 said in a statement.

Google, part of Alphabet Inc, pays little tax in most European countries because it reports almost all sales in Ireland. This is possible thanks to a loophole in international tax law but it hinges on staff in Dublin concluding all sales contracts.

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

The combined tax payment is less than the 1.6 billion euros the finance ministry had been seeking from Google after the company’s 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 has eventually imposed its own unilateral tax, prompting U.S. President Donald Trump to brandish the menace of a retaliatory tax on French wine.

“We remain convinced that a coordinated reform of the international tax system is the best way to provide a clear framework for companies operating worldwide,” Google said.

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