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Google escapes tax hit in France

July 12, 2017

A French court has ruled that the internet giant is not liable to pay more than one billion euros on profits channeled through its subsidiary in Ireland - a favorite among multinationals seeking lower taxes in the EU.

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Google has avoided paying back taxes / EU
Image: picture-alliance/dpa

A claim by Paris for 1.115 billion euros ($1.272 billion) in unpaid taxes was not legal, a French court ruled on Wednesday, because the US company's subsidiary in Ireland was not taxable in France. "Google Ireland Limited is not taxable in France for the 2005 to 2010 period," the court ruled.

The French claim was the latest in a series against the California-based group, which faces mounting legal problems in the EU. It was significantly higher than the amount Google agreed to pay Italian and British tax authorities over its tax arrangements with its Irish subsidiary.

In May, the group agreed to pay 306 million euros to Italian authorities. Last year, it struck a deal with Britain to pay 130 million pounds (147 million euros or $167.5 million) for a decade of business, which was criticised at the time by opposition MPs as being too low.

France sues Google for back taxes

Low-tax haven

Google employs 700 people in France but advertising contracts for its search engine or video-sharing website YouTube are signed with its Irish subsidiary. In 2015, for example, the company paid just 6.7 million euros in corporate taxes in France by booking revenues for its online empire at its European subsidiary in low-tax Ireland, a legal loophole prized by multinationals.

Newly elected French President Emmanuel Macron promised to get tough on US internet giants during his campaign, seeing their low tax rates as a source of resentment about globalisation and unfair on European companies.

Just last Sunday, French Economy Minister Bruno Le Maire said that Europe "got a grip and defended its interests," by making the likes of Google, Amazon and Facebook pay the taxes they owe European taxpayers.

The European Union has also become increasingly aggressive against US technology giants, with the bloc's executive Commission hitting Google with a record 2.4 billion euro fine on June 27 for abusing its dominant position in the search engine business and illegally favouring its own shopping service over rivals.

In 2016, European competition chief Margrethe Vestager shocked Washington and the world by ordering iPhone manufacturer Apple to repay 13 billion euros in back taxes in Ireland after paying a near-zero rate of tax some years.

uhe/jd (Reuters, AFP)