Last week, Alphabet subsidiary Google made arrangements with France’s financial prosecutor to pay $1.046 billion in back taxes and fines. With the settlement, the Big Tech firm has finally brought an end to an investigation that stretches back to 2015. Though numerically significant, the payout only represents 2.9 percent of Alphabet’s revenue last quarter.
Google’s French Tax Issues
Four years ago, France’s tax authority filed a complaint with its financial prosecutor regarding Google’s alleged tax evasion. The government agency accused the tech giant of not correctly declaring how much revenue and profit it generated in the nation. The regulator asserted the Alphabet subsidiary booked its income in fellow European Union member Ireland while reimbursing the costs of its French outlet.
In particular, Gallic authorities accused Google of negotiating key advertising deals in Paris while filing the transactions in Ireland.
Consequently, Google recorded relatively minimal taxable revenues in its French tax filings.
Because Google executives negotiated key advertising deals in Paris, French authorities argued the firm should record income from those transactions in France. In 2016, local police raided Google’s regional office seeking evidence backing up that assertion.
The French tax authority levied Google with a $1.27 billion bill for not paying its duties from 2005 to 2015. However, in 2017, a regional court rejected the agency’s assertion. Gallic investigators launched a separate criminal probe into the search engine’s tax history in 2015.
Google’s settlement requires the corporation to pay a $553 million fine and an additional $513 million in fines.
In recent years, the conglomerate has paid hundreds of millions of dollars in back taxes to various European nations. In 2016, the firm agreed to pay U.K. authorities $160 million in back taxes. Moreover, last year, the corporation reached a settlement with Italy to pay the nation $337 million for unpaid taxes from 2009 to 2015.
However, Google’s overseas regulatory issues are far from over.
In August, executives from Amazon, Facebook, and Google French petitioned the White House to fight a new French tax initiative. Paris instituted a 3 percent tax on technology companies that earned $831 million globally and $28 million locally. The Big Tech firms argued the new levy represented an unfair double tax. The Trump administration agreed and threatened to issue new import taxes on French goods.
However, as of this writing, Washington hasn’t made good on its threat, and France hasn’t rescinded the new duty. As the European republic’s new tech tax is retroactive, the firm could end 2019 with a multibillion-dollar tax bill.
Furthermore, Google owes the European Union (EU) a staggering amount of money. In March, the EU’s regulatory arm, the European Commission, levied a $1.7 billion antitrust fine against the search engine. The organization found the tech giant used its power to force local companies into restrictive advertising agreements.
Besides, last year, the European Commission slapped Google with a $5 billion fine for two different antitrust infractions. The agency sanctioned the company for bundling Chrome with its Android operating system and not allowing phone manufacturers to install open source additions of its operating system on their devices.
Also, the EU hit the corporation with a $2.7 billion penalty in 2017 for manipulating its search results to benefit its Google Shopping service. Despite generating $38.94 billion in revenue in Q2 2019 alone, Alphabet has put off paying its fines with a series of objections.
With the EU and its members taking a more aggressive stance toward Silicon Valley, Google will likely pay its taxes sooner rather than later.