France is the latest in a growing list of countries to seek “back taxes” from Google. France is trying to collect the equivalent of roughly $1.7 billion it says Google owes over a period of years.
In January, Google agreed to pay the equivalent of $185 million in UK taxes, concerning a period from 2006 to 2011. It also agreed to pay future taxes in the UK commensurate with UK revenue. Amazon has also changed its accounting practices to report revenue in individual countries, rather than running all revenue through Luxembourg.
Google had been paying most of its taxes through its Irish subsidiary, where tax rates are lower than in the rest of Europe. Most countries in Western Europe have corporate tax rates above 20 or 25 percent. France taxes corporate profits at levels above 30 percent. European governments have long accused Google, Apple, Amazon and other US corporations of tax avoidance through arcane legal and accounting practices.
Italian authorities have also been pursuing Google for taxes reportedly owed. The government there wants more than $300 million, covering a six-year period. Late last year, Apple agreed to pay Italy roughly $350 million in a tax settlement.
Farther east, Russia is considering a bill that would create an 18-percent value-added tax on the revenues of foreign companies doing business in the country. If enacted it would generate an estimated $4 billion in annual tax revenue.
These tax collection moves are motivated by principle, but also by economics. European governments have been trying to eliminate “diversion” of profits to lower tax jurisdictions. However, they’re also seeking additional revenue sources amid economic weakness.
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