Google denies €1bn tax claim report

Google has denied a newspaper report it had received a €1bn tax claim from the French authorities arising out of the billing of French customers from Ireland.

The weekly Le Canard Enchaine said the French Tax Administration was looking into whether Google’s practice of charging French advertisers via its European headquarters in Ireland led it to underpay taxes in France.

European Union rules on freedom of trade within the bloc generally allow firms to freely sell into one EU market from another.

The newspaper said the French Tax Administration had sent a letter to Google, notifying it of the claim, but a spokeswoman for Google France denied this.

“Google has not received any tax assessment from the French tax administration.” She acknowledged the company was in talks with the taxman about its affairs but declined to give details.

“We have and will continue to cooperate with the authorities in France. Google complies with tax law in every country in which the company operates and with European laws,” the spokeswoman added.

Google paid taxes of just 3.2% on non-US income of $7.6bn (€5.87bn) last year. The company had a tax bill on $4.7bn of US income equal to 43%.

The company said in its annual report for 2011 that it was under examination by the US Internal Revenue Service and “various other tax authorities”.

Corporate tax avoidance has become a hot topic as governments struggle with large deficits following the banking crisis. Tax campaigners say international technology groups are among the most aggressive at shifting income into low tax jurisdictions to avoid income taxes.

Last month, a US senate investigation criticised Google and Microsoft for sheltering tens of billions of dollars from income taxes by using tax havens.

Google France reported sales of €68.7m in 2010, the most recent period for which accounts are available. The company paid French income taxes of €2m, on €4.4m income.

Google earns revenue from selling space on its search engine to advertisers. European units in France, and elsewhere, are usually designated as support centers for its Irish operation, which actually bills advertisers, according to company statements. Ireland’s corporate tax rate of 12.5% is around half the average rate in the European Union.

Separately, French president François Hollande told Google’s chief executive Eric Schmidt this week that France would legislate to force the web search engine to pay for displaying links to news articles unless Google struck a deal with French media outlets.

Reuters