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Google will pay $1B+ to French authorities to settle tax evasion probe

Google LLC will pay a 500 million euro fine and 465 million euros in back dues to settle allegations that it evaded taxes in France.

The penalty, which works out to roughly $1.068 billion at the current exchange rate, brings to an end a four-year investigation by the France’s Office of the Financial Crimes Prosecutor. The probe at one point saw authorities raid Google’s Paris office in search of evidence. The terms of today’s settlement allowed Google to avoid pleading guilty to the accusations. 

“The outcome is good news for public finances and tax equity in France,” French Justice Minister Nicole Belloubet and Budget Minister Gerald Darmanin said in a joint statement about the settlement. 

The France’s Office of the Financial Crimes Prosecutor, known by its French acronym PNF, charged that Google failed to fully meet its financial obligations to the state by neglecting to declare part of its locally-generated revenues. The search giant reports almost all European sales in Ireland to take advantage of the island nation’s low corporate tax rate. 

That’s a fairly common practice among U.S. tech giants and other global enterprises which is made possible by a loophole in the international tax system. Google can declare deals with French customers in Ireland so long as staffers at its Dublin campus conclude the contract. On the other hand, if a sale contract is finalized in France, Google would be obligated to pay taxes to the French government.

The other firms engaged in practice have apparently also caught authorities’ attention. According to Reuters, French Budget Minister Gerald Darmanin told local press that the is currently in talks with several companies  “big and small” about similar settlements.

Those unnamed companies may include Google’s fellow tech giants. In recent years, French authorities have handed out fines to Inc., Apple Inc. and Facebook Inc. for offenses ranging from privacy breaches  to consumer rights violations. The European Union has also taken tech companies to task, including by ordering Apple to pay Ireland 13 billion euros in back taxes for a more than 10-year period.

These developments have come against the backdrop of a broader push in the region to up taxes on large tech firms that currently pay a lower rate than many traditional businesses. France moved to implement a 3% digital service tax  earlier this year but scrapped the law last month as part of a compromise with the U.S.

“We continue to believe that the best way to provide a clear framework for companies that operate around the world is coordinated reform of the international tax system,” Google said in a statement today after the announcement of the settlement. 

Photo: Tobin

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