A court in Paris ruled in favor of Google and spared a $1.3 billion French tax bill against the company. The decision comes after six years of a billion-dollar dispute with the French tax authority over back taxes.
Tax authorities argued that Google was liable to pay taxes in France because the California company and its Irish subsidiary have been selling a service for inserting online ads to clients in France through its Google search engine. A court’s adviser recommended that Google did not have a permanent establishment or sufficient taxable presence in France to justify the hefty tax bill. In the end, the French court annulled Google Ireland Limited’s corporate and value-added taxes for the period of 2005-2010. Google Ireland Limited does not have a “permanent establishment” in France. So, the Irish subsidiary is not taxable in France.
The French government can appeal the decision.
Unpaid Tax Bills & Double Irish Dutch Scandal
Alphabet-owned Google has, time and again, abused loopholes to avoid paying its taxes. Dubbed ‘Double Irish,’ the evasion was explained by Quartz three years ago. Here is the gist of it: Google Ireland sends money to Google Netherlands Holdings, which also happens to receive money from Google Singapore. The Netherlands has no “withholding tax,” a compulsory pre-payment of tax, also called the “Dutch Sandwich.” Using this loophole, Google Netherlands sends all money to Google Ireland Holdings, a second company registered in Ireland but a tax resident in Bermuda. In the end, there is virtually no tax for Google to pay. This strategy has helped Google boost its profits and stock price.
Google has been illegally routing sales out of Ireland since a long time now. France wants Google to pay taxes to the EU, instead of Ireland so it can stop evading taxes by finding loopholes.
Google has been at odds with several countries over tax evasion. Recently, Alphabet-owned Google agreed to pay $349 million tax bill to end criminal investigation over an on-going tax dispute. It paid $167 million tax bill to settle a dispute in Britain. Although, the British committee believes the amount is disproportionately small given Google’s operations in Britain. It also faces a long-standing battle with the European Union. Last month, the EU fined Google $2.7 billion for manipulating product searches.
Google, Amazon, Facebook and Apple – also known as GAFA have been widely criticized for Double Irish deception.