French tax bill could hit Google’s Irish arm

Adequate provision has been made for bill which could total €1bn

Google said “it is reasonably possible that resolution with the French tax authorities could result in an adjustment to our tax position”. Photograph: Justin Sullivan/Getty Images

Google said “it is reasonably possible that resolution with the French tax authorities could result in an adjustment to our tax position”. Photograph: Justin Sullivan/Getty Images

Sat, Apr 26, 2014, 01:00

Google has confirmed that a large tax assessment was received from French tax authorities in March, in a move that could hit its Irish subsidiary for hundreds of millions of euros.

In a quarterly report to the US Securities and Exchange Commission, the search engine giant said it believed an adequate provision had been made against the French assessment and it was more likely than not that its tax position would be sustained. “However, it is reasonably possible that resolution with the French tax authorities could result in an adjustment to our tax position.”

Investigation
In February, the French magazine Le Point reported that the sum, relating to an investigation which began in 2011, could total between €500 million and €1 billion. Google declined to comment on the figures.

Google sales in France are conducted from the Irish subsidiary Google Ireland Ltd, which is in turn owned by the Irish company Google Ireland Holdings, which is tax resident in Bermuda.

Taxes paid in France would be deductible against the tax to be paid in Ireland by Google Ireland Ltd.

France has been coming down hard in recent years on US technology companies which are conducting significant amounts of business in its economy from operational companies tax resident elsewhere.

Microsoft, which sells into France from Ireland, has been hit with corporation tax bills in the tens of millions, while Amazon, which has its European headquarters in Luxembourg, says it will challenge a $250 million demand for alleged unpaid taxes from sales between 2006 and 2010.

In its filing, Google said that its effective tax rate – the tax rate it actually pays on its earnings – could fluctuate on a quarterly basis and could be adversely affected “to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates”.

France is not alone in looking askance at the tax affairs of US technology companies. Other European countries have objected to internet companies’ use of offshore subsidiaries to reduce their tax bills.

Google has always argued that its tax affairs are fully compliant with European law and often cites consultants’ reports that argue internet companies contribute billions of euro to local economies. – (Additional re porting the Financial Times Limited 2014)