Google Escapes €1.1 Billion Tax Lawsuit against French Tax Authorities

Google has received a favorable verdict from French court regarding retrospective tax slapped on the company by French tax authorities. The tax was slapped on technology major by French tax authorities for period between 2005 and 2010 for the business Google conducted in France. Google has been criticized by many European governments for escaping taxes in their region by getting tax incentives in Ireland.

Google Ireland operates majority of business in European countries and Google pays lower tax compared to the business it conducts in major European nations. Google has contested that the company pays taxes where they are due. The current verdict handed over by French court is important as Google faces tough times in many European countries regarding taxes. Google has recently agreed to a deal with Italian authorities with a lower tax rate. Italy received €272 million from Google earlier this year.

Last year in January, Google agreed to a deal with the UK tax authorities to pay nearly €160 million for the business the company conducted in the UK. The effective tax rate for Google in this deal comes at 3 percent. The deal with UK government was criticized by many politicians due to its low tax rate.

French authorities were determined to get higher taxes from Google as they weren’t interested in signing a special deal with the company. Other technology companies including Apple have been criticized for escaping taxes in European Union.

Google employs 700 people in France but advertising contracts for its search engine or video-sharing website YouTube are signed with its Irish subsidiary.

Offering relief to Google in this case, the French court ruled, “Google Ireland Limited is not taxable in France for the 2005 to 2010 period.”

European politicians will need to change the law regarding taxes in order to collect higher taxes from multinationals. Many companies are using the loopholes in the current tax system to escape paying taxes. As per the current laws, these companies aren’t doing anything wrong. Unless the law clearly defines some fine points about due taxes, companies and their accountants will figure out a way to escape taxes.