Google under fire in Europe for tax avoidance techniques

[drmike]

Google is getting lots of heat for its long adhered to tax practices to "structure" "legally".  To lay folk, complicated funneling of proceeds to avoid tax liabilities, often in logical brains deemed tax avoidance and illegal.


The UK has made Google pay $181 million USD for their misdeeds.


Now France is going after 1.6 BILLION euros.


Source: http://www.reuters.com/article/us-google-france-taxation-idUSKCN0VX1Z5/


Should be noted that tech darlings like Apple use many of the same tactics.  Hoping this becomes more a presidential campaign issue here in the US from both sides of aisle.

 

[Jonathan]

Europe is just a nasty mess of taxes and other garbage laws.  Looking forward to seeing the UK pull out of the EU.

 

[DomainBop]

Should be noted that tech darlings like Apple use many of the same tactics. 

In google's defense, at least it pays its workers a decent wage and doesn't use sweatshop labor in its factories in China (Apple) or poorly paid temp workers who work in sweatshop like conditions in its warehouses in the US and UK (Amazon).


Back to the topic...the EU estimates that losses from tax avoidance and tax fraud are costing it  up to $1 trillion annually http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/a_huge_problem/index_en.htm


For further reading on the subject, visit the "LuxLeaks" site for the searchable list of 350 multinationals like Pepsi and Ikea who funnel revenues through Luxembourg to avoid taxes http://www.icij.org/project/luxembourg-leaks 

Hoping this becomes more a presidential campaign issue here in the US from both sides of aisle.

In a perfect world Verizon and Comcast and other megacorporations would pay the same effective tax rates that small businesses and the average American pay. Probably not going to happen as long as all 3 branches of the federal government are essentially bought and paid for by huge corporations.

 

[GM2015]

This is just prick waving between rich people on what to spend tax money on.

 

[graeme]

Microsoft is another huge tax avoider. They have got off the radar by switching to an unlimited liability Irish subsidiary, which has no public annual accounts, so no-one knows how much is going through it (probably mots non-US revenue)

Probably not going to happen as long as all 3 branches of the federal government are essentially bought and paid for by huge corporations.

You mean just like the EU?

 

[estnoc]

This is quite interesting that EU tax agencys now came to that conclusion. Google operated systems for ages here already

 

[graeme]

There has been a lot of media attention recently. The governments are quite happy for big companies to dodge tax, the public are not.

 

[ChrisM]

If the EU doesn't stop with these ridiculous Tax polices its time for Google and others companies to start laying people off in the EU and moving their presence away from the EU. 

 

[graeme]

@KnownHost-ChrisM Are you suggesting that Google should just sacrifice all its EU revenues? Perhaps stop accepting European advertisers in adsense. Perhaps Microsoft should stop setting Windows and Office in Europe? I cannot see it happing, somehow.

 

[Jonathan]

@KnownHost-ChrisM Are you suggesting that Google should just sacrifice all its EU revenues? Perhaps stop accepting European advertisers in adsense. Perhaps Microsoft should stop setting Windows and Office in Europe? I cannot see it happing, somehow.

He didn't say that.  They can remove all physical assets/offices/etc. from the EU at which point they're basically giving a middle finger to the EU as the EU then has no way to "force" Google into paying any tax, VAT or otherwise.


VAT might work in a pre-internet world, but VAT is not enforceable for other countries which have no physical assets in the EU as legally the EU has no way to go after say, a US company so the only thing is when you have physical assets in the EU that they could seize based on their laws.  Without those physical assets, poof, they can't really do much to you (the company avoiding taxes there).

 

[mpkossen]

Looking forward to seeing the UK pull out of the EU.

I really doubt that's going to do them any good. It's not going to make doing business in the UK easier anyway, it's just going to make it harder.

 

[DomainBop]

He didn't say that.  They can remove all physical assets/offices/etc. from the EU at which point they're basically giving a middle finger to the EU as the EU then has no way to "force" Google into paying any tax, VAT or otherwise.

They do that and they're potentially also giving a middle finger to a large chunk of their revenues from European businesses because without a physical presence in the EU (and an EU domiciled subsidiary)  many of their EU business customers (depending on the customer's country) will not be able to use cloud providers like Google due to a ruling by the European Court of Justice last October (Maximillian Schrems v Data Protection Commissioner) that ruled the transatlantic Safe Harbor Agreement which has governed the flow of data between the US and EU since 2000 is invalid.  The tl;dr of it is the court ruled European customer data shouldn't be stored on servers in countries that don't offer the same privacy/data protections as the EU.


The amount of revenue that the major cloud players like Google/Amazon/Microshat could potentially lose from European consumers and businesses is significantly more than the tax savings they'd save by removing their physical presence from the EU.  They remove their physical presence and many of their European business customers will be forced to find a Europe based cloud provider to host their company/customer data in order to comply with privacy/data protection laws. All of the major Internet players like Google have significant international exposure (the US accounts for less than 50% of Alphabet/Google's revenues) so trying to isolate themselves from foreign laws by retreating is only going to hurt themselves.

 

[drmike]

This is quite interesting that EU tax agencys now came to that conclusion. Google operated systems for ages here already

Speed of government is glacial as usual.  These structuring games aren't new, they've been going on for decades.

If the EU doesn't stop with these ridiculous Tax polices its time for Google and others companies to start laying people off in the EU and moving their presence away from the EU. 

That's fine They can pull their businesses from there too - no income from EU.  No way Google or Apple or Microsloth or anyone else will do that.


The won't.  If you sell products in a country, you should be subject to some taxation, at least at that sort of level.  Not saying every hosting biz should have to pay 50 countries because they have a few customers in each.


Another nagging issue with Google and why they've likely structured biz the way the did from the product side is at least this side of the pond internet services are mostly non-taxable and more importantly, advertising is often explicitly non taxed.   I think advertising should be taxed and always have felt that way.  What gets spent on advertising is a large pot of money and it is for commercial purposes - aka commerce.

 

[graeme]

They can remove all physical assets/offices/etc. from the EU at which point they're basically giving a middle finger to the EU as the EU then has no way to "force" Google into paying any tax, VAT or otherwise.

They would also have to remove all financial assets: bank accounts, money owed to them, etc. Look up a granishee order They would be unable to enforce contracts or the authorities would seize any money due to them as a result of that. They just could not do business.

So where are they going to relocate to? If, for example, MS move from Ireland to an obvious tax haven the US authorities may go after them. Imagine if all non-US WIndows licences were sold from the Cayman Islands or somewhere like that.