PARIS — Google reported sales of more than $ 4 billion in Britain last year. It paid less than $ 10 million in taxes.
Some tax collectors, lawmakers and competitors of Google in Europe see this as unfair. As governments throughout the region seek to close gaping holes in their budgets, they are taking aim at U.S. multinational companies, especially Internet giants like Google and Amazon.com, which pay little or no tax in Europe, despite generating billions of dollars’ worth of revenue there.
“Why on earth do you manipulate your accounts so that you get away with not paying corporation tax in the U.K.?” a British member of Parliament, Margaret Hodge, asked representatives of Google, Amazon and Starbucks, the coffee shop chain, during a heated committee hearing last week.
In France, tax collectors have gone further. Amazon says it has received a bill for taxes and penalties related to the “allocation of income between foreign jurisdictions” from 2006 through 2010. Other companies, including Google, are also reportedly in the French authorities’ sights.
“Even if the Internet is a zone of freedom, it shouldn’t be a lawless zone,” Najat Vallaud-Belkacem, a spokeswoman for the French government, said last week. “Fiscal rules should be able to be applied to those activities as well.”
Google, Amazon, Starbucks and other American companies facing scrutiny over their taxes say they are doing nothing wrong. There are complex accounting strategies they use to exploit differences across Europe in corporate tax rates, which range from less than 10 percent in some countries to more than 30 percent, as well as other loopholes that can reduce their effective European tax levies to almost nothing.
Google, for example, records most of its international revenue at its European headquarters in Ireland, where the corporate tax rate is 12.5 percent. Across Europe, customers who buy advertising, Google’s primary source of revenue, sign contracts with the company’s subsidiary in Ireland, rather than with local branches.
Google ends up paying Irish taxes on only a fraction of the billions of euros that course through its Dublin office, because the company uses a variety of methods, including royalty payments to an offshore unit in Bermuda, to reduce further the amount of money that is actually exposed to tax liability.
So, while Google told the U.S. Securities and Exchange Commission that it had generated more than $ 4 billion in sales in Britain last year, it reported revenue of only £396 million, or $ 629 million, in its official filings in Britain. This total, the company says, reflected the amount that Google’s British unit billed Google Ireland for promotional work, consulting and other activities. Google declared a profit of £31 million in Britain, resulting in a British tax bill of only £6 million.
“We pay the tax we are required to pay in every country in which we operate,” Matt Brittin, Google vice president for North and Central Europe, told the parliamentary panel.
Ms. Hodge, chairwoman of the Public Accounts Committee, acknowledged that she thought Google, Amazon and Starbucks were probably complying with the law. “We are not accusing you of being illegal, we are accusing you of being immoral,” she said.
In France, there is more than just morality at stake. In his testimony to the parliamentary panel, Andrew Cecil, director of public policy for Amazon in Europe, confirmed that the company had received a demand for $ 252 million from the French tax collection agency. He said Amazon was contesting the claim, which was originally disclosed in a U.S. regulatory filing.
Amazon, whose European headquarters is in Luxembourg, another small country with favorable tax conditions for multinational companies, reported €9.1 billion, or $ 11.6 billion, in revenue across Europe last year. It posted an after-tax profit of €20 million on those sales, and paid about €8 million in tax, Mr. Cecil said.
Mr. Cecil told the parliamentary committee that when customers across Europe bought books from Amazon, they were actually buying them from the Luxembourg-based Amazon entity, rather than their local subsidiaries. That response was met with incredulity by Ms. Hodge, who noted that when she ordered a book from the company, she used a British Web site, Amazon.co.uk, and the goods were delivered from a British warehouse via the British Royal Mail.
News reports in France note that the French fiscal authorities are also seeking back taxes and penalties from Google, to the tune of €1.7 billion. Ms. Vallaud-Belkacem told reporters that she could not comment on individual companies for privacy reasons. Google, in a statement, said the reports were premature.
“Google has not received any tax assessment from the French tax administration,” Google said. “We have and will continue to cooperate with the authorities in France.”
Europe Seeks More Taxes From U.S. Multinationals
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