European governments want to reduce budget deficits and are turning their attention to U.S. based multinational companies, especially on some Internet giants such as Google and Amazon, who pay little or no taxes in Europe, even though they had revenues of billions of dollars in EU.
Google reported revenues last year of more than $4 billion in the UK, where it paid taxes of only $10 million. Tax authorities, lawmakers and competitors of the company in Europe believe that this is incorrect, reports the New York Times.
“Why do you manipulate accounting so you do not pay income tax in the UK?”, asked Margaret Hodge, a member of the British Parliament, the representatives of Google, Amazon and Starbucks, in a hearing held last week.
In France, the fiscal authorities went further. Amazon was informed that it has to pay taxes and penalties related to “revenue sharing between foreign jurisdictions” in the period 2006-2010. And other companies, among them Google, are in sight of the French authorities.
“While the Internet is an area of freedom, there shouldn’t be one outside the law. Fiscal rules should be applicable to these activities as well,” said Najat Vallaud-Belkacem, spokesman for the French government.
Google, Amazon, Starbucks and other companies under the scrutiny of tax authorities say they are doing nothing wrong. They use complex accounting strategies to exploit differences between national tax levels, ranging from under 10% to over 30%.
Google, for example, recorded most international revenues at its headquarters in Ireland, where corporation tax is 12.5%. In Europe, customers who buy advertising, the main source of income for Google, sign contracts with a subsidiary of the company in Ireland, rather than with local branches.
Eventually, Google pays tax in Ireland which is a fraction of the billions of euros run by Dublin office, because it uses a number of methods, including the payment of royalties to a division based in Bermuda.
Thus, Google reported to Securities and Exchange Commission in the sales of over $4 billion in the UK last year. But in the UK it reported revenues of only £396 million ($629 million). Google declared a profit of £31 million in the UK, resulting in a tax of £6 million.
“We pay taxes that we have to pay in every country in which we operate,” said Matt Brittin, Google’s vice president for North and Central Europe, at the hearing in the British Parliament.
Andrew Cecil, director of public policy at Amazon Europe has confirmed that the group had received a bill of $252 million from the French tax authorities. He said that Amazon is contesting the claim.
Amazon, with its European head office in Luxembourg, another country with low tax, last year reported revenue of €9.1 billion in EU. Net income was €20 million and the tax paid was €8 million, said Cecil.
French media reported that tax authorities in the country are seeking outstanding taxes and penalties from Google worth €1.7 billion.
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