Google agreed to pay more than $1 billion to settle allegation by French financial prosecutors that the tech giant committed tax evasion.
Since 2015, French authorities have been investigating Google over its tax structure. The tech giant has been using a tax loophole called the “Double Irish, Dutch Sandwich.”
The loophole is legal and allows Google to move its overseas profits from high-tax countries to a tax haven. It involves sending profits first through its Irish subsidiary then to another Dutch subsidiary and finally to a second Irish subsidiary based in a tax
For example, documents submitted to the Dutch Chamber of Commerce in 2017 showed that Google Netherlands Holdings transferred $22.7 billion in overseas revenue to Google Ireland Holdings, a subsidiary in Bermuda. Google just like other multinational companies do not pay income tax in Bermuda.
In 2014, Ireland decided to eliminate the tax loophole due to pressure from the European Union and the United States.
In a statement on Thursday, Google said the settlement in France is composed of 500 million euros ($550 million) in penalty due to its tax strategy and €465 million ($513 million) in additional taxes. A French court approved the settlement and ordered the tech giant to pay the total amount.
A Google spokesman said, “We remain convinced that a coordinated reform of the international tax system is the best way to provide a clear framework to companies operating worldwide.”
In July, the French government started implementing a 3 percent tax on technology companies. The White House condemned it and warned that it could result to U.S, tariffs on imports from France.
The French government responded that it will only cancel the tech tax if there is a global agreement on taxing technology companies.
On Thursday, Gerald Darmanin, the Budget Minister of France, told Le Figaro newspaper that the settlement would serve as a legal precedent. He added that discussions with several other companies regarding their tax strategies are ongoing.