Google must pay $1 billion in penalties and back taxes to put to an end a pair of investigations in France into whether the tech giant properly declared the full extent of its activities in the country.
Like other major companies that have made headlines in the European press for aggressive tax avoidance—including Apple, Starbucks, and Amazon—France’s beef was due to the stark numerical contrast between the billions of dollars in sales the U.S. technology company makes from European consumers and the rather paltry tax payments it makes to the countries where these customers live.
“The settlements comprise a €500 million [U.S. $554 million] payment that was ordered [on Sept. 12] by a French court, as well as €465 million [U.S. $515 million] in additional taxes that we had agreed to pay, and that have been substantially reflected in our prior financial results,” a Google spokesperson told CNBC in a statement. “We continue to believe that the best way to provide a clear framework for companies that operate around the world is coordinated reform of the international tax system.”
In a statement, France’s National Financial Prosecutor (PNF) said the settlement “puts a definitive end to all ongoing litigation related to the imposition of Google in France.” Specifically, the settlement ends a tax audit that began two years ago and is a testament to “the excellent cooperation between the judicial authority,” particularly between the PNF and the tax administration, the PNF stated.
“This agreement is historic, both for our public finances and because it marks the end of an era,” said Gerald Darmanin, Minister of Public Accounts and Action. “By normalizing the tax situation of Google in France, it meets the requirement of tax justice of our fellow citizens.”
According to the PNF, the settlement would not have been possible without the country’s new tax law that took effect last year expanding the scope of the CJIP. The CJIP, which stands for “Judicial Agreement in the Public Interest,” allows companies to negotiate an outcome that would resolve certain kinds of criminal charges against it without a judgment of conviction (similar to the concept of deferred prosecution agreements in the United States).
It was not until last year, however, that the President of the Republic expanded the scope of the CJIP, which previously was reserved for cases of bribery, trading in influence, and the laundering of tax fraud, in cases of tax evasion and authorized the settlement by transactional procedure of tax files subject to an ongoing judicial inquiry. “The conclusion of this case shows that financial justice now has effective tools to fight against tax fraud,” Justice Minister Nicole Belloubet said upon announcement of the settlement. “Equality before the tax is one of the founding principles of our republican pact. Our determination to uphold this principle is essential to restore the confidence of our fellow citizens in the action of the State.”
The agreement with French authorities, while significantly larger, follows similar out-of-court agreements reached in Italy and Britain by Google in recent years.