Nations feel share should be larger
profits out of the countries they’ve done business in, the online companies have managed to keep down both sales taxes and corporate income taxes on their overseas income.
Google’s British chief, Matt Brittin, said last week that the company “plays by the rules set by politicians.”
“The only people who really have choices are politicians who set the tax rates,” he told the U.K.’s Channel 4 News.
The fact that the methods are legal hasn’t stopped resentment brewing among governments, other brick-andmortar businesses, and households feeling ever higher tax burdens.
The British Parliament’s public accounts committee said Amazon, by accounting for the profits made in the U.K. elsewhere in the EU, paid $2.9 million in British tax in 2011, on revenue of $333 million.
In Italy, the government said tax police determined Google had undeclared earnings of $311 million from 20022006 and had not paid value added tax of $125 million in the period.
Philippe Marini, the French senator who leads the country’s finance commission, estimated France is missing out on $1.7 billion in taxes from Google, Apple, Facebook and Amazon. And, Marini said, that amount would pale in comparison with what they likely owe Germany and Britain where sales figures are higher.
“A bakery across the street is easier to control,” Marini said. “And households can’t relocate to Ireland just like that.”
The companies say they comply with the law and are cooperative in countries where they operate, but do not elaborate. Even people critical of their tactics say ultimately the job of an accountant is to keep a client’s tax bill as low as possible.
The companies also stress that they do pay some taxes — contributions to their employees’ social security, for example.
France, however, is going after the tech companies: On June 30, tax authorities raided Google’s Paris offices, according to court documents posted online after Google contested the seizure of its files. The tech giant has denied receiving a $2.2 billion bill from the French government and says it pays all legally required taxes.
Taxes fall under French privacy law, so specific amounts are not made public. But the raid on Google’s Paris offices is a sign the French government believes the tech company has more than just incidental support staff in the French capital. France’s budget minister, Jerome Cahuzac, said “a certain search engine needs to regularize its situation in France.”
Facebook, Amazon and Apple have come under similar French scrutiny, according to published reports and public filings. Marini said French law is lagging behind, but hopes to catch up.
Both Amazon and Google are contesting the French actions in court.
Britain and Germany have joined France in targeting the tech giants and, officials say, are coordinating against what one official calls “stateless income.”
The G-20 meeting in Mexico this month showed a measure of international support for tightening the rules. The U.K. Treasury chief George Osborne and German finance minister Wolfgang Schaeuble called for a common front “to strengthen international standards for corporate tax regimes.”
“Governments have to keep up in the race,” said Marini, the French senator. “Companies have a much faster pace than either national or European law.”
Helping the governments keep tabs on the tech multinationals is the Organization for Economic Cooperation and Development. Originally set up in 1948 with the aim of stimulating world trade, the OECD now is taking the lead role in fighting tax evasion, said Pascal Saint-Amans, director of the organization’s Center for Tax Policy since February.
The OECD has established a locked database detailing some of the world’s most sophisticated tax schemes to allow government tax authorities to privately share revenue-shifting schemes they encounter.
The main problem, for Saint-Amans, is that tax havens within Europe such as Ireland and Luxembourg ease the process that allows multinationals to send profits even farther offshore to places like Bermuda. That makes it harder for the countries with the most staff and sales to track. Google, Apple, Microsoft and Facebook have international headquarters in Ireland; Amazon’s international offices are in Luxembourg. But the biggest European markets for all those companies are Germany, France and Great Britain.
“At some point again you’re back to the basics, which is where is the real activity? And that’s something that we may have lost sight of,” said Saint-Amans. “The lowtax regimes are more the consequence than the problem.”