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French, German politicians to pressure Google on tax

A view shows an office block at Central St Giles where Google has offices, in London April 23, 2013. REUTERS/Luke Macgregor
A view shows an office block at Central St Giles where Google has offices, in London April 23, 2013. REUTERS/Luke Macgregor

By Tom Bergin and Natalie Huet

LONDON (Reuters) - Politicians in Germany and France say they will press for Google Inc to be quizzed on corporate income tax after a Reuters report highlighted how the company employs sales staff in the UK while telling the tax authorities that sales are made from Ireland.

The report showed the company advertised for "sales" staff to "negotiate" and "close" deals, although a Google executive had told parliament its London-based employees did not sell to UK clients. British lawmakers plan to call Google to testify again to a parliamentary committee to clarify what work it does in Britain.

Currently Google has no taxable presence in France, Germany or Britain in relation to its advertising business, from which it makes almost all its profit, allowing the company to operate almost tax-free in these countries. Whether staff in a country sell could have a big impact on its tax bill, tax lawyers and academics say.

Like Google UK, Google designates its French and German units as providers of marketing and support services to Google Ireland, which pays most of its turnover to an affiliate in Bermuda; and gives the subsidiaries enough to cover their costs and generate a small taxable profit.

In April, Google advertised dozens of French and German-based positions in job categories that fall within the area it describes as "selling". It has now changed many adverts, but several staff based in France and Germany still say on networking website LinkedIn that they fulfill sales roles.

In 2011, French tax authorities raided Google in an investigation of whether its Paris office does sales work, and the country has asked the company for 1.7 billion euros ($2.2 billion) in back taxes. In Germany, where one advert told candidates for "Enterprise Account Manager (Munich)" that they would "seal the deal and help make the world a more Googley place", one lawmaker said he would call for an investigation.

Google spokesman Peter Barron said the company follows tax rules in every country where it operates; references to selling in job ads reflected the fact Google liked to hire people with a sales background.

He declined to say whether staff in France or Germany did engage in negotiation of contracts or closed deals.

"We accept that the wording of some job adverts may have been confusing, and we are working to make it clearer," he said.

"FALSE DELOCALISATION"

In France, the company's own website says its Paris office is "the hub for all sales activity in Southern and Eastern Europe, the Middle East and Africa".

Pierre-Alain Muet, vice-president of the National Assembly's finance commission and a member of the ruling Socialist party, said he planned to quiz Google about the apparent inconsistencies when it appears before a parliamentary committee this month looking into how multinationals structure themselves to minimize tax bills.

"If this is true then it seems to me that the tax administration can already intervene ... It would no longer be a case of fiscal optimization, but of an operation in a country that's being falsely delocalized," he told Reuters in a telephone interview.

Muet said he would publish a report on the topic in July, with the aim of making legislative proposals to close tax loopholes.

Philippe Marini, senator with France's UMP centre-right opposition party, said the evidence from France would boost the case the French tax authority already has against Google.

Marini, who heads the Senate's finance commission, has pushed for a tax on online advertising and ecommerce since 2010.

MORE THAN LOOPHOLES

In Germany, Sven Giegold, Member of the European Parliament (MEP) for the German Green Party, said he would call on the tax authority in Hamburg, where Google Germany is based, to investigate the company's affairs.

Google should publicly explain the apparent discrepancy between the different statements it has made about the nature of its German unit's business, he said.

A spokesman for the German government said taxation was a matter for state tax authorities, as Germany does not have a single federal tax administration. The Hamburg tax office did not respond to a request for comment.

Giegold said the Reuters report showed tax authorities across Europe needed to act more firmly and not just blame shortcomings in international tax law for allowing companies to get away with paying low or no tax.

"The potential to limit tax avoidance by transnational corporations from the point of national tax authorities is tremendous," he said.

Google does not disclose its French or German sales but from 2006 to 2011, according to statutory filings, Google generated $18 billion in revenues from the UK, whose economy is roughly comparable to France's and smaller than Germany's.

The company paid $16 million in UK taxes over the period. It had an income tax bill of 19 million euros in Germany, and 13 million euros in France.

(Additional reporting by Annika Breidthardt in Berlin and Jean-Baptiste Vey in Paris; Edited by Sara Ledwith and William Waterman)

(This story corrects paragraph 3 to show Google not having taxable presence in France and Germany referred to Google Inc's core business. Google units are subject to tax on any profit from fees from affiliates. See tax charges in paragraph 22 as in original)

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