France makes billion euro tax claim against Google

French tax authorities have made a billion-euro ($1.3 billion) claim against Google to pressure it in a dispute over compensation to media websites, a French newspaper reported, a claim denied by the US Internet giant's local arm. The weekly Canard Enchaine said in its edition to hit news-stands on Wednesday that the tax claim concerns the transfer prices set between Google's Irish holding company and the French unit for four tax years, without disclosing its sources.
French tax authorities told AFP they do not comment on specific cases due to taxpayer privacy. Google did not immediately respond to a request for comment. A Google France spokesman told AFP that the company had received no such notification. "We continue to cooperate with the French authorities as we have done till now," the spokesman said in an email, stressing that "Google conforms with the fiscal laws of all the countries in which we operate, and with European rules."
The weekly said the tax claim was brought up during Monday's meeting between President Francois Hollande and Google chief Eric Schmidt, and that it was a bargaining chip in the dispute with French media. Hollande said the French government would adopt a law if necessary to settle a dispute with French media websites, which want the search engine to hand over a percentage of the advertising revenue it earns from directing users to their content.
"If the negotiations between Google and the media publishers don't result in a deal by the end of the year, Google already knows what awaits it from a tax point of view: one billion," said the weekly. "Otherwise, there will no doubt be room to negotiate." In March, a source told AFP that French authorities had made a tax claim against Google.
The weekly L'Express reported the tax authorities were looking into whether Google had correctly paid company and sales tax between 2008 and 2010. Google uses a number of measures to reduce the amount of tax it pays in France by funnelling most revenue through a Bermuda-registered holding and then reporting it in Ireland. According to estimates Google generated between 1.25 billion and 1.4 billion euros in revenue in France last year, primarily due to Internet advertising. It paid only a little more than 5 million euros in tax, primarily due to the corporate tax.