France is pushing for a Europe-wide Google tax

Hollande decries the Dutch sandwich.
Hollande decries the Dutch sandwich.
Image: AP Photo/Philippe Wojazer
We may earn a commission from links on this page.

The French have had enough of the way Google and its ilk approach tax issues. A series of initiatives to raise cash from the digital economy have failed, among them a push to re-write international tax rules at the Organisation for Economic Co-operation and Development, another to tax online advertising, and yet another to tax mobile devices that can connect to the internet. France has also abandoned ideas of a national tax on the technology sector, rightly concluding that it would only be to its own detriment.

The latest plan, first suggested last month and publicly aired at a conference in Paris this week as the government tries to drum up support, is more ambitious. France is pushing for a the European Union as a whole to adopt a minimum tax on digital companies, which it will formally introduce at an EU summit meeting about the digital economy later this month. Details are scarce but a new continental tax would avoid problems posed by differing regulatory and tax regimes in different countries. And it could be pushed through without interference from the United States, which is vehemently opposed to meddling European bureaucrats stifling its successful companies.

A double-Irish to go, please

The proposal for a new tax stems from France’s inability to do anything about international tax structures and treaties that allow tech companies to minimize their bills. This is is how it works: Revenue from its Google’s European operations are sent to Google Ireland, the company’s non-US headquarters. Ireland’s corporate tax rate is 12.5%, among the lowest in Europe. Google Ireland sends the money to Google Netherlands Holdings, which also receives cash from Google Singapore. The Netherlands has no “withholding tax,” which is a compulsory pre-payment of tax similar to the bit lopped off your paycheck. That’s the “Dutch sandwich.” Google Netherlands sends all the booty to Google Ireland Holdings—a second company registered in Ireland but tax resident in Bermuda. Whence the “double Irish.”

The upshot? Google’s total tax bill is more than halved from the already low amount Ireland expects. And it pays practically nothing in most European countries. Last year, Google paid just under $18 million in tax in the United Kingdom, even though Britain accounted for nearly $5 billion in revenue (paywall). In France the previous year, Google paid €5.5 million ($7.5 million). French tax authorities estimate the real bill should have been closer to €150 million. It’s the same picture across Europe. And other tech firms, including Amazon and Apple, use similar structures. Facebook’s total corporation tax bill on £223 million of revenue in Britain last year was precisely zero.