E.U. Pursues Google Over Taxes - Gainesville Coins News
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E.U. Pursues Google Over Taxes

blog | Published On 1/28/2016 4:15:32 PM by Everett Millman

Tax evasion is the placing of a private company's assets in a "tax haven" to avoid paying taxes. The sound of the name alone implies this is an illegal practice.

For years, exorbitant taxation rates established by the American government have given corporations an incentive to hide vast amounts of money in tax havens. The U.S. has some of the highest taxes imposed on businesses found anywhere in the world.

The two most popular destinations for would-be tax-evaders have been various Caribbean islands and especially Switzerland.

taxesThe use of tax havens has gradually lost favor, however. Instead, companies have chosen to use tax inversions. These are tactics wherein a different country is listed as the home nation for a corporation's tax purposes.

Over time, Congress has passed laws that make it harder for companies to take advantage of these kinds of tax arrangements. Major corporations have been using tax inversions in the United States for at least 20 years, but only on an infrequent basis. Last year, Burger King (moved to Canada) was one noteworthy case. President Obama has been critical of tax inversions and says it is an unfair practice.

Most state governments agree. (The collection of taxes is the lifeblood of any government.) According to the BBC,

"Yesterday, 31 countries signed an international agreement designed to stop multinational companies using complex tax arrangements to avoid paying corporate tax. The agreement, signed at the Organisation of Economic Cooperation and Development in Paris, will mean that those countries all share tax information. Under its terms, multi-national companies will have to tell the country they operate in what they make in that nation and how much tax they pay. Critics say the deal doesn't go far enough, and that such information should be made public, rather than held confidentially by the tax authorities."

We have seen organized efforts to squash such tax evasion methods. It is getting harder, though. Many of the offenders are high-tech companies that carry out their business through the Internet. The newest targets of this tax campaign are the two juggernauts of the computer technology industry: Google (now known as "Alphabet Inc.") and Apple Inc.

Somebody Google "Avoiding Taxes"

google_searchGoogle (NYSE:GOOG) went into defensive mode when a member of the Scottish National Party (SNP) complained to authorities in Europe that the government of the U.K was offering a tax arrangement (£130 million) to the company that was too friendly. Yet, Google actually made £24 billion in revenue from the U.K. over the last ten years. (It didn't pay any taxes over that time.) Under current corporate laws, that means Google's tax liability should be far higher.

This was the impetus that prompted authorities in Italy to bring similar claims of tax avoidance against Google. Italy in particular alleges that Google's €2.2 million in paid taxes during 2014 are only a fraction of what it owes. Authorities allege that Google's Italian division used a tax inversion to claim it was headquartered in Ireland, and thus pay much less in taxes.

Apple Faces Similar Accusations

apple-inc-508812_640Just a month before Google came under fire, Apple Inc. (NASDAQ:AAPL) was also flagged by European authorities for not paying sufficient taxes in 2013. Apple was accused of failing to report its full revenues of €1 billion ($1.3 billion) for the year. This also led to the discovery that the company had not paid its fair share of taxes during the previous six years, either. Apple settled with Italian tax authorities for €318 million.

These cases with Google and Apple have been the impetus for the European Commission to evaluate how foreign corporations that have locations within Europe should be taxed.

 

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