29 May 2016

France targets multinationals with tax cases

9:12 pm on 29 May 2016

France will "go all the way" to ensure multinationals pay taxes and more cases could follow after Google and McDonald's were targeted by tax raids.

Google could face €10m in fines or fines equal to half what was laundered, if found guilty.

Google could face €10m in fines or fines equal to half what was laundered, if found guilty. Photo: 123rf

French Finance Minister Michel Sapin ruled out negotiating any deal with Google on back taxes as Britain did in January.

Dozens of French police raided Google's Paris headquarters on Tuesday, escalating an investigation on suspicions of tax evasion.

Investigators searched McDonald's French headquarters on 18 May in another tax probe.

"We'll go all the way. There could be other cases," Sapin said.

Raids this month by police and justice investigators built on the work started by tax authorities three or four years ago, when they transferred tax data to judicial authorities that looked into any possible criminal angle, Mr Sapin said.

Google, McDonald's and other multinational firms such as Starbucks were under increasing pressure in Europe and other countries, including New Zealand.

Google has said it was fully complying with French law, and McDonald's declined to comment on the search, referring back to past comments that it was proud to be one of the biggest tax payers in France.

Mr Sapin said he could not discuss what sums were at stake because of the confidentiality of tax matters.

A source in his ministry had said in February that French tax authorities were seeking some €1.6 billion in back taxes from Google.

No deal

Asked if tax authorities could strike a deal with the tech giant, he said: "We don't do deals like Britain, we apply the law."

Google agreed in January to pay £130 million in back taxes to Britain, prompting criticism from opposition lawmakers and campaigners that the sum was too low.

"There won't be negotiations," Mr Sapin said, adding that there was always the possibility of some marginal adjustments "but that's not the logic we're in".

Google, now part of Alphabet Inc, pays little tax in most European countries because it reports almost all sales in Ireland.

This is possible thanks to a loophole in international tax law, but it hinges on staff in Dublin concluding all sales contracts.

This week's police raid was part of a separate judicial investigation into aggravated tax fraud and the organised laundering of the proceeds of tax fraud.

Should it be found guilty of that, Google would face either up to €10m in fines or a fine of half the value of the laundered amount.

A preliminary inquiry into McDonald's was opened this year after former investigating magistrate and politician Eva Joly filed a lawsuit in December on behalf of an employee committee, a judicial source said.

French business magazine L'Expansion reported last month that authorities had sent McDonald's France a €300m bill for unpaid taxes on profits believed to have been funneled through Luxembourg and Switzerland.

It said tax officials had accused the burger chain of using a Luxembourg-based entity, McD Europe Franchising, to shift profits to lower-tax jurisdictions by billing the French division excessively for use of the company brand and other services.

The judicial source confirmed the investigation was looking into this.

The government said this week that it had raked in 3.3 billion euros in back taxes and penalties from just five multinationals in 2015.

"Nothing prevents big groups from coming to us and declaring their taxes," Sapin said.

- Reuters

Get the new RNZ app

for ad-free news and current affairs