Since when is it illegal to follow the law? Sure, we all have different opinions on the legal gray areas and of whether certain or all laws are legitimate and to what extent - but come on, that quote is just ridiculous.
For example, as an Irish company, you can open a subsidiary in France to do business in France. That's a right.
But if you're doing business in France essentially, you can't make the French company a subsidiary of an Irish one that doesn't have any other activity, in the sole purpose of evading French taxes. That would be abusing the right (of opening subsidiaries). It may conform to the letter of the law but not to its spirit, and can be punished.
Of course, this is all a very grey area and up to the judge to evaluate (and my explanation perhaps lacks clarity); but it's real nonetheless!
The whole point of the EU single market is that you do not have to do that. You can set up shop in Ireland and sell to the French market until the cows come home. You only owe Irish taxes (modulo the recent completely crazy VAT changes).
Laws that say "forget the law, anything we think is unreasonable is illegal" are a growing problem in Europe. It makes the EU look like fools to the rest of the world when something as basic as the rule of law becomes flaky and unpredictable. France is not just causing itself problems with this kind of action, their greed will create a bad impression of the whole of the EU.
As an example, banks are required to report all deposits of $20,000. It's a right to deposit $19,999 into a bank account, nothing wrong there. But to deposit $19,999 five times in a row, rather than than $100,000 all at once? That's structuring, and it's illegal.
I'm not aware of a general "law against circumventing laws" but there are certainly specific ones banning classes of behavior that exist to avoid other regulations.
> Just because you can do something "in general", you can't do it with the specific purpose of circumventing another legal obligation.
Most countries have laws that say you can't do something JUST for tax purposes. You can, however, structure things in a tax friendly way, if there's a commercial motive to do so.
Sure, some will say that it creates too much of a gray area, but that's life. Sorry. I think there's a lot more "effective" ambiguity when everyone is trying to dodge the spirit of the law and exploit loopholes. It creates chaos that lobbyists, consultants, and others can exploit.
Focusing on enforcing the spirit of the law may lead to some abuses, but those abuses have to be weighed against the massive, systemic, abuses that occur when people violate the spirit of the law.
Honest intent may defend an action which would otherwise be illegal. Or you can skirt the edges with malintent and be found for it. Carrying a knife may be legal with demonstrable reason. Carrying a screwdriver may be illegal with malintent. And we trust the courts to spot the difference. And in general, they do.
America, however, has been raised on "a healthy distrust of government". They simply don't trust, or don't want to trust the courts to straddle such grey lines. They want nice solid black & white line so they can point to the law instead of the courts - and they want to see "the people" (juries) police the gray lines.
Personally, I think there's merits to both systems. But it's clear to see that both are very culturally ingrained. I think it's actually very difficult for either side to see the other clearly.
It seems that the prosecutors are using a small clause in the French Irish tax treaty saying that the taxation rules applying to a corporation officially incorporated in Ireland are different (implying much higher than the Irish 12.5%), if this corporation has a "stable establishment" in France. The prosecutor is arguing that this applies to Google, so that paying only the Irish 12.5% was illegal.
So no, they are not being accused of using legal methods to minimise their tax bills.
The main problem is actually a even more complicated. It rests on the understanding of the wording of the convention relating to the words "Fixed installation of affairs used only for purposes of advertising (...)" (those are exempted from the "stable establishment" exemption).Google argues that their advertising business makes them exempt to it. Meanwhile French prosecutors argue this clause is intended for companies advertising their own products (imagine Tesla having an agency in France advertising the Tesla cars because they intend to open a point of sale in France, but not selling them yet), not the actual sale of advertisement space like Google do.
And frankly when reading the elements of the convention the Prosecutors have made public... they seem to have a pretty solid ground.
PS : Yay at last, being a tech fan with french legal background is useful !
This almost feels like blackmail. Pay up, or we'll keep harassing you, raiding your offices etc.
The notion of intent is a very important protection in law ... for the accused. For lawmakers, not so much.
I agree with the sentiment that they should receive equal treatment than local/smaller companies, but saying that they contribute "nothing" is unfair and ingenuous, they do in terms of creation of local jobs and the direct and indirect taxes they pay for them.
They contribute a service, in this case a search engine that's miles ahead of its closest competitor, Bing. They don't "take" anything, they offer something that you're free not to use. Unlike nation states, which are happy to take whatever they want (claiming they're owed it for providing you things you may never have asked for, which are paid for by other people potentially against their will, and for which you're probably not allowed to solicit alternative providers) and your only option if you don't like it is to emigrate.
Google doesn't throw black people in prison for recreational drug use, Google doesn't prevent people from marrying who they want, Google doesn't send people to die fighting pointless wars in the middle east, or drone bomb weddings.
>but if I have to pay company tax, why don't they
If you're uncomfortable with how much taxes you pay, then blame whoever's taxing you, not Google.
One of the big things in the UK was Google claiming they sold all their adverts from the Republic of Ireland not the UK and thus could pay Irish taxes. This was despite having lots of sales staff at their London office...
> case a search engine that's miles ahead of its closest competitor, Bing
Thats debatable. Any blind studies?
Maybe I don't realize correctly, but it seems Google is going to have hard time with all of this.
As for Microsoft coming for them, well, I fail to see any inroads Microsoft is actually making. Their desktop OS sales continue to decline, their search business is still in the red, despite their creative accounting to state otherwise and their smartphone business just sank below 1%.
You may be right but I really hope you're not. Such a dangerous precedent.
Microsoft is in a good position right now, in the short term, Apple is on certain fronts as well. (Mobile would go to Apple in the short term, though OEMs looking to escape Android might take a new look at wherever Windows Phone gets to in the next year or two of development work.)
The businesses that understand game theory like the ones you see winning against google are doing better. This is one of life's uncomfortable truths.
That said, its really interesting to watch such powerful interests dance around (in a more general sense) shooting each other. The whole scheme which companies like Apple, Google, others use to "legitimately" minimize their tax burden and the financial pressure being put on the people of the EU by the immigration situation and general financial mismanagement, has really created a fascinating pressure vector.
The pressure point is this; If these companies paid their "fair" taxes in the countries where they do business, then there would be extra tax money to support the government obligations and less need for austerity programs.
Interesting times.
I am a French lawyer.
So I have to disagree. This is not the case here. The prosecutors are plainly saying that Google did something outright illegal by misinterpreting on purpose a clause in the French Irish tax convention.
According to the prosecutors in this case Google used a clause sheltering pure advertisement and research subsidiaries of Irish companies from having to pay French tax. But this clause is clearly intended to protect subsidiaries doing market research and advertising a product in advance of actually selling it in France (And also for subsidiaries doing purely informative business (tech support, warranty management etc.) and pure research).
So Google is saying that they do advertisement, so that this clause apply to them, but a reading of the part of the convention that was made public by the prosecutors, clearly show that this is apparently wrong. But the fact that I still haven't found the full convention is a huge caveat :).
So most of developed countries would have enough to prosecute.
It's really, really hard for me to sympathize with US tech companies given their financial situation:
> "Apple, Microsoft and Google Hold 23% Of All US Corporate Cash Outside the Finance Sector
> Apple leads the pack with $215.7 billion in cash, followed by Microsoft at $102.6 billion, and Google at $73.1 billion.
http://www.geekwire.com/2016/apple-microsoft-google-hold-nea...
The problem is still that nobody can answer this question: If an international company designs its products in America, manufactures them in Asia, sells them in France and has its headquarters in Ireland, what portion of its total income is it supposed to report in each country?
Any kind of non-circular definition effectively converts the "income tax" into a tax on the thing that happens in the country where the income has to be reported, which nobody wants to admit (because people don't like sales taxes or job taxes), and which nobody even actually wants because it will then discourage that thing from happening in that country.
What people want is for the money to come from the corporation without that fact altering anyone's behavior in any way. But that's not how taxes work. If you want to collect taxes from companies that sell things in your country, you have a de facto sales tax and everything that comes with it. Either accept that and call it what it is or admit that you would rather get the money from somewhere else (or not have it).
The challenge though is getting everyone on board, without a common vision of how it should work, you won't get progress.
Private limited companies must keep some or all of their statutory records
at their registered office, unless they are stored at a SAIL address
instead. These include the certificate of incorporation, the memorandum and
articles of association and share certificates (if applicable).
Furthermore, the following records and registers, where applicable, must be
kept up-to-date and stored at the registered office or SAIL address for
inspection purposes:
Register of members.
Register of company directors.
Register of secretaries.
Directors’ service contracts.
Directors’ indemnities – security against liability claims or legal costs..
Copies of resolutions.
Minutes of meetings.
Contracts relating to purchase of own shares.
Documents relating to redemption or purchase of own shares out of capital by private company.
Register of debenture holders.
Instruments creating charges and register of charges
If this was an engineering office then there would be a lot more involved (making sure such a raid did not expose code or allow on-premise agents to access raw data that an engineer at that facility might otherwise be able to access for dev and debugging purposes, etc.) I think this is just a sales office really, so it is more symbolic than anything else...
What a terrible accusation. Good to know the whole world needs some serious tax reform.
https://www.reddit.com/r/news/comments/4ktdm2/google_hq_raid...
A prosecutor can still try to please the government, by doing things he thinks the gov will like, but if he receive an instruction on that matter... that would be quite a bit scandalous.
Anyway... the National Prosecutor for Financial Affairs has shown that she is quite feisty. She goes after a lot of people with a lot of power. With or without gov. aproval.
France’s financial prosecutor’s office said the raids were carried out with the assistance of the police anti-corruption unit and 25 information technology experts. French daily Le Parisien, which first reported the news, said the raid took place at dawn and involved some 100 investigators. Officers were still at the scene Tuesday afternoon.
“These searches are the result of a preliminary investigation opened on June 16, 2015 relative to aggravated tax fraud and organized money laundering following a complaint from French fiscal authorities,” the prosecutor’s office said in a statement. “The investigation is aimed at finding out whether Google Ireland Ltd. is permanently established in France and if, by not declaring some of its activity on French soil, it has failed to meet its fiscal obligations, in particular with regard to corporation tax and value added tax.”
http://sanfrancisco.cbslocal.com/2016/05/24/french-police-ra...
I don't see this ending well.
Personally I'd like to see both avenues get shaken up but it's sort of questionable in the long-term, as I see both the "big authorities" and "big players" as having a lot of political overlap and influence. Basically minimize until it goes away (or causes such rot the host dies).
Maybe the tax officials should offer Google a chance to "disavow" some of their book entries :)