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Taxing Google and Other U.S. Giants Is Dividing Europe Taxing Google and Other U.S. Giants Is Dividing Europe
(about 7 hours later)
BRUSSELS — For some European nations, big American corporations like Google are seen primarily as employers and technological innovators whose presence can help with their global competitiveness.BRUSSELS — For some European nations, big American corporations like Google are seen primarily as employers and technological innovators whose presence can help with their global competitiveness.
But for others, the multinational giants are seen as having used complex accounting to sidestep corporate taxes. That, some argue, makes them prime targets at a time when governments are grasping for revenue to fill budget deficits and trying to address populist concerns about inequality.But for others, the multinational giants are seen as having used complex accounting to sidestep corporate taxes. That, some argue, makes them prime targets at a time when governments are grasping for revenue to fill budget deficits and trying to address populist concerns about inequality.
The divide, long present in Europe, is playing out with new intensity.The divide, long present in Europe, is playing out with new intensity.
The issue bobbed to the surface on Thursday when Margrethe Vestager, the European commissioner who has become the bloc’s chief tax inquisitor, told the BBC that she might look into the $185 million tax settlement recently reached between Google and the Conservative government of Prime Minister David Cameron. Critics say Mr. Cameron has let Google off too easy.The issue bobbed to the surface on Thursday when Margrethe Vestager, the European commissioner who has become the bloc’s chief tax inquisitor, told the BBC that she might look into the $185 million tax settlement recently reached between Google and the Conservative government of Prime Minister David Cameron. Critics say Mr. Cameron has let Google off too easy.
European Union officials in Brussels are intent on imposing a blocwide standard for taxation and clawing back what they consider to be improper tax breaks granted by national governments to multinational companies.European Union officials in Brussels are intent on imposing a blocwide standard for taxation and clawing back what they consider to be improper tax breaks granted by national governments to multinational companies.
While some countries like France and Germany are happy to see back taxes collected from big corporations as a result of the effort, others are essentially saying they would rather the companies keep all or some of their tax breaks as long as they bring prosperity.While some countries like France and Germany are happy to see back taxes collected from big corporations as a result of the effort, others are essentially saying they would rather the companies keep all or some of their tax breaks as long as they bring prosperity.
The difference in approach may not rank with more existential problems for the European Union, like how to control the migrant influx without sacrificing open borders across much of the Continent. But it shows how tax policy cuts to the core of economic competitiveness for most countries in Europe, where sustained growth and balanced budgets have been hard to achieve lately.The difference in approach may not rank with more existential problems for the European Union, like how to control the migrant influx without sacrificing open borders across much of the Continent. But it shows how tax policy cuts to the core of economic competitiveness for most countries in Europe, where sustained growth and balanced budgets have been hard to achieve lately.
Ms. Vestager made her comments about Britain’s deal with Google on the same day that the European commissioner for financial affairs and taxes, Pierre Moscovici, proposed measures meant to close a number of corporate tax loopholes across the European Union.Ms. Vestager made her comments about Britain’s deal with Google on the same day that the European commissioner for financial affairs and taxes, Pierre Moscovici, proposed measures meant to close a number of corporate tax loopholes across the European Union.
The European Union wants no member state to use tax policy to achieve an unfair business advantage over its neighbors. But the ability of European countries to tailor tax practices to their own purposes is a matter of national sovereignty that many leaders are unwilling to cede to Brussels. That is true for the countries that are trying to compete for jobs and foreign investment brought by multinational titans like Google, Apple or Facebook as well as for those trying to wring more tax revenue from rich companies to help support a struggling economy.The European Union wants no member state to use tax policy to achieve an unfair business advantage over its neighbors. But the ability of European countries to tailor tax practices to their own purposes is a matter of national sovereignty that many leaders are unwilling to cede to Brussels. That is true for the countries that are trying to compete for jobs and foreign investment brought by multinational titans like Google, Apple or Facebook as well as for those trying to wring more tax revenue from rich companies to help support a struggling economy.
“National governments have competing objectives here,” Neal Todd, an international tax expert and partner at the law firm Berwin Leighton Paisner, wrote in a note to clients on Thursday. “Whilst nearly all governments want multinationals in general (and U.S. tech groups in particular) to pay more tax," he wrote, "none of them want to change their own rules only to find that businesses simply relocate to warmer fiscal climes." “National governments have competing objectives here,” Neal Todd, an international tax expert and partner at the law firm Berwin Leighton Paisner, wrote in an email message to reporters on Thursday. “Whilst nearly all governments want multinationals in general (and U.S. tech groups in particular) to pay more tax," he wrote, "none of them want to change their own rules only to find that businesses simply relocate to warmer fiscal climes."
United States officials and members of Congress have also taken hard looks at some big American companies’ tax arrangements in Europe. And the Treasury Department has tried to block so-called tax inversions, in which American companies use mergers to relocate to European countries as a way to reduce their tax bills — although the rules might not be able to stop the drug giant Pfizer from using its acquisition of much-smaller Allergan to relocate its headquarters to Ireland.United States officials and members of Congress have also taken hard looks at some big American companies’ tax arrangements in Europe. And the Treasury Department has tried to block so-called tax inversions, in which American companies use mergers to relocate to European countries as a way to reduce their tax bills — although the rules might not be able to stop the drug giant Pfizer from using its acquisition of much-smaller Allergan to relocate its headquarters to Ireland.
Although the British prime minister, Mr. Cameron, defended his Google deal, his political opponents have criticized it as too generous to the company and not reflective of the full magnitude of its British revenue for the 10 years it covers.Although the British prime minister, Mr. Cameron, defended his Google deal, his political opponents have criticized it as too generous to the company and not reflective of the full magnitude of its British revenue for the 10 years it covers.
In studying the Cameron-Google agreement, Ms. Vestager may follow up on a request of the Scottish National Party, a British opposition party, which has sent a letter to the European Commission criticizing the tax deal with the search giant. A spokesman for Ms. Vestager’s office said on Thursday that the complaint would need to be studied to see if it warranted a formal investigation.In studying the Cameron-Google agreement, Ms. Vestager may follow up on a request of the Scottish National Party, a British opposition party, which has sent a letter to the European Commission criticizing the tax deal with the search giant. A spokesman for Ms. Vestager’s office said on Thursday that the complaint would need to be studied to see if it warranted a formal investigation.
The issue could be particularly delicate, coming as Mr. Cameron has been trying to negotiate better terms for Britain within the European Union. As soon as June, Britain may hold a referendum in which voters would be asked whether they want to remain in the bloc or leave it.The issue could be particularly delicate, coming as Mr. Cameron has been trying to negotiate better terms for Britain within the European Union. As soon as June, Britain may hold a referendum in which voters would be asked whether they want to remain in the bloc or leave it.
But Christian Cubitt, a Cameron spokesman, declined on Thursday to elevate the tax dispute to the level of the debate on Britain’s place in the European Union. He said simply that it was “a decision for the commission" to decide whether to investigate, although he stressed that Google had agreed to pay all the tax that is due.But Christian Cubitt, a Cameron spokesman, declined on Thursday to elevate the tax dispute to the level of the debate on Britain’s place in the European Union. He said simply that it was “a decision for the commission" to decide whether to investigate, although he stressed that Google had agreed to pay all the tax that is due.
Britain is by no means alone in seeking to handle corporate tax matters on its own terms.Britain is by no means alone in seeking to handle corporate tax matters on its own terms.
Italian financial police officials were to issue an investigative report to Google on Thursday, indicating whether the company has paid sufficient taxes in Italy since 2008. Although Google has not been accused of wrongdoing, tax officials say the delinquent amount could be about 300 million euros, or about $325.3 million.Italian financial police officials were to issue an investigative report to Google on Thursday, indicating whether the company has paid sufficient taxes in Italy since 2008. Although Google has not been accused of wrongdoing, tax officials say the delinquent amount could be about 300 million euros, or about $325.3 million.
Google is also in discussions with France over back taxes. Last week at the World Economic Forum in Davos, Switzerland, the company’s executive chairman, Eric Schmidt, met with the French economy minister, Emmanuel Macron, to discuss the matter.Google is also in discussions with France over back taxes. Last week at the World Economic Forum in Davos, Switzerland, the company’s executive chairman, Eric Schmidt, met with the French economy minister, Emmanuel Macron, to discuss the matter.
There has been no public discussion of how much in back taxes is being sought by France’s Socialist government, but local news reports have placed the figure as high as €500 million.There has been no public discussion of how much in back taxes is being sought by France’s Socialist government, but local news reports have placed the figure as high as €500 million.
Google’s official response to reports of those negotiations has been the same, which it repeated yesterday: “Google complies with the tax laws in every country where we operate. We continue to work with the relevant authorities.”Google’s official response to reports of those negotiations has been the same, which it repeated yesterday: “Google complies with the tax laws in every country where we operate. We continue to work with the relevant authorities.”
Ms. Vestager is also investigating tax arrangements between Ireland and Apple, and Luxembourg and Amazon over whether the companies received preferential tax deals that broke the European Union’s state-aid rules. A decision in the Apple case is expected in March, at the earliest; the Amazon case could also be decided in the coming months. The companies and governments say they have done nothing wrong.Ms. Vestager is also investigating tax arrangements between Ireland and Apple, and Luxembourg and Amazon over whether the companies received preferential tax deals that broke the European Union’s state-aid rules. A decision in the Apple case is expected in March, at the earliest; the Amazon case could also be decided in the coming months. The companies and governments say they have done nothing wrong.
In previous cases where Ms. Vestager has ruled that corporate tax arrangements violated European Union law by favoring certain companies, governments have been ordered to recoup back taxes that they would rather not collect lest they signal to other multinationals that their countries are not business-friendly.In previous cases where Ms. Vestager has ruled that corporate tax arrangements violated European Union law by favoring certain companies, governments have been ordered to recoup back taxes that they would rather not collect lest they signal to other multinationals that their countries are not business-friendly.
Ms. Vestager has ordered Luxembourg to recover about $34 million in unpaid taxes from the financing arm of the Italian carmaker Fiat; she also told the Netherlands to recoup a similar amount from Starbucks and demanded that Belgium recover a total of about $765 million in taxes from at least 35 companies, including Anheuser-Busch InBev.Ms. Vestager has ordered Luxembourg to recover about $34 million in unpaid taxes from the financing arm of the Italian carmaker Fiat; she also told the Netherlands to recoup a similar amount from Starbucks and demanded that Belgium recover a total of about $765 million in taxes from at least 35 companies, including Anheuser-Busch InBev.
While Ms. Vestager is investigating cases where countries might have let companies pay too little tax, the proposals by Mr. Moscovici on Thursday are meant to prevent tax avoidance before it happens by closing gaps in cross-border rules to channel profit to subsidiaries in lower-tax countries.While Ms. Vestager is investigating cases where countries might have let companies pay too little tax, the proposals by Mr. Moscovici on Thursday are meant to prevent tax avoidance before it happens by closing gaps in cross-border rules to channel profit to subsidiaries in lower-tax countries.
In a news conference, Mr. Moscovici said losses from the loopholes amounted to nearly €70 billion a year, discriminated against small business and angered ordinary citizens.In a news conference, Mr. Moscovici said losses from the loopholes amounted to nearly €70 billion a year, discriminated against small business and angered ordinary citizens.
His proposals mean to deter European governments from, for example, letting companies shift profit to low-tax jurisdictions. Mr. Moscovici said his proposals also showed Europe’s eagerness to put into effect international standards endorsed by the leaders of Group of 20 major economies last year.His proposals mean to deter European governments from, for example, letting companies shift profit to low-tax jurisdictions. Mr. Moscovici said his proposals also showed Europe’s eagerness to put into effect international standards endorsed by the leaders of Group of 20 major economies last year.
Mr. Moscovici’s measures would also require corporations to fully disclose all of their taxes, profit, revenue and other financial data to the administrations of all countries where they operate.Mr. Moscovici’s measures would also require corporations to fully disclose all of their taxes, profit, revenue and other financial data to the administrations of all countries where they operate.
The proposals, though, might be hard to turn into law. They would require the unanimous approval of European Union governments, and some could balk. And the measures would not affect the low across-the-board corporate tax rates that countries like Ireland use as an inducement to attract foreign companies.The proposals, though, might be hard to turn into law. They would require the unanimous approval of European Union governments, and some could balk. And the measures would not affect the low across-the-board corporate tax rates that countries like Ireland use as an inducement to attract foreign companies.
Oxfam, an antipoverty group, criticized Mr. Moscovici as taking an ineffective “lowest common denominator approach” to the tax overhaul.Oxfam, an antipoverty group, criticized Mr. Moscovici as taking an ineffective “lowest common denominator approach” to the tax overhaul.
British lawmakers aligned with Mr. Cameron’s government were wary of Mr. Moscovici’s proposals.British lawmakers aligned with Mr. Cameron’s government were wary of Mr. Moscovici’s proposals.
“Globally, there is a battle raging for jobs and growth,” said Ashley Fox, the leader of the delegation of British Conservatives at the European Parliament. “The E.U. must ensure that its proposals do not act as a deterrent to international investment and employment.”“Globally, there is a battle raging for jobs and growth,” said Ashley Fox, the leader of the delegation of British Conservatives at the European Parliament. “The E.U. must ensure that its proposals do not act as a deterrent to international investment and employment.”