Google Spared $1.3 Billion Tax Bill With Victory In French Court (bloomberg.com)

New submitter Zorro shares a report from Bloomberg: Google won its fight against a 1.12 billion-euro ($1.3 billion) French tax bill after a court rejected claims the search-engine giant abused loopholes to avoid paying its fair share. Google didn't illegally dodge French taxes by routing sales in the country out of Ireland, the Paris administrative court decided Wednesday. Judges ruled that Google's European headquarters in Ireland can't be taxed as if it also has a permanent base in France, as requested by the nation's administration. "Google Ireland isn't taxable in France over the period 2005-2010," the court said in a statement. Google said in a statement: "The French Administrative Court of Paris has confirmed Google abides by French tax law and international standards. We remain committed to France and the growth of its digital economy."

Comments

Re:Tax Equivs

[bluefoxlucid]

To me it's a matter of stability. This system is stable, so whatever. Yes, they abuse the loopholes; and it doesn't matter. We can design new tax strategies that don't address this behavior without opening up new loopholes, so our economic data about what's out there to tax is safe.

There's some logistics we can look at about this, too. They don't form a coherent argument; they're just worth a thought.

When we buy things from a seller in China, we don't tax that seller on profits. We might issue a tariff, but that's generally a bad idea; instead, we just tax the profits of the business selling the good domestically. That gets the good to the consumer at the lowest price.

Likewise, the business doing the selling has employees locally. It pays some of its revenue to those employees, who are taxable, and who spend money into the local economy. We also tax it on any of its profits.

If the business abroad takes a huge profit margin, it starts charging more than domestic manufacture. In such a case, trade makes no sense: we can make it cheaper ourselves, and so do so.

So what's with these tech businesses?

A tech business will supply a good or service to a country. In essence, it's selling to the country, but not necessarily in the country. Where the business is selling from is ... well, it's not clear. It's pretty much arbitrary.

A business like Google might or might not have a presence in a country, such as France. That is to say: Google might or might not have employees in France. If it has employees in France, then it's doing productive work in France; that productive work is part of France's GDP, because it's producing a product in France. Those employees's labor represents the actual production, although the business profits represent the expenditure for that productive output: the total contribution to GDP should be the entire revenue stream created by that particular productive unit.

Even that's fuzzy: Google in France is using Google in the U.S.. Face it: local Apple, local Google, local Microsoft, all are leveraging the products of business efforts of other parts of the business in other parts of the world. No, we can't accurately model this; we can, of course, say that an empty office in Ireland receiving all the taxable income is not providing productive output.

You also have secondary effects of presence. Google, Apple, or Microsoft might have a data center, an office building, something. If Google is hosting Google's French services in France, then Google is paying money to a French data center buying French power, French internet, and French office space. That's even more of the revenue stream of Google France going to France. If Google France's servers are colocated in Ireland and not France, well... that chunk of Google's revenue stream represents the GDP of Ireland; taxing it in France is a nifty legal trick, and dishonest.

So it's somewhat of a complex issue. It's also one that doesn't much matter, usually; and when it does, it's often a matter of perspective. Apple, for example, chews through $234Bn of revenue, keeps $53Bn of profits; Apple gets that revenue from sales all over the world of devices manufactured in China and services (iTunes) provided from wherever they locate their servers. Apple draws $2Bn of global revenue to Cupertino, paying the workers there, who spend into the local economy of Cupertino and the surrounding municipalities. Apple expends billions of dollars into the United States economy for products and services supplying its business activities.

That $53Bn seems like a lot to dodge if you're only diffusing $100Bn into the U.S. economy.

It is.

Apple's effective tax rate is 25.8% (the statutory rate is 35%). They paid $15.8 billion in U.S. taxes, after all the dodging they did.

On $53Bn, Apple would owe $18.55Bn. (Irrelevant factoid: under the Universal Social Security I designed, the the