Google to pay Italy €306 million in tax arrears

Google has agreed to pay €306 million in back taxes to Italy and Ireland to end a criminal investigation into whether the company avoided paying the full amount on its revenues for more than a decade, Italian tax officials confirmed on Thursday.

The agreement resolves multiple disputes including a criminal probe that saw Milan prosecutors accuse Google of generating revenues of €1 billion in Italy and Ireland between 2009 and 2013.

The sum also settles other disputes for the tax years 2002-2006 and 2014-2015.

Tax officials said the settlement also launches a process to determine Google's proper taxation level in Italy going forward.

Google said €303 million was attributed to Google Italy and the remainder to Google Ireland. This is "in addition to the corporate tax already paid in Italy for these years", Google said.

The company worked out a similar deal with the UK over a year ago, paying £130 million to British tax authorities.

A few months after reaching the settlement, the UK government introduced its Diverted Profits Tax -- nicknamed the 'Google Tax -- to prevent the practice of multinational organisations shifting profits made in the UK offshore to avoid paying tax.

The Australian government also introduced legislation of the same name in March hitting multinationals -- with global revenue of more than AU$1 billion and Australian revenue of greater than AU$25 million -- with a 40 percent tax on all profits.

In late 2015, the Organisation for Economic Cooperation and Development released recommendations in a bid to claw back as much as $240 billion in lost revenue each year through suspicious tax practices across the globe, such as funnelling money through certain countries in order to pay a lower tax rate.

Last year, European officials proposed new regulations that would require large, multinational companies -- with global revenues exceeding €750 million and with a presence in the European Union -- to report the amount of revenue they generate and the tax they pay in each European country they operate in, in addition to providing a summary of how much tax they pay in other countries.

The European Commission estimated at the time that EU loses as much as €70 billion per year due to corporate tax avoidance.

The new rules are expected to come into effect in 2018.

The biggest outstanding dispute in Europe concerns a €13 billion tax bill that Ireland was ordered by the European Commission to assign to Apple.

Ireland in December said it would appeal the European Commission's ruling that declared tax arrangements between Apple and Ireland -- originally established in 1991 -- had allowed the company to pay "substantially less tax" than rival companies, and were therefore illegal under state aid rules.

Google is currently facing another case in France where the authorities believe it owes €1.6 billion in back taxes. France's finance minister Michel Sapin said last year that he won't negotiate a deal with Google, but will instead pursue legal action.

However, at the end of 2016, France's Constitutional Council ruled against a new measure, dubbed the Google Tax, that would tax "diverted profits" up to 60 percent.

The French government said it wanted to make it more attractive for foreign businesses looking for a new European location after Brexit.

Italian tax officials have also reportedly started proceedings against Amazon last week, which could owe €130 million for passing its earnings through Luxembourg.

With AAP