It looks like Google's respite from the scrutiny of the French government may be over.
Earlier this month, Google signed a deal with French publishers to set up a €60m fund meant to help them adapt to the digital age — a move that came after a showdown last autumn between Google, French publishers, and the French government.
The publishers had been calling for a share of the revenue the search engine makes by indexing and linking to their stories on Google News. During the tussle, Google responded by threatened to simply stop indexing those stories. At the time, Aurélie Filippetti, the French minister of culture, expressed her "surprise" about the company's tactics, claiming that "you don't deal with a democratic government using threats". According to the satirical newspaper Le Canard Enchaîné, the French president François Hollande then raised the question of Google's income tax bill in France during a meeting with its CEO, Eric Schmidt — helping to crank up the pressure on the search giant to reach a deal with the media companies.
But it seems that despite reaching an agreement with French publishers, taxing times might not be over for Google. On Sunday, Filippetti denied there would be any link between the agreement and Google's tax bill: "As long as publishers are satisfied, that's a good deal," she said during a TV interview on Sunday. "But it doesn't release Google from its other duties and I'm thinking notably of its tax duties... It may not all end there."
Last autumn, Le Canard Enchaîné reported that the French income tax authorities wanted Google to pay as much as €1bn extra in tax covering the last four years. Google denied having received any communication from the department about the matter.
Issues around how companies operate online and across borders are taxed were judged so pressing that the French government set up an enquiry — named 'Colin et Collin' after the two civil servants appointed last July to lead it — to look into the matter. The enquiry published its conclusions in mid-January, suggesting the creation of a new tax based on the value of personal data collected from French users by large online companies, in order to limit the extent of tax optimisation practices.
Such practice also recently caught the eye of the OECD (Organisation for Economic Co-operation and Development), which called for a better international co-operation in order to address taxation "base erosion and profit shifting". The organisation found that by using such methods, multinationals operating in the G20 group of countries can end up paying corporation tax of five percent, while SMEs may pay up to 30 percent.
"Many of the existing rules which protect multinational corporations from paying double taxation too often allow them to pay no taxes at all. These rules do not properly reflect today's economic integration across borders, the value of intellectual property or new communications technologies," it said.