European net closing on Google's tax affairs

The net seems to be closing in on Google's alleged systematic tax avoidance strategies as a series of European countries launch more probes into the internet giant's fiscal activities.

In Germany, politicians are sending legislation on potential copyright restrictions on internet search engines, widely dubbed the "Google Tax", to a top legal committee for review, while Italian financial police have launched a probe into a suspected tax evasion scheme that criss-crosses international borders.

The German levy is being pushed by publishers who want search engines to fork out when they link to media content. Following a late night debate, the Bundestag said its legal committee was now looking into the issue but could not confirm when it would release its recommendations.

Italian tax authorities are investigating reports that between 2002 and 2006 Google Italy avoided paying €96m (£77.8m) in VAT on undeclared revenue of €240m (£194.5m), an Italian economy ministry official revealed.

Deputy Stefano Graziano, a Democratic Party member in the Italian Parliament, said Google had avoided declaring Italian revenue to the nation's tax authorities by stating its sales were marketing services to Google Ireland.

Google's Italian revenue stream had rocketed since 2006 to around €400m in 2009, and up to €700m in 2012.

He told Italian daily, Corriere della Sera: 'The current deep economic crisis calls for more vigour and determination. Otherwise there is a risk that Italian companies will find themselves at a distinct disadvantage relative to companies based in countries offering greater fiscal advantages. It's a matter of social justice that cannot be overlooked.'

Google strongly denied the allegations and in an email to Bloomberg said: 'Google complies with tax law in every country in which it operates and we are confident we comply with Italian law.

'We will continue to cooperate with local authorities and work with them to answer all their questions on Google Italia and our services.'

The UK is also conducting its own investigations into Google's tax affairs and its use of the "double Irish Dutch sandwich".

At the recent PAC hearing, chief executive of Google northern Europe, Matt Brittin, said that its European HQ was based in Ireland because of its 12.5% corporation tax rate - almost half that of the UK's 24%.

He added that until recently, the Irish-based entity was paying a fee to a Dutch-registered company within Google in a bid to reduce its tax burden.

France meanwhile, could become the first European country to pass laws that will stop online companies avoid paying higher taxes on income earned in France by shifting it to other lower tax EU regimes.

Senator Philippe Marini, president of the Senate finance committee, has long expressed frustration that global internet giants like Google, Apple and Amazon have managed to avoid hundreds of millions of euros in French VAT and other corporate taxes, due to a series of loopholes in EU law and wildly divergent tax regimes.

French politicians are now gearing up to discuss a draft law to raise more revenue by taxing the digital sector in the same way as other sectors in the French Senate in the January 2013.

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