Google has settled a tax dispute with Italian authorities, agreeing to pay €326 million in taxes, fines, and interest. The settlement resolves a long-standing issue over Google’s failure to declare and pay taxes on income generated in Italy between 2015 and 2019.
Google Settles Italian Tax Dispute with €326 Million Payment
Investigation and Charges
Italian authorities had accused Google Ireland Limited of failing to declare and pay taxes on income generated in the country between 2015 and 2019, focusing particularly on revenues obtained through selling advertising space.
Google Ireland Limited is a subsidiary of Google LLC, responsible for managing the company's European operations.
Registered in Dublin, Ireland, it serves as the regional headquarters for Google's EMEA (Europe, Middle East, and Africa) region.
The company handles various aspects of Google's business in Europe, including sales, marketing, and customer support.
With a significant presence in Ireland, Google Ireland Limited plays a crucial role in facilitating innovation and economic growth across the continent.
Settlement Agreement
Under an agreement reached with ‘the company proceeded to payment of… 326 million euros in taxes, fines and interest, to resolve the outstanding matter with the Italian tax authorities’ , Milan prosecutors said in a statement. As a result, the prosecutors submitted to a judge a request to dismiss criminal proceedings in the case.
Background on Tech Companies’ Tax Practices
The EU has had little success in getting tech companies to pay more taxes in Europe, where they are accused of funnelling profits into low-tax economies like Ireland and Luxembourg. In one of the most notorious cases, the European Commission ordered Apple to pay Ireland more than a decade in back taxes — 13 billion euros — after ruling a sweetheart deal with the government was illegal. However, EU judges overturned the decision saying there was no evidence the company had broken the rules.
Tech giants like Amazon, Google, and Microsoft have been scrutinized for their tax practices.
These companies often exploit loopholes in international taxation laws to minimize their tax liabilities.
According to a report by the Institute on Taxation and Economic Policy (ITEP), in 2020, the top five tech companies paid an effective federal income tax rate of just 8.2%.
This is significantly lower than the 21% corporate tax rate.
The companies' use of transfer pricing, intellectual property shifting, and other techniques allows them to shift profits to low-tax jurisdictions.
Ireland has a reputation for having a low-tax economy, with corporate tax rates as low as 12.5%.
The country's tax system is designed to attract foreign investment and promote economic growth.
Ireland's low corporate tax rate is one of the lowest in the world, making it an attractive location for multinational companies.
In fact, over 1,000 US companies have operations in Ireland, including Google, Apple, and Facebook.
According to a study by the Economic and Social Research Institute (ESRI), foreign-owned firms account for nearly 90% of Ireland's exports.
Confirmation from Google
In a statement to AFP, a spokesperson for the tech company confirmed the deal, without giving a figure. ‘Google and the Italian Revenue Agency have reached a settlement, resolving a tax audit for a period between 2015 and 2019 without litigation’ , it said.
