<> on April 24, 2017 in Paris, France.
French Presidential Candidate Emmanuel Macron on April 24, 2017 in Paris, France. Aurelien Meunier—Getty Images

France Prepares Another Swing at Closing Tax Loophole Used by Google

Aug 07, 2017

France is back, seeking to plug tax loopholes with a vengeance.

In July, a French court rejected claims that Google abused loopholes to avoid paying its fair share of taxes. This follows a similar attempt made by the U.K. last year, in which Google settled for $168 million in back taxes.

European countries have filed several claims against U.S. tech giants in recent years—most notably a $14.5 billion case against Apple. Companies like Google and Apple have historically registered their European entities in Ireland, Luxembourg or the Netherlands to make use of advantageous tax rates. While the loophole used by Apple was technically closed, companies that registered before 2015 can continue to take advantage of it until 2020.

France has often tried and failed to coordinate tax policy within the EU, something that reflects in part the fact that it has a high statutory corporate income tax of 33.3%, making it easy for other countries such as Ireland to undercut it. However, its new President Emmanuel Macron has pledged to cut that rate to 25% by the end of his five-year term.

French Finance Minister Bruno Le Maire said that France will be proposing a simpler set of rules at a meeting of EU heads of government in mid-September. He called for Europe to defend its economic interests “more firmly” in the way that other countries like the U.S. and China do.

In particular France plans to harmonize its corporate tax rate with that of Germany with its neighbor by 2018, “which should be the basis for a harmonization at the level of the 19 member states of the eurozone,” according to Le Maire. France has lost its traditional influence in European policy-making over the last decade as its economy has consistently lost ground to Germany's. Macron is aiming to restore that influence by closing the economic gap. German Chancellor Angela Merkel made positive noises about Macron's plans for reform of the eurozone after his election, but Berlin has traditionally guarded its tax-making powers as jealously as any other EU country.

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