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Facebook coughs up $125 million to settle French tax dispute

August 24, 2020, 2:24 PM UTC

Facebook will pay €106 million ($125.5 million) to settle a dispute with the French tax authorities, the company confirmed on Monday.

Initially reported by France’s Capital, the settlement covers the period from 2009-2018. The publication reported that the sum included a €22 million fine, although Facebook has not confirmed this.

“We take our tax obligations seriously and work closely with tax authorities around the world to ensure compliance with all applicable tax laws and to resolve any disputes, as we have done with the French tax authorities,” a company spokesperson said.

This is the latest in a string of similar Big Tech settlements with the French tax office. Last year, Google paid €465 million in back taxes and €500 million in fines, and Apple agreed a settlement with a value of around €500 million.

The core issue is that of where taxes should be paid. France has long been bullish on the idea that profits generated there should be taxed there, rather than in other countries—specifically, Ireland.

Facebook, Google and Apple all have their international headquarters in Ireland, which has a relatively low corporate tax rate of 12.5%, compared with France’s rate of up to 31%. Until recently, they have been happily optimizing their tax bills by booking profits from across Europe in Dublin. But in the last couple years, France and other European governments have been cracking down on this practice.

“We pay the taxes we owe in every market we operate,” Facebook’s spokesperson said. “Since 2018, we have changed our selling structure so that revenue from advertisers supported by the team in France is now recorded in this country. This year, we are paying €8.46m in tax revenue in France, a nearly 50% increase on last year.”

Capital estimated that Facebook’s annual revenues in France total €1.3 billion ($1.5 billion).

Apart from launching those tax cases against big American tech firms, the French government is also preparing to introduce a special 3% “digital tax” on the French revenues (rather than profits) of such companies.

The introduction of the tax was delayed due to hopes that the taxation-location issue could be agreed at a global level, under the auspices of the Organization for Economic Cooperation and Development (OECD). Indeed, the French tax was only intended as a stopgap measure, until such an agreement could be reached. But it is unclear whether the OECD talks will bear fruit and, with the pandemic straining its coffers, the French government said in May that would launch the digital tax either way by the end of this year.

Other countries, such as the U.K., are also due to debut a digital tax along the same lines. It was reported on the weekend that the British government would scrap the idea, so as to mollify the U.S. as the two countries negotiate a post-Brexit trade deal, but the government denied those reports on Monday.

If and when European countries do introduce their digital taxes, the U.S. is likely to retaliate with tariffs on their exports.