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Google in new tax dispute with French government

The French government is currently in talks with Google over how much tax the search engine pays in the country.

According to Reuters, tax authorities in France are investigating whether Google's practise of charging French advertisers using a subsidiary based in Ireland is a deliberate attempt by the Internet giant to underpay taxes in France.

Google France reported sales of €68.7 million (£55 million) in 2010, of which the company paid French income taxes of just €2 million (£1.6 million).

French budget minister, Jerome Cahuzac, said the company has been asked to sort out its tax affairs or the issue would end up in court.

Analysts say the French administration is trying to gather information to support the claim that Google should pay more tax in France, as enough work is done by the firm's staff in the country to merit more revenues and profit being declared.

"Evidence shows a business activity based in France that is incontestable," said Cahuzac.

Google has been under investigation by the French tax authorities since June last year when three of its offices in Paris were searched and computers seized.

Google has repeatedly denied any claims of avoiding tax.

"Google conforms with the tax laws in all the countries where the company operates. We co-operate with local authorities and we work with them to answer their questions about Google France and our services," said a spokeswoman in an emailed statement on Tuesday.

France, Britain and Germany are all intensifying efforts to crack down on tax avoidance by US multinationals.

Earlier this month, satirical weekly publication Le Canard enchaîné - France's equivalent of Private Eye - reported that the government had demanded €1.7 billion (£1.4 billion) in back taxes from the company.

Last week, the UK Public Affairs Committee (PAC) questioned the firm's European head, Matt Brittin on why the world's number one search engine paid only paid £3.4 million tax in 2011, despite earning a 33 per cent profit margin on £2.5 billion of in the UK last year.

"We're not accusing you of being illegal, we are accusing you of being immoral," said Margaret Hodge, Chairman of the PAC in her condemnation of Google's tax practices.

Google is not the only US multinational to be in hot water across the channel. Last week, French authorities similarly demanded that Amazon pay £159 million in unpaid taxes dating back to 2006 - a claim which the online retailer vehemently disputes.

Image Credit: Flickr (Håkan Dahlström)