A French court handed Google’s parent company, Alphabet, a reprieve from a 1.11bn-euro ($1.27bn) tax bill on Wednesday in a major victory for the tech giant.
The decision comes after six years of fighting with the French tax authority over back taxes it claims are due from the tech firm for the years 2005 to 2010.
The French tax administration argued that Google had to pay taxes in France because the California firm and its subsidiary in Ireland have been selling a service for inserting online ads to clients in France for years through its Google search engine.
But the Paris administrative court noted that the subsidiary, Google Ireland Limited, doesn’t have a “permanent establishment” in France via the company Google France, also a subsidiary of the US group Google Inc.
I’ve already done the “I told you so” piece. And do note that country by country reporting doesn’t change this in the slightest. Under the standard international tax treaties sales from outside the country pay tax where the sales are booked, not where the customers are. It is only when there is a permanent establishment in the country that everything comes under that taxing jurisdiction.
There is no dodging here, this is not an abuse of the rules, it’s following them as they are written. As HMRC has been known to point out, this is just how the system works.