Ebay & Paypal star in the latest episode of "investigations into tax evasion in France"

Dec 14, 2012
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eBayI remember the pilot episode like it was just yesterday: the “do no evil” anti-hero Google confidently strolls in and out of government hearings, proclaiming loudly “we take all European tax regulations seriously,” meanwhile figures showed that Google was earning at least €1 Billion in revenues from French customers, but allegedly did all its business out of its Dublin-based Irish HQ. As the French government began to zero in on these figures, they were coming at Google from other sides, and finally hit them with a bill for €1.7 Billion just last month.

After announcing the opening of its 3rd logistics office in France, Amazon, too was hit with a $252 Million bill for back taxes over the past 5 years. This story is particularly interesting, as Amazon has sinced announced yet another logistics office to be opened in France, not at all to the delight of FNAC, of course, who has been yelling as loud as he can to the French press about how the French government has been giving tax credits to Amazon

After Amazon’s bill came, the news broke that tax authorities had investigated Facebook’s Paris office this past summer, and that the investigation was ongoing.

Microsoft too has “fallen from grace” in the eyes of the French tax authorities, having previously paid appropriate taxes, but has since fallen into the <5% tax bracket.

Chapter 5 & 6: Ebay & Paypal vs. Goliath?

It feels like we’re going down a checklist of multinationals tech companies operating in France these days, and it’s likely what the French government is doing. As l’Express reported (with a lovely timeline of tax evasion scandals, i might add), it seems that Ebay & PayPal reported earnings of just €10 Million in France, while Germany and the UK each saw revenue north of €1 Billion in 2011, according to SEC filings. With eBay having only paid €1 Million in taxes, this leaves a whopping €100 Million that the French tax authorities feel they have been cheated out of in taxes.

Like other multinationals, it will most likely come out that eBay has complied with all tax regulations required of them, and they are likely running their revenue generated through French clients in a different country (Luxembourg, Ireland, etc.). France is currently fighting vigorously the symptoms, but I wonder how hard they are looking at finding a cure for the disease. Many will say that the disease is France’s corporate taxes being “noncompetitive,” which may or may not be true; regardless, the disease that’s leaving France looking pale with malnourished coffers is “Europe” – multinationals have the right to only pay taxes in the country from which they operate, and they can do international business with companies while still only paying taxes in one country. This has been great for cross-border business, but France is really getting the ugly end of the stick on this one.

The solution may be lowering corporate taxes, but I think France will be hesitant to do so, and should thus start pushing other options.