Google reported sales of more than $4 billion in Britain last year. It paid less than $10 million in taxes.
Some tax collectors, lawmakers and competitors of Google in Europe say this is unfair.
As governments throughout the region seek to close gaping holes in their budgets, they are taking aim at United States multinational companies, especially internet giants like Google and Amazon, which pay little or no taxes in Europe, despite generating billions of dollars in revenue on the continent.
Why on earth do you manipulate your accounts so that you get away with not paying corporation tax in the UK? Margaret Hodge, a member of Parliament, asked representatives of Google, Amazon and Starbucks last week, during a heated committee hearing in London.
In France, tax collectors have gone further.
Amazon says it has received a bill from France for taxes and penalties related to the allocation of income between foreign jurisdictions from 2006 through 2010. Other companies, including Google, are also reportedly in the French authorities sights.
Even if the internet is a zone of freedom, it shouldnt be a lawless zone, Najat Vallaud-Belkacem, a French government spokeswoman, said. Fiscal rules should be able to be applied to those activities as well.
Google, Amazon, Starbucks and other American companies facing tax scrutiny say they are doing nothing wrong. They use complex accounting strategies to exploit national differences across Europe in corporate tax rates, which range from less than 10% to more than 30%, and loopholes that can reduce their effective European tax levies to almost nothing.
Google, for example, records most of its international revenue at its European headquarters in Ireland, where the corporate tax rate is 12.5%. Across Europe, customers who buy advertising, Googles primary source of revenue, sign contracts with the companys subsidiary in Ireland, rather than with local branches.
Google ends up paying Irish taxes on only a fraction of the billions of euros that course through its Dublin office. That is because the company uses a variety of methods, including royalty payments to a unit in Bermuda, to reduce further the amount of money exposed to tax liability.
So, while Google told the Securities and Exchange Commission that it generated more than $4 billion in sales in Britain last year, it reported revenue of only £396 million, or $629 million, in its official filings there. The total, the company said, reflected the amount that Googles British unit billed Google Ireland for promotional work,