ROME – Alphabet Inc.'s Google has agreed to pay around EUR306 million ($334 million) in back taxes in Italy, settling one of multiple legal and regulatory battles that have dogged the tech giant in Europe.
Continue Reading Below
The settlement ends one of several probes into Google's tax arrangements in the European Union, as governments maintain the pressure on other U.S. giants they accuse of tax evasion.
The tax probes come as Brussels and national capitals crack down on what they view as corporate tax abuse, both by pushing to change international tax rules and by investigating companies that have struck deals with low-tax jurisdictions to slash their tax bill.
Thursday's agreement between Google and Italy relates mainly to corporate taxes the Italians say Google failed to pay between 2009 and 2015. Rome alleges Google routed more than EUR1 billion in Italy-based revenue to its office in Ireland, where tax rates are far lower.
A company spokesman said that of the EUR306 million in back taxes, EUR303 million was attributed to Google Italy, with the rest to Google Ireland. As part of the deal, Google will agree to pay taxes on future income -- largely related to advertising sales -- generated in Italy, according to Italian tax authorities.
Google has long argued that clients in countries such as Italy don't actually close any advertising deals with employees in these countries, but instead buy the spots from Google Ireland, the company's headquarters for Europe, the Middle East and Africa.
Continue Reading Below
However, a person familiar with the company's thinking said Google preferred to settle with Rome to bring to a close a controversy that has cast a negative light on the company in Italy.
The Italian probe is just one of a number of judicial problems facing Google in Europe, where it has also faced scrutiny from national tax authorities in France and the U.K.
The company also remains entangled in three separate antitrust investigations led by the European Commission, the bloc's top competition watchdog, which accuses Google of abusing its dominant position and favoring its own products over those of competitors. The company has denied the allegations.
Governments have taken particular aim at complex corporate structures that allow companies to book revenue in low-tax jurisdictions, such as Luxembourg and Ireland, that they have earned in high-tax countries such as Italy. Last August, the commission ordered Apple Inc. to return $13 billion to Ireland in unpaid taxes. Apple is appealing, as is Ireland, which accuses Brussels of meddling in its domestic tax affairs.
Italy has been especially aggressive in pursuing tech giants. In late 2015, Apple Inc. agreed to pay about EUR318 million to end a dispute in which the company allegedly failed to pay almost EUR900 million in taxes between 2008 and 2013.
Other U.S. multinationals, including Amazon.com and Facebook Inc., are also under scrutiny in Italy. Tax police have told Amazon they believe the company has evaded around EUR130 million of taxes in Italy on EUR2.5 billion in sales effected through the company's Italian website between 2011 and 2015, according to people familiar with the matter.
In a statement, Amazon said it pays "all the taxes we are required to pay in every country where we operate."
"Corporate tax is based on profits, not revenues, and our profits have remained low given our heavy investments and the fact that retail is a highly competitive, low-margin business," said Amazon, which has invested EUR800 million in Italy since 2010.
People familiar with the situation say an Italian investigation into Facebook is also continuing. Facebook didn't immediately reply to requests for comment.
Write to Giovanni Legorano at email@example.com
(END) Dow Jones Newswires
May 04, 2017 14:37 ET (18:37 GMT)