On September 12, 2019, the US tech giant Google agreed to pay close to EUR 1 billion to settle both a criminal investigation for tax fraud by the French Prosecution Office and an ongoing dispute with the French tax authorities focused on the existence of a French permanent establishment of Google’s headquarters in Ireland.
To put an end to the criminal procedure, Google concluded a Public Interest Judicial Convention (Convention judiciaire d’intérêt public or CJIP) which is somehow similar to a US Deferred Prosecution Agreement (DPA). Under the CJIP, Google will pay a “public interest fine” of EUR 500 million but it will not be considered as sentenced from a criminal standpoint and will not have a criminal record.
According to public information, Google has simultaneously concluded a global settlement with the French tax authorities overarching fiscal years 2005 to 2018 for a total amount of EUR 465 million. This settlement will end the ongoing litigation that was pending before French Supreme Court with respect to fiscal years 2005 to 2010 (Google had won before the Court of First Instance in July 2017 and before the Court of Appeal in April 2019).
In France, criminal and tax procedures are clearly distinct and generally follow separate – and sometimes rather contradictory – paths. However, here, quite interestingly, the Google settlement is a joint negotiation between the taxpayer, the French tax authorities and the Public Prosecutor. The main benefit of this global approach for Google is to put an end to all disputes and “move on”.
Since the enactment of the Anti-fraud law in October 2018, many significant tax disputes are at risk of being automatically transferred to the Financial Prosecutor depending on the level of penalties applied and the past tax audit history of the taxpayer. This landmark settlement will undoubtedly influence the way the Financial Prosecutor and the French tax authorities will deal with such cases.
The Anti-fraud law will also be under the spotlights in the coming days: the hearing on the challenge of its compatibility with the French Constitution will take place on September 17, 2019 and the decision should be available by the end of September.