Google set to pay $395m Italian tax bill

Google is expected to pay more than £240m ($395m) to Italy after being accused of tax evasion, dwarfing the sum that it agreed to pay Britain in a similar deal last year.

The settlement with Italy’s tax agency could be finalised early this year, an Italian source with knowledge of the investigation said.

“It’s not fixed but there have been talks and €280m ($400m) is a possible amount,” he said, adding that the final bill would include interest and penalties.

An Italian police investigation found that Google avoided €227 million in taxes between 2009 and 2013 by channelling revenue through its operation in Ireland, where corporate tax laws are more favourable.

A spokeswoman for Google in Italy said on Tuesday (local time): “We are continuing to work with the authorities.”

The settlement comes as governments across Europe try to tighten the rules to stop multinationals funnelling profits into lower tax regimes. The amount contrasts with the £130m ($214m) that Google agreed to pay Britain in January last year to make up for underpaid taxes over a decade.

As in Italy, Google in the UK was accused of pushing revenue out to its Irish operation to avoid taxation. The UK settlement was condemned at the time as a sweetheart deal by John McDonnell, the shadow chancellor of the exchequer.

It is far less than the payment that Italy may demand even though the Italian inquiry covered only five years of tax payments compared with ten in the UK, and despite the fact that Google’s UK turnover is estimated to be ten times its turnover in Italy.

“There is no precedent for the Italian deal and it will set an example in Europe,” the source said.

After the Italian investigation, magistrates in Milan have also accused five Google executives of tax evasion. “But should a settlement now be reached by Google and Italy’s tax agency, proceedings could be dropped,” the source added.

In 2015 Apple agreed to pay Italy €318m ($455m) after allegations that it evaded taxes for six years. It also agreed a settlement of €45,000 ($64,300) after charges were brought against Michael O’Sullivan, head of Apple in Ireland.

“The teamwork between magistrates and the tax agency which developed in the Apple case was again put to work in the Google probe and proved to be key to its success,” said the source, who added that authorities may now take a closer look at the tax affairs of companies such as Amazon and Facebook.