President Francois Hollande Takes Tax Offensive to Silicon Valley

President Francois Hollande will press the issue of tax avoidance by large US digital companies with US leader Barack Obama, during a two day trip which will include meetings with Silicon Valley giants, Google, Facebook and Twitter.

Hollande said: "This is not acceptable and that is why, at both the European and the global level, we must ensure that tax optimisation ... can be called into question."

"Everyone must be in the same competitive situation, including on the fiscal level. When I go to the United States in a few days, we have agreed with President Obama to make this effort on tax harmonisation," he added.

His comments follow a report in the French publication Le Point that claims the French government is seeking €1bn (£832.3m, $1.3bn) in tax from Google over its tax policies.

The French president has sought higher taxes for big earners and has been perceived as a critic of big business in France.

A growing number of nations including France want to hunt down what they see as abuse of tax and accounting rules that allows some multinational companies to pay less tax.

In June 2011 French tax inspectors searched Google's Paris offices in an aggressive probe into its tax affairs.

Global corporations avoid paying tax because they make deductible payments of interest and royalties and such to affiliates in tax havens like Ireland and Switzerland.

Google, Facebook and many other US tech companies have established European finance hubs in Ireland, which acts as a kind of way station, on route to finally booking profits in off-shore centres with zero income tax, like Bermuda and the Cayman Islands.

According to court documents obtained by AFP, Google France reported revenue of €192.9m in 2012, and paid €6.5m in tax on the €8.3m of net profit it earned.

Analysts estimate that Google generated between €1.25bn and €1.4bn in revenue in France in 2011, mainly from internet advertising.

The European Commission recently established a digital taxation expert group to examine ways to tax the European operations of large internet companies. France is energetically represented in the group, and the French government has commissioned reports on the subject of a digital tax.

To some extent internet-based firms have got publicity for their tax affairs because they are household names and thus more vulnerable to public pressure, not because their tax structures are particularly devious.

Lee Sheppard, a lawyer and tax expert from Tax Analysts described the situation as an "eye poking contest" between Europe and the US.

"The beauty of taxing data for EU countries is that they could get at the mostly American digital economy players without the risk of subjecting their own companies to taxation," she said.