French President targets companies that bypass national fiscal regulations

French President Nicolas Sarkozy initiated Wednesday the first steps of what looks like a full-blown offensive to impose stricter fiscal rules on internet multinationals, forcing them to pay taxes in the markets where they make their profits.

Speaking to an audience of internet entrepreneurs at the inauguration of the Conseil National du Numerique (CNN), France’s new consultative commission for all things digital, Sarkozy targeted his speech to those companies who bypass national fiscal regulations and transfer profits to countries with lower tax rates.

“The majority of you can’t consider it normal that a company comes massively on a market like ours and then delocalizes all its fiscal operations with the only purpose of fiscal maximization,” Sarkozy said.

Sarkozy didn’t name names in his speech, but hinted heavily at Google Inc., one of the best known examples of fiscal optimisation.
The U.S. company is known to pay an overseas tax rate of just 2.4% by using a double structure of licensing its intellectual property to its Irish-based subsidiary, which in turn pays almost all of its profits in the form of royalties to another company, Google Ireland Holdings, based in the tax haven of Bermuda.

The French President, who has managed to put the internet on the agenda of the meeting of the Group of Eight Leading Nations that he is chairing next month in the northern town of Deauville, said he’ll push for the newly-established CNN to be extended beyond France’s borders.