Google Paid More in EU Fines Than in Taxes in 2018

Published on: February 12, 2019 / Update from: February 12, 2019 - Author: Konrad Wolfenstein

In recent years, the European Commission has made a name for itself by taking the lead in tax evasion and antitrust cases involving American technology companies. After Microsoft was embroiled in legal battles with the Commission for most of the 21st century, and in 2016 Apple was ordered to pay €13 billion in back taxes to the Irish government ( which didn't want the money and was eventually forced to collect it ), is Google has become the main target of EU antitrust regulators in recent years.

After being fined 2.4 billion euros ($2.7 billion) in 2017 for anti-competitive behavior related to Google Shopping, the search giant was fined a record 4.3 billion euros last summer (5 .1b) for antitrust violations related to its Android mobile operating system. While this easily exceeds any other antitrust fine the European Commission has imposed over the years, Google's annual earnings report released last week shows just how significant this fine really was. As the chart below shows, the $5.1 billion penalty exceeded the amount of income tax Google's parent company Alphabet had to pay for the entire year.

Thanks to the Tax Cuts and Jobs Act of 2017, Google's effective tax rate fell to 12 percent last year, allowing the company to report record profits of $30.7 billion last year, even after the fine, which is still under appeal 5.1 billion US dollars was recorded.

In recent years, the European Commission has made a name for itself by going head to head with American tech companies in tax evasion and antitrust cases. After Microsoft had been entangled in legal battles with the Commission for the better part of the 21st century and Apple was ordered to pay €13 billion in back taxes to the Irish government in 2016 (which didn't want the money and eventually was forced to collect it ), Google has become the prime target of the EU's antitrust watchdog in recent years.

After having been found €2.4 billion ($2.7b) for anticompetitive behavior related to Google Shopping in 2017, the search giant was slapped with a record-breaking €4.3 billion ($5.1b) fine last summer for antitrust violations related to its mobile operating system Android. While that easily trumps any other antitrust fine the European Commission has handed out over the years, Google's full-year earnings report, published last week, reveals how significant that fine really was. As the following chart shows, the $5.1 billion penalties exceeded the amount of income tax that Google's parent company Alphabet had to pay for the entire year.

Thanks to the 2017 Tax Cuts and Jobs Act, Google's effective tax rate dropped to 12 percent last year, enabling the company to post a record profit of $30.7 billion last year, even after accounting for the $5.1 billion fine which is still under appeal.

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