The internet surfer googling for "France-negocier-Google" will be surprised to find first various versions of a news item heading "France proposes… / does not exclude… / about to… / budget minister willing to negotiate with Google" (25 July 2017), and immediately below "France Unwilling to Negotiate with Google" (2 February 2017).

The search algorithm did its job, the sources are trustworthy, so… nothing is wrong. Actually, many things can change nowadays within five months. Meanwhile, France has a new president - Mr. Macron, a European pragmatic, and Google has the confirmation of the Administrative Court of Paris that it does not have to pay additional taxes of €1.115bn, recently claimed by the government-unwilling-to-negotiate-with-Google.

Our case studies section presents in detail this ruling, by which the Court explains why Google Ireland (which operates Google throughout Europe) does not have a permanent establishment in France, and is thus not subject to additional taxes, besides those already paid by the Google France Company. (Error 404 – Why the French (Also) Could Not Find a "Permanent Establishment" of Google).

OK, will further ask our net surfer, but what can be still negotiated after the court ruling? Wouldn't it have made more sense to negotiate before the litigation? As the great French novelist Balzac would have said, "even a bad settlement is better than a good litigation" (Lost Illusions).

To cap it all off, the French Minister of Public Action and Accounts (each government has its own literature, but essentially he's the minister in charge of the budget) "we shall appeal against this ruling, because it's a matter of principle, but… if Google is willing to enter a sincere approach to the French government to regulate its status within the framework of a trading agreement wise for the company and for the public finances, our door is open. A good settlement is preferable to a bad litigation."

What hides behind this update of Balzac, behind this new view on the tax negotiation concept?
Even if the answer is not to be found at Google, it can appear by connecting the dots in the general picture, as we like to say in transfer pricing.

After January 2016, when the British tax authority announced a €130m agreement with Google to settle the financial quarrel, it became clear that this Google case is a touchstone for tax authorities throughout Europe, as each of them will face the same business model of the IT giant - invoicing in Ireland all the AdWords advertising services.

The French understood the political stake and announced they were playing the card of court litigation (obviously, Google has challenged the retroactive claim of one billion euros). Moreover, in May 2016, when the now-President Macron - was the minister of economy, news broke about a large-scale search at the Paris offices. (see "Operation Tulip" or how the French are searching for ”transfer pricing” on Google).

A force comprised of no less than 96 prosecutors and IT experts has been mobilized, but the consequences are still unclear. As resulting from the July 2017 ruling, the emails/documents seized by the authorities revealed that Google France employees were calling each other Sales Representative or Account Manager, which was still not enough to demonstrate that the Paris offices are a permanent establishment of Google Ireland (which would have resulted in the re-classification of the operations and implicitly in higher taxes - see the case study).

But things were to become more complicated for the French even before this ruling. In May 2017, news broke in Rome about the fiscal peace between the Italian authorities and Google on €306m, after "more than one year of negotiations". Negotiation, not divorce Italian style - here's more pressure for Paris who was unwilling to negotiate, but obviously has to produce results for the public eye.
Now, after the court ruling, such outcomes seem utterly "lost illusions." And yet…

If the litigations with Google are either lost or negotiated, it means there are no national solutions for the expectations of tax authorities, within the current laws. Here's one more political argument for speeding the implementation of a European solution. A solution called by one name only, and in the final negotiation phase on a EU level - the common, then consolidated corporate tax base (CCCTB).

By winning in national courts, Google and other large multinationals can only prepare faster to face a single set of rules on a European level, through which the economic substance, the functions, the risks taken by group subsidiaries, the arguments used to allocate profits to subsidiaries are ruled administratively. (here, on the CCCTB algorithm).

As early as last year, Google voiced in the European Parliament its concern about CCCTB increasing its operating costs in each EU member state. The French are the main driving force of restoring the CCCTB on the European Commission agenda (the European commissioner in charge of taxation, Pierre Moscovici, is ultimately a Frenchman). So you see discussion matters arise, because - as the action minister said - a good settlement is preferable

Dear partners,

Transfer Pricing Services (TPS) is proud to announce carrying out its ”Transfer Pricing Safety” standard on the intrenational markets through the key strategic alliance signed with Quantera Global, one of the world’s leading independent transfer pricing firms.

Quantera Global is well-known for its best practice transfer pricing consulting services in Asia, Europe and the Americas, in order to support multinationals to satisfy all aspects of their transfer pricing design, compliance and risk management requirements.

“Being part of the Quantera Global Alliance will enable us to respond in an adequate manner to the new tax challenges with both local and global implications for MNEs. We are also glad to share our expertise and serve local subsidiaries of MNEs out of Quantera Global’s client portfolio operating in CEE region. Having worked with several members of Quantera Global before meant that we can easily relate to a common approach and understanding” – says Adrian Luca, Founding Partner of TPS.

Quantera Global has recognized TPS having a deep understanding of the Central & Eastern European market’s characteristics and tax authorities’ local practices, being involved in many transfer pricing projects in the region.

“As most of the CEE countries currently witness aggressive transfer pricing issues that tackle sensitive issues such as economic substance, profit allocation, intangibles and hybrid arrangements, this alliance will provide the multinational groups with operations in CEE with appropriate and tailor-made TP solutions,” says Rudolf Sinx, Managing Director of Quantera Global.
“A decisive factor for signing TPS as strategic partner was its professionalism and the work culture which is shared by both companies,” adds Richard Slimmen, Managing Director of Quantera Global. “Both TPS and Quantera Global share a similar approach on working with their clients as with their colleagues.”

Please find here the press release issued by Quantera Global & TPS

For further information, please do not hesitate to contact us

Adrian Luca:

Daniel Sacal:

Rudolf Sinx:

Richard Slimmen:


About TPS

Established in 2009, Transfer Pricing Services (TPS) has become one of the strongest and most appraised independent tax consultancy firms in the field of transfer pricing in Central and Eastern Europe. TPS currently provides specialized services to over 450 clients, subsidiaries of multinational and national groups. Based on its results, during 2011-2016 the TPS team was designated by various specialized publications as the best team in the field of transfer pricing in Romania and Central and Eastern Europe.

The team has now over 20 consultants and each of them is accredited or under accreditation by the standards of ADIT. On a local level, TPS is the only tax consultancy firm to have two of five of its members proposed by Romanian authorities to the European Arbitration Commission for removing the double taxation in the relation between affiliates. On the local market, TPS has a strategic partnership with one of the largest and most renowned law firms in Romania: Nestor Nestor Diculescu Kingston Petersen (NNDKP).

About Quantera Global

Quantera Global is one of the world’s leading independent transfer pricing advisory firms, providing specialist and integrated transfer pricing services to multinationals of all sizes across the globe. Our mission is to be our clients’ trusted transfer pricing advisor, working in close cooperation and building a long term relationship that will bring value to your business. We provide best practice transfer pricing consulting services in Asia, Europe and the Americas, in order to support multinationals to satisfy all aspects of their transfer pricing design, compliance and risk management requirements.

The Quantera Global team is composed of trusted transfer pricing specialists and an extensive network of alliance partners distributed in key countries around the world. Our offices are strategically located in Amsterdam, Antwerp, Bangkok, Brisbane, Eindhoven, Genoa, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Milan, Shanghai, Singapore, Sydney and Tokyo.



"It is impossible to accept the (CETA) agreement without this decision (of Canada waiving visas for Romanians." I am just reading this statement of our prime minister, the latest in a series opened by the Foreign Affairs Ministry and continued by practically all the officials in Bucharest. I'm reading and I'm thinking, it’s a legitimate question whether, if so firm about the Canadian visas, then… is there anything else we should demand from Brussels as trade-off?

We had a similar position last year (article here - Romanian version),  hearing about "the national interest" we took to Brussels in order to reject the refugee quota allotted by the European Commission, based on an algorithm set up on a EU level. We're fighting quotas for 15 years already (since the beginning of the acceptance process) and we still have not learned the beauty and harshness of the European game / negotiations: ceding where it's "really impossible", pushing where one's strengths are and where allies can be drawn… just like in any other negotiations, only with "extraordinary, long-term stakes."

The matter I discussed back then is hotter than ever nowadays. The Guardian just reported that the journalists already saw the final draft of the Common Consolidated Corporate Tax Base (CCTB) Directive, to be most probably issued next week. It's a topic which's consequences to our national economy I mention on every occasion, as we'll get used to it anyhow on every occasion - please see a relevant article here. By the time we get used to it, however, there will be little to do about it: the matter will be already settled.

So we will have a common taxation base throughout the EU for the big European groups (including their Romanian subsidiaries), then the base will be consolidated on a group level (and the profit will be shared among subsidiaries based on an algorithm). Why should be interested in this as a priority? Because on a common taxation base, countries like Romania will be no longer allowed to use arguments like, "we're more attractive due to accelerated amortization," for instance. And "we have a lower tax level" will actually became void! The topic is, therefore, investments, the way we manage to draw value-added investments that allow us a real income growth - in other words, a real integration into Europe.

I confess to my readers that I wish I heard lately at least a minimal official reassurance or a single public mention like, yes our representatives in Brussels saw the final version of the directive (at least as much as The Guardian's journalists), and we as a country already have a strategy for negotiating the algorithms used for splitting the profits of multinationals.

I honestly fail to understand why the issue of Canadian visas is more immediate than ever (anyhow, I'm hearing that the Canadian side agrees to waive visas by 2018). Moreover, the EU, which wants to absorb the Brexit shock by unprecedented integration, really has not time for our and Bulgarians' problem with visas, or Walloons' upset about economy, meaning about ... multinationals (at least their issue is related to CETA). On the other hand, the Canadians are raising the stakes very high, bluntly asking Brussels, "if Europe is incapable of signing a progressive trade deal with a country like Canada, then who does Europe think it can do business with in the years to come?"

So this is about a European interest, a much higher stake. Romania has much higher interests in the EU, long-term ones, too, than getting the Union's support to make Canadians allow us visiting without visas. The question still stands: what is our game in Europe? What are our really important stakes?

Article by Adrian Luca, TPS, published on, October 20, 2016

Update (October 21) - We just learned this morning that Canada is finally capitulating: it waives visas for all Romanians, not starting from 2018, but from December 1, 2017. And pay attention: if all of us go there, the Canadians could reinstate the visas for three years.What I want to see is what will we negotiate then, in exchange of what?


Last Monday, at the inauguration of a car components factory in Ramnicu Valcea (180 km West from Bucharest), someone yelled from the last row, 'wage of 200 euros?'. The report has been viewed over 25,000 times and has 150 comments so far - a reaction that undoubtedly reflects a certain state of mind. We're in a country that celebrates in a couple of months 10 years since it joined the EU, but we still don't feel inside in terms of wages, and implicitly of living standards. The economic reason for this net wage of 200 euros – as we still much rely on the minimum gross wage of 276 euros to draw investors – does not feed, warm or educate; it does not pay any installments or vacations, nor does it improve the mood that pushed the guy to ask why this is all he takes home.

The state of mind I mention has become an important economic variable in our days. The état d'esprit was also mentioned by European Commissioner Pierre Moscovici (Economic and Financial Affairs, Taxation and Customs), a Leftist Frenchman of Romanian origins, now the main voice of the tax revolution under preparation on a EU level. "We have a strong asset that was not present five years ago – it is the mood in the public and the scandals, which give us some strength. Clearly today the public cannot stand that multinationals do not pay their fair share of taxes, while ordinary citizens did in order to reduce deficits," he said in an interview to major European media. In these terms, he announced that in late October or early November we should expect… the CCCTB.

So, finally: the Common Consolidated Corporate Tax Base, aka the CCCTB is making its grand entrance, and there's no way back! I try to explain on every occasion what the CCTB is, ever since June last year, when Brussels released a 1min10sec video setting up the milestones of a Europe where citizens were very upset, because "a cross-border company in the EU pays on average 30 per cent less tax than a similar company active in only one country. Now, research suggests that if one country increases its corporate taxes, profits that companies declare before they actually pay those taxes decrease. That's because the profits are shifted elsewhere." This is why "out of 100 Europeans, 88 support tighter measures against tax avoidance and tax havens." And because they want it, they clearly want the CCCTB (i.e. they won't oppose to it). Thus, the European multinationals will find in every member state where they operate the same rules for calculating their profits, which will be totaled for the group, then – based on an algorithm – split between the states where it was obtained (see the article here - a Romanian version)
This will calm down people, even make them happy, the Brussels strategists thought, basking in their own brightness. Is that so simple, indeed?

The upsetting is essentially based on the fact that – surprise?! – we all need the money (state budgets and private budgets/pockets equally), to quote the head of the OECD, who synthesized the philosophy of new tax revolutions. These revolutions were fueled by revelations, by information leaks (from Luxemburg, from Panama, now also from the Bahamas) and by investigations (some worth several billions, such as the already famous Apple case). All these contributed to the critical level of the state of mind, urging to do something.
That’s how – after two years of talks on the final form – the BEPS plan (against the Base Erosion and Profit Shiftin) was done, and is now in the implementation phase. It aims at increasing the transparency of global business, by detailed reports on the groups' businesses in every country where they operate. CCCTB wants more: to change the very businesses, their model. This is precisely why there were (official) talks about the CCCTB over the past 16 years (it was seen as a priority of the 2nd Barroso Commission), and it's easy to understand why member states did not appreciate what Commissioner Moscovici called "probably the most ambitions tax reform ever devised" and "the real prize for businesses". So it's not that simple, after all.
While the big states worry about the CCCTB profit splitting algorithm, the other states, before the profit consolidation and allocation, could have a problem with the common taxation base. Countries like Romania will no longer be able to use arguments like "we're more attractive because we have accelerated amortization", and "we have a lower tax rate" will actually become void!

Is this connected with the 200-euro wage? Very much so! When an investor finds the same taxes in Ratzeburg and in Ramnicu Valcea, what will our arguments be?…

Last December, upon the appointment of the incumbent government, made up of people who know what Brussels means, I was thinking they'll force Europe down our throats. I was not expecting the minimum wage to be raised to 400 euros, e.g. like in Croatia (see the EU statistics here) it the economy cannot sustain this level. But this government could and should have joining the major European teams, putting Europe on the domestic public agenda!

Meanwhile, the tax revolution will be done, and not owing to the ambitions of European commissioners: if today's path leads to more Europe, it cannot be achieved without a common tax policy. So I don't imagine we as a state could fight the inevitable (it would also be counterproductive). I imagine, however, that despite its lack on the domestic public agenda, we're having a fight at least on the finance ministry's level, on the algorithm, on fractions of percentages; I imagine we're seeking the European compromise that takes into account the development needs of our economy, too. I also imagine that we're searching for new arguments to replace the old ones. What if we could tell investors, "you might search throughout Europe and not find more business-friendly tax authorities than Romania's, with clearer procedures and verifications"? Now wouldn’t that be nice?...
To conclude, I'm as confident as ever that beyond our day-by-day problems, our present and especially our future is also dealt in Brussels. "How are we playing in Europe?” is an all the more actual question, as we have so many people who have to live on 200 euros per month.

P.S. Talking about arguments to encourage investments: last week, Italy has passed the "Piano Nazionale Industria 4.0", a plan to develop industry based on new technologies. Nothing spectaculars (all Western states have such plans), except for the tax incentives proposed for the next year's budget. The percentages mentioned are remarkable, but not as much as the imagination in combining leverages. For instance, a 250% hyper-amortization is proposed to investors in technology, agrifood, equipment to boost the energy efficiency; there is a one-year prorogation of the super-amortization of 140% for investments in capital goods, other than transportation means (hyper- and super-amortization can operate until mid-2017); tax credits of 50% (up from 25%) for R&D expenditure above the company's past three-year average; tax exemptions of 30% for investments up to one million euros in innovative SMEs; and the possibility of the "sponsor" company taking over the start-up's losses for 4 years of operation. Even if Italian Ferrari is somehow tired, perhaps rusty (note the government debt of 130% of the GDP!), the skillful tax piloting can produce a chance to advance to the new economy, to the 4.0 level. Otherwise, one is left with the chance of keeping manufacturing Ferrari's upholstery. Which is OK, but… on a "wage of 200 euros?"

Article by Adrian Luca, TPS, published on, September 2016

News from the front. From our TPS correspondents: 

So far, Brussels has promised just not to push Dublin on how to spend the 13 bln. (for instance, it's not required to pay down the huge debt). On the other side, Apple knows to make its allies happy. What would the U.S. want to hear? That the company brings (more) money home. And what would Ireland want to hear? That the company’s commitment is undiminished. Plus – a discrete call to the Irish dignity.

Speaking today, 1 September, to Irish RTE broadcaster, Tim Cook said that investment will continue “as per plan” and he is very confident that the government from Dublin will appeal, adding “The sovereignty of this country is at stake”
As for the U.S .audience, he has pointed out, "We paid $400m to Ireland, we paid $400 (million) to the U.S. (tax on profits in 2014) and we provisioned several billion dollars for the U.S. for payment as soon as we repatriate it and right now I forecast that repatriation to occur next year".

On the World Tax Fight, and why the fighters are still shooting at transfer pricing, please see the yesterday article


The EU sinks its tax fangs into America's Apple and demands 13 billion dollars 'owed' to Europe. A harsh warning of intolerance to tax arrangements without Brussels' OK. The US grinds its teeth equally harshly, and brutally displays its own intolerance to anyone who might bite into the taxes 'owed' to Uncle Sam. Their warning - hands off our transfer pricing agreements! Do not undermine the (already frail) progress of the BEPS towards reforming international taxation and increasing its transparency.

We Romanians have an old saying, which I think is appropriate here – brother is brother, but the cheese costs money. Actually, it’s quite an appropriate equivalent for the arm’s length principle in transfer pricing, don’t you think?

Anyway, the issue of profit appropriation and tax collection following multinational intra-group transactions is still unclear. States still need more money (as says the father of the BEPS project at the OECD). So it's… WTF: the World Tax Fight.

On its collateral damage, please see the comment of Adrian Luca, TPS. 

Dollar by dollar, euro by euro, we're in a full-blown World Tax Fight. The mere audience gets the… reflection.

”Is this a joke? Ireland challenges the EU decision to request Apple pay back 13 billion euros (to the Irish)?" – asks a Romanian reader who calls himself "Aramis", in a comment to the news shared all over the world on 30 August 2016. I don't know Aramis, but I noted the way the musketeer reader ends his observation with the famous combination which best voices the modern confusion. Willy-nilly, we're all caught in this confusion which already earned the name of… World Tax Fight. The global struggle for taxes did not begin with the Apple case, but surely this August 30 will be a milestone- the day the large-scale hostilities started.

Large-scale, but not because it's about 13 billion euros - the amount Apple should refund to Ireland for the past 10 years of selective fiscal treatment, as the European Commission has asked (Brussels would have asked even more, but the current legislation only allows recalculating aid for the past 10 years). It's a huge pile of money, but also just a crumb. On quarterly profits nearing 8 billion (in June 2016) and hundreds of billions cash, Apple could call tomorrow for wiring the money and settle the conflict. The problem is – what conflict?

Ireland does not seem to have a problem with this company, which happens to be a giant corporation today, although 36 years ago it was just the company of a guy named Jobs. This guy decided to come to some place called… Cork, and open a factory to produce something called… a personal computer (see here a mini-interview with Steve Jobs on the opening – it's unbelievable it happened in our days), employing 60 Irish. Today it's a plant with 4000 employees producing Macs, and the only production unit in Apple's portfolio.

Yes, Apple, which might only pay a profit tax of 0.005%, compared to… 1% in 2003, as per the European Commission's charges. But Ireland asking even this one per cent back (the operating profit rate is 12.5% in Ireland, in case you wonder) would be economic suicide, something like making fake whiskey, or whatever one might call undermining the whole edifice of 30 years in terms of attractiveness of the investment climate (which Brussels cannot pretend it didn't see). Not to mention that even tiny Ireland does not get drunk on 13 billion earned overnight. Just one month ago, this small country with a population of 4.6 has reviewed its 2015 GDP to 215 billion euros, which is 26 billion (or 2 x 13) the 2014 result. The reason? More and more multinationals are relocating to Ireland and bring investments on paper, accounted as a plus for the economy. But this really doesn't make the Irish more confident (public debt is 94% from GDP, remember? A few years ago was 120%), especially now with their neighbors on Brexit, bringing uncertainty and confusion to the gate.

Still, the question 'what conflict?' needs an answer. From the CEO seat of one of the world's richest and most influential corporation, without the ties of a politician, Tim Cook asserted on 13 August in an interview to Washington Post, "the basic controversy at the root of this is, people really aren’t arguing that Apple should pay more taxes. They’re arguing about who they should be paid to. And so there’s a tug of war going on between the countries of how you allocate profits. The way tax law works is the place you create value is the place where you are taxed. And so because we develop products largely in the United States, the tax accrues to the United States." Well, this global fight is the issue - profit appropriation, the size of the slices of this pie.

The American system allows IRS to tax all net income obtained worldwide by an American taxpayer, even if the collection can be deferred until money comes back home/is repatriated. The perennial deferment… is a problem, one fiercely debated by American politicians (see the 2013 Senate hearings), the present-day election campaign included. Cook reminded, however, that he will not repatriate the profits as long as an unfair rate of 40% is waiting for them back there (35% federal tax, plus local taxes), so he prefers to wait… for a reform of the system. But this is strictly a U.S. problem, not the Europeans' business.

As Uncle Sam said in very undiplomatic terms, even bluntly (Irish green, Irish grin?), "There is the possibility that any repayments ordered by the Commission will be considered foreign income taxes that are creditable against U.S. taxes owed by the companies in the United States. If so, the companies’ U.S. tax liability would be reduced dollar for dollar by these recoveries when their offshore earnings are repatriated or treated as repatriated as part of possible U.S. tax reform." It's right in the U.S. Department of the Treasury White Paper released on 24 August. Sort of 'hands off our money! Whether we collect it or not is our business, but you, Europeans, keep away of Apple's, Amazon's, Starbucks's, Chrysler-Fiat's taxes' (these being the cases opened so far by the DG Competition).

The 25 pages of technicalities ("the Commission’s approach will undermine the international consensus on transfer pricing standards, call into question Member States’ ability to comply with existing bilateral tax treaties, and undermine the progress made under the OECD/G20 BEPS project", etc.) are invoked to rebuff the Brussels Executive. The Commission is clearly told that it means to "expand the role of the Commission’s Directorate-General for Competition beyond enforcement of competition and State aid law under the TFEU into that of a supra-national tax authority that reviews Member State transfer price determinations". Our European pride tells us the Americans should not patronize us, but we must admit they're mostly right.

Like for a surgical strike, Washington accurately aimed the great vulnerability of Brussels, namely the lack of cohesion and consistency on a Community level, at least in the sensitive field of taxation. For instance, it's not clear who benefits from this act of independence of the European executive: how the competition climate on a Community level is fixed post factum, antagonizing a big company (Cook's Apple already communicated it provides, directly and indirectly, 1.5 million jobs in the EU). Antagonizing does not mean Apple will grab its gadgets and go home (no one can afford giving up such a developed consumption market), but at any rate it does not mean the European economy will become more attractive, at least for the big technology projects. Should we mention that ultimately neither Apple, nor Amazon, Google, not even Starbucks are products of the European economy?

Google might follow Apple, as the next high-profile trial in Brussels (the blamed tax arrangements are basically similar). But I will remind here the pragmatic approach of the Brits, on a national level, to the issue of incredibly small taxes paid by the Internet search giant. Despite the political pressure in the Parliament, HM Revenue & Customs made a deal under which the company should, at least from now on, use market-level transfer pricing, thus contributing higher taxes. An attitude not seen yet in France, which is still threatening to squeeze billions from Google. Until then, on the Thames, Google is doing its new homework on taxes, keeps investing in the UK, and refrains from rocking the boat about the thousands of jobs in Britain. Perhaps there's a reason for this pragmatic and pro-active approach of the administration being one of London's arguments it can stand the shock of parting ways with Brussels.

Meanwhile, Brussels is more concerned in its super-integration progress - for instance we expect the European reform of the CCCTB (Common Consolidated Corporate Tax Base, which is mainly a radical change in profit sharing/allocation) to come soon – and less in a harmony of 27 economies. (At any rate, that Community musketeer spirit does not exist yet - this is also in reference to our reader).

This is why I think Brussels's 13-billion stiffening about Apple is actually bad news for the European economy, firstly for the small Member States, which are practically denied any tax initiative of their own to draw investors.

I was reading this Monday that prime minister Cioloș displayed in front of our diplomats a slightly more critical attitude towards Brussels's actions "We have already voiced our opening to the European states that started internal reflection processes. (…) We will continue such contacts, and pragmatically offer proposals and ideas, while also constantly pleading for the need of a shared reflection process, a coordinated and inclusive one, which should not create or widen gaps between Community blocks." Reflection is generally good, but it seems some action is needed, too. Otherwise, Brussels will go on its way. Actually, where will Romania stand in the new World Tax Fight? The question really needs an answer.

Article by Adrian Luca, TPS, published on, August 2016

The whole tax reform under work nowadays in Brussels is centered on the reformulation of the concept of tax advantage on a national level that does not cause damage on a European level.
Which brings us to the intragroup transactions and of their prices - the so-called transfer prices, which the Tax Administration wants at market levels; well, in the new context, it's no longer the field of national tax administration, but of the EU's, plain and clear.

The World after Brexit: Brits Dream of Golden Ages, Europeans Hope for Taxit!

by Adrian Luca

Naturally, after the irreparable occurred, even those opposing Brexit now try to see the full half of the glass.
Anti-Brexit Britons are coming with a realism that makes one think of its usefulness one month ago, when it could have brought even more votes - to the pro-Brexit camp.

The Chancellor of the Exchequer has admitted it's pointless to mimic a budget surplus, if it realistically cannot happen. He also came up with the proposition of a corporate tax rate of 15%, unseen outside the East which seeks desperate solutions to draw in investor. Trade Minister Lord Price, an esteemed businessman, talked in Hong Kong about sending and army of trade attachés to explain that "freed from Brussels' more bureaucratic tendencies, we will be able to tackle any excessive red tape that can choke small businesses," the UK would enter a "second golden age of trade and investment." Let us add here that the decision seems closer to nationalize the bankrupt steel plants owned by India's Tata Steel.

We can imagine the waves sent by such declaration in the context of UK in, not one step closer to get exit from the EU. It's only that Europe - anti-Brexit until a couple of days ago - now has other priorities, when it does not run moving trucks to Berlin and Paris to relocate business from non-European London, and hustles about displaying its own freedom provided by a Union without the ever-looming British naysayer. Here's a meaningful recent anecdote from our camp, of those remaining and called to close ranks and staunchly follow the European Project.

In the European Parliament, convened on Tuesday, 5 July, in Strasbourg, the declaration about the EU completing the list of uncooperating tax jurisdictions had a somehow different echo. To call things by their proper name, as Commissioner Moscovici did, these jurisdictions are tax havens; he recalled that work is in progress for the automatic exchange of information on the beneficial owners of registered structure, for finding "who does what." This is a sensitive matter that has become unavoidable especially after this spring's mega-leak called Panama Papers. And somehow I feel talks becoming more resolute about most of companies in the database of Panama lawyers Mossack Fonseca being registered in the jurisdiction of… British Virgin Islands (more than 113,000 of them, which is more than half), and paradoxically not in Panama itself (only one in four companies).
On the open front of all-out combat against tax evasion, it would have sounded improper to remind that the BVI were part of the overseas territories where people automatically get British citizenship, implicitly becoming EU citizens. So, while not necessarily under EU jurisdiction, one cannot see them as unaffiliated, either. But things seem to have changed since 24 June.

"It turned out that the big problem was the beneficial ownership of the UK. The structures of different foundations that the UK has built up during centuries. We know that this is one of the fundamental parts of the system of tax avoidance that exists in the world, and for that reason I think that we today can say we are going to turn Brexit intoTaxit." The very undiplomatic declaration belongs to Finnish MEP Nils Torvalds (ALDE) (see the script of the film released by the Audiovisual Unit of the EP, minute 3.59). A former member of the Communist Party of Finland (apparenty up to its Central Committee), a former journalist, the son of a well-known poet and the father of an even more famous software engineer (Linus Torvalds, the creator of Linux, the open-source operating system), Mr. Nils Torvalds might well not be the lead vocalist of the European establishment, just like Finland isn't Germany. Nevertheless, he coined a catchy term that has the potential of a European career.

This 'TAXIT' might easily expand over areas seen until recently through a British fog. For instance, the CCCTB (Common Consolidated Corporate Tax Base), which's not-much-surprising re-launch this year was reminded by Moscovici, the French. (Especially that until now one of CCCTB's opponents to negotiate with was - easy guess - the UK).

The Brexit vote now changes the way the EU lays the sensitive matters; among them, of course, the much-politicized topic of trans-European taxation, with transfer prices and profit allocation as keywords. Ultimately, the positions of both sides sum up to profit allocation; the winners are the promoters of the idea that the UK loses more than it wins in the EU (we mentioned it in our 24 June post).

About the Way Europe Confiscated National Taxation

The whole tax reform under work nowadays in Brussels is centered on the reformulation of the concept of tax advantage on a national level that does not cause damage on a European level.

In this respect, the recent internal working paper on state aid and tax ruling released by the DG Competition is quite eloquent. A working paper, indeed, because it puts to work those who failed to understand that from a certain level on they must analyze their fiscal position on a European level, and cannot count on a possible national protection. "While the Member States enjoy fiscal autonomy in the design of their direct taxation systems, any fiscal measure a Member State adopts must comply with the EU State aid rules, which bind the Member States and enjoy primacy over their domestic legislation."

The document further reads, "As early as 1974, the Court of Justice of the European Union clarified that the Commission's competence in the field of State aid control also covers the area of direct business taxation."
Which brings us to the intragroup transactions and of their prices - the so-called transfer prices, which the Tax Administration wants at market levels; well, in the new context, it's no longer the field of national tax administration, but of the EU's, plain and clear.

Because the Commission Decision on State Aid which Luxemburg Granted to Fiat also came from Brussels last month. It took the Commission nearly nine month to release it in full, after announcing the conclusion last October - it ordered Luxemburg to recover the unpaid tax from Fiat, through its Fiat Finance and Trade division in Luxemburg, which has enjoyed an unfair competitive advantage following a tax ruling issued by the Luxembourg authorities in 2012.

I will get back to the technical arguments used by the Commission; for now, I only mention the extreme interpretation of tax advantage for a group of companies. It's the next level of considering conformance in transfer prices.

It's the Brussels level. "The arm’s length principle therefore necessarily forms part of the Commission’s assessment under Article 107(1) of the TFEU (Treaty on the Functioning of the European Union) of tax measures granted to group companies, independently of whether a Member State has incorporated this principle into its national legal system. It is used to establish whether the taxable profits of a group company for corporate income tax purposes has been determined on the basis of a methodology that approximates market conditions, so that that company is not treated favourably under the general corporate income tax system as compared to non-integrated companies whose taxable profit is determined by the market. Thus, for any avoidance of doubt, the arm’s length principle that the Commission applies in its State aid assessment is not that derived from Article 9 of the OECD Model Tax Convention, which is a non-binding instrument, but is a general principle of equal treatment in taxation falling within the application of Article 107(1) of the TFEU, which binds the Member States and from whose scope the national tax rules are not excluded. Consequently, in response to Luxemburg’s argument that the Commission, in undertaking such an assessment, replaces the national tax authorities in the interpretation of Luxembourg law113, the Commission recalls that is not examining whether the contested ruling complies with the arm’s length principle as laid down in Article 164(3) L.I.R. or the Circular, but whether the Luxembourg tax administration conferred a selective advantage on FFT for the purposes of Article 107(1) of the TFEU by issuing a tax ruling that endorses a profit allocation that departs from the amount of profit that would have been taxed under the general Luxembourg corporate income tax system if the same transactions had been executed by independent companies negotiating under comparable circumstances at arm’s length."

Sounds complicated? It's nevertheless clear!
It's clear we're entering a new tax Europe. Honestly, it now seems a very long time since July 2013, when I announced the beginning of the BEPS Era of worldwide steps against Base Erosion & Profit Shifting. The BEPS, via the OECD, is perhaps the pretext to reach faster the targets of the European project, the core of which is the EU tax policy.

The question still stands: so where are we, and how do we play in the new TAXIT?


Article by Adrian Luca, TPS, published on and


The Brexit vote result will change, if it hadn’t already started to, the way in which the EU will approach the most controversial topics – among which, the highly politicized issue of trans-European taxation, where transfer pricing and profit allocation are the key words. The two parties’ position regards after all, the profit allocation – the winners are those who have claimed that UK is losing rather than winning, from being a part of the EU.

I wrote this article on Friday, 24th of June. Naturally, I was impressed not only by the vote results but also by the picture posted on this very morning on the EU website – the picture’s unintentional irony reminds us that we live in a Union which seems to be stuck in the middle of its very own project, overwhelmed by the real life struggles.

”Never let a good crisis go to waste”

This is the message we must get from the event across the Channel. The wit of Churchill, the savior of Europe seventy years ago, should haunt us, the Europeans left on the other side. There's no time to think what happens to 'poor' Britons, to threaten them they'll be 'killed' in trade talks, like a French minister dramatically warned. No one can say who's now more lost in the fog - the Europe, or the UK?

Right now, all I want to say is, the English humor is immortal; it perfectly works on our side. What do I find right now (I'm writing on Friday, 25 June, around noon) on EU's news web page, in the highlights? "International divorces: new rules on whose courts settle property disputes". The European Parliament tells us it just set new rules to decide what international courts should settle property disputes in divorce or death in an international couple or partnership (the picture chosen, with two quarrelsome fingers, is also sensational)

This is façade Europe, curing details, from easier divorces (they even calculated savings of 1.1 billion euros) to the size of eggs, curvature of bananas, to whether plums are laxative or water actually hydrates (beware of the dog days!). Such details have shattered the proverbial English reserve/calm.

Beyond these, however, is the great European project, whose reach is hard to fathom. I think this was the essence of Brexit - how far we want the EU to go, how much Europe is too much?
It's no surprise England (especially, as the others in the UK seem more European than ever) avoided excessive integration, asking for several derogations from the very beginning. It's just that both the EU and the UK have changed lately, most of all in economic terms. The home of the Industrial Revolution is no longer much industrialized, and it relies on services. Such discrepancies deepened with the crisis (I recall France's Sarkozy saying Britons are more vulnerable as they have no industry anymore)

In brief, new times call for new politicians. Indeed, with astonishing virulence, Brussels recently began pushing matters that were taboo not long ago, such as the common tax policy, which ultimately touches the hot potato of state aids. This is a sensitive topic in the EU since forever, because it ultimately limits the levers used by national economies to act on specific sectors. All this background talks are more visible as the Common Consolidated Corporate Tax Base (CCCTB) has been addressed exactly one year ago.

Brussels resumed this idea last year, but since the beginning of this year there was practically no month without a warning from some European institution - you'll see, when the CCCTB comes, it will settle everything.
Don't think this week brought just the note on divorces; we also had a draft directive "laying down rules against tax avoidance practices that directly affect the functioning of the internal market." It exceeds the usual norm of Brussels lingo, with several proposals and declarations in January that compelled the officials to draw up a table with document titles - a 'chapeau' communication, they called it (hat, in english). Well, if we flip this hat and turn it into a (life)boat, we could find the node emphasized by EU itself: Did the EU need this Anti Tax Avoidance Package if the CCCTB is to be re-launched this year?

The answer is, the big guys still have to cut a deal on percentages and algorithms; the idea was, they will, eventually. Why 'was'? Because I think everything changes in the EU after Brexit. Even bananas might keep their natural bend.

Guess what - the UK was quite squeamish about the CCCTB, precisely because it has several interest of its own, not perfectly matching the others'.
Do you think now, as the UK leaves the Union, Brussels will insist as viciously on sensitive issues? Not because others might think of their own exits (there are few as confident as Brits to even consider walking alone), but because there will be increased focus on pragmatism. Many will muster their courage and raise their hands (see the fingers in EU's picture linked above) and ask, more or less shyly, 'what's in it for me?' Here I see the manual of pragmatism Romania must study, too, now, while it still has a say; no blackmail, just arguments on table; no hysteria, but realism. Honestly, I'm one of those who want more Europe; I believe in Europe, but in one that takes in the Brexit lesson.

Who knows? After years we might thank the Britons who walked through yesterday's storms to change Europe. Good luck, everyone, and remember everything is "As You Like It": "All the world's a stage, and all the men and women merely players".

 Aticle by Adrian Luca, TPS

Operation Tulip (Opération Tulipe) was the code name of a French army offensive launched in November 1951 during the First Indochina War. Following a string of defensive victories, the French adopted a more aggressive approach. After achieving the initial objectives, however, the tide of war turned once again and the French forces were forced to withdraw from the area by February 1952.

With its unconquerable logiciel, Google (the engine) fetched on my ordinateur a chapter of history to show me that the French have a penchant for such tulip-related operations. 65 years later, on Sunday, 29 May 2016, France received official acknowledgment of an unprecedented raid by state authorities on the Google offices in Paris. Some 96 people were involved in the action, including representatives of the National Prosecutor Financial (NFP), the Central Office for the Fight against Corruption and Financial Crimes and Tax (OCLCIFF), plus IT experts.

Code name – Operation Tulip

Summarised disclosures of Mrs. Eliane Houlette, head of NFP:

1. The most important operation led by the NFP (a state body established two years ago, with 15 prosecutors now): "It looks a bit like the battle between David and Goliath."

2. The investigation started based on a Tax Administration complaint and developed into a charge of "aggravated tax fraud and money laundering."

3. The objective of the investigation is to determine whether Google Ireland Ltd. has a permanent establishment in France (where it has 700 employees) and whether it has a tax system similar to other French enterprises.

4. The operation required a code name, because, when NFP took over the investigation a year ago, it was decided "never to mention Google by name."

5. Preparations were conducted in “total secrecy”, with a very small number of people involved and communications conducted the good “old school” way, by taking them offline (pardon! hors-connexion).

6. The result was a “considerable” amount of data; “at least as much, if not more than, in the Panama Papers case”.

7. “It will take a couple of months, hopefully not years, to process the information, but the investigators do not have the state-of-the-art software / logiciels that would enable them to make better progress”. Performant logiciel would cost "around 200,000 euros."

8. The expectation is that there will be “a trial where they bring forth their arguments and we bring forth our arguments.”

To all of the above, I add further information:

9. The dispute with the French tax authorities has been known for at least five years. In June 2011, the French conducted a significant raid on the IT giant’s local offices, during an inspection regarding transfer pricing between its French subsidiary and the parent company at European level, based in the Republic of Ireland.

10. In March 2014, Google France received a tax decision from the French tax authorities for an unspecified amount, rumoured to be around EUR 1.6 billion (with EUR 0.6 billion in late-payment penalties).

11. In its disputes with several European national tax administrations, Google has argued its position based on the group business model, involving a largely automated process whereby all European sales are invoiced by the company in the Republic of Ireland (and in doing so recognises that, like other giants of IT, it chose the location based on the friendly business and fiscal environment). Google Ireland admits that its big advertising clients are introduced by its French, British, Italian, etc., subsidiaries, which receive remuneration for the provision of market services.

12. The French market is officially rated by Google at a mere EUR 216 million, but estimated by local advertisers to be worth EUR 1.7 billion. All of which is a far cry from what goes on across the Channel, with the British market officially contributing 10% of the global earnings of the search engine. Indeed, the UK is the only market, besides the US market, which is dealt with separately in the Group’s global reports.

13. Regarding the subject of the permanent establishment, the British tax authorities conducted a ten-year investigation of Google. That process was completed earlier this year with agreement over a transfer pricing adjustment, which is basically a recalculation of the remuneration received via Ireland.
It is not tax evasion, but rather a transfer pricing issue! The agreement implies the retroactive payment of taxes amounting to EUR 130 million euro (with no penalties announced). Analysed in comparison with the company's revenue, the amount generated new political debate. For the British case, you can find explanations from Google and HMRC and a short film about the tempest surrounding transfer pricing issues ... in Shakespeare’s words!

14. Against this background, the authorities in Paris have announced categorically that “we [the French state] don’t do deals like Britain; we apply the law”. (It's interesting that the French do not see Google's case as a transfer pricing issue, as agreed, finally, by the British authorities. But a few days before their raid on Google, they also paid a visit to McDonald’s offices regarding "a transfer pricing issue", says Ms. Houlette).

15. In February, Google boss, Sundar Pichai, chose France as his first destination on his maiden tour of Europe. He was welcomed with high hopes by the French Minister of the Economy, Emmanuel Macron, who did not say a word about the billions of euros subject to tax disputes. Pichai had just pledged to help teach computer skills (aux pratiques numeriques) to as many as 200,000 French people (employees, undergraduates and underprivileged people) this year. A move described by Paris newspapers as a “seduction effort”. However, Google had been shown an “open for business” sign, at least in a rather British way (as no one likes tax harassment). But at the same time, Google reverted to the official position that the law is being respected.

16. Italy also has tax claims against Google (the Guardia Finanza calculated a sum of EUR 227 million to be paid), but the IT giant isn’t wanted by tax authorities everywhere. Germany has so far staked no extra claim against the multinational. German officials say that the company currently meets the requirements of applicable laws, while still admitting to their support in the EU and OECD to system updates that would enable collection of higher revenues for the budget from business group companies (see BEPS CCCTB, minimum effective taxation).  

17. Today (1 June 2016) no trains are moving in France. It's a new day of strikes.

This is another piece of the puzzle framing the European case regarding Google – the transfer pricing saga! This latest French drama reminds us that today we are doing transfer pricing without knowing it, as the great Molière would likely have said.

Some pieces fit, for others ... we do not yet have all the necessary elements to match them. If you are asking, “why is France so afraid that it even “cut” the internet at the National Financial Prosecutor, so that a strictly confidential inquiry would not be discovered (despite it being known about for five years)?" ... We can imagine various scenarios, or possibly, we can amuse ourselves with considering how, instead of searching the internet, they took a step back in time to the Le Petit Larousse dictionary.

If you are asking "how can 200,000 euros not be found in the French treasury, if this would result in revenues of EUR 1.6 billion?" I would answer with another QUESTION - "can we assume that the British are conceivably far from having failed to do their own legal homework when they struck their bargain with Google?”

In the meantime, I come back with an older question - In a Europe changing on all sides (including political and fiscal), how prepared are we as a state / economy to find a place in this new puzzle growing before our eyes (see pt. 16 and an article on the subject here)?

And, by the way, here's another piece of the puzzle:

18. Speaking of which, as recently as last week the European Parliament’s Committee on Economic and Monetary Affairs passed the EC’s anti-tax avoidance directive, further driving the limits on interest payment deductions down to a maximum of 20% of earnings or EUR 2 million (whichever is higher). Moreover, the double taxation avoidance principle will cease to be applied if the foreign income was taxed at a rate lower than 40% of the national rate, while a minimum 15% rate should be set on any earnings from outside the EU.
These may not be the final figures to be released by the EU Political Council, but this should be the ground over which we as a nation show some pragmatism and at least make an effort to simulate a negotiation process.

Unfortunately, as so many times before, we remain disconnected from these issues. Neither are we informed as to whether the Bucharest authorities have had negotiations regarding this issue. And when (if) we wake up, it might be a bit late.

Again, these are the real topics being discussed and changing Europe, beyond the other points affecting some others. We can not afford not to take a position ourselves!

Transfer pricing is not any more a tale about fiscal technicalities where All’s Well that Ends Well once you have established a Measure for Measure (meaning an arm’s length price, in line with the market and the economic substance of the intra-group transaction).

Transfer pricing has become a political stage play destined for the general audience, appealing to their emotional state. A new scenario staged at a Glob(e)al level demonstrates that it is not quite Much Ado About Nothing and Love's Labor’s Lost regarding the love affairs of taxpayers with their aggressive fiscal planning. There’s going to be a TemPest… Hold on for a second! Doesn’t all this sound like Shakespeare? You bet!

You can find here Transfer Pricing in Shakespearean language.

A TPS production so everyone can understand that right now, in transfer pricing All the world’s a stage and it is time for … BEPS: Be Prepared to Switch!