Why is core to Google's tax planning to fix a tax base (also known as permanent establishment) in Ireland?
What will be an ideal response?
Answer: Permanent establishment rules allow firms such as Google to fix a tax base in a low-tax country like Ireland, while generating lots of business in a country where tax rates are higher, like France. Companies in principle are taxed not on "where they do business," but on "where they finalize their business deals with customers" — the country or jurisdiction where the final contract is signed. In the case of Google, that means most sales throughout the European Union are finalized in Ireland. It is estimated that 75% of the top 50 U.S. software, Internet, and computer hardware companies use similar PE structures that help them avoid taxes.
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