French authorities have raided Google’s offices in Paris in an investigation into tax fraud and money laundering.
French authorities reportedly suspect Google has evaded corporation tax in France by channelling it profits through its European headquarters in Ireland, where tax rates are lower.
The raid comes just four months after Google agreed to pay £130m in back taxes to the UK in a controversial deal that opposition members of Parliament (MPs) and others criticised for being too low.
In June 2013, the UK’s Public Accounts Committee (PAC) called for a full investigation of Google’s tax practices in the light of the fact that the company generated around £11.5bn in revenue in the UK between 2006 and 2011 – yet paid only £10m in corporation tax in that period.
Google said the deal to pay back taxes in the UK was not an admission of wrongdoing in the past, but simply reflected changes in the international tax system as a result of a long-running debate on the way multinational companies are taxed.
Google is among several US multinationals – such as Facebook, Amazon and Starbucks – that have come under fire for their tax practices in Europe.
French prosecutors want to establish whether Google’s headquarters in Ireland does control a “permanent establishment” in France, reports the Guardian.
In 2014, Google reported revenues of €216m for its French operation and paid just €5m in tax, but advertising researchers put its actual revenues at around €1.7bn, the paper said.
Read more about Google’s tax issues
- Google’s executive chairman Eric Schmidt says the company is tax law compliant and key to electronic commerce expansion in the UK.
- Google has been accused of avoiding paying tax on its £1.6bn UK revenues.
- It is common practice - and not illegal - for international firms to use accounting tricks to reduce the declared profits of their UK operations.
Google is still claiming that its offices in Paris, London and other European capitals operate as satellites of its headquarters in Dublin, where all marketing activities are carried out.
Google said in a statement: “We comply with French law and are co-operating fully with the authorities to answer their questions.”
French prosecutors issued a statement saying: “These searches form part of a preliminary enquiry opened on 16 June 2015 relating to acts of aggravated financial fraud and organised laundering of aggravated financial fraud, following a complaint from the French tax authorities.
“The enquiry is focused on verifying whether the company Google Ireland Ltd controls a permanent establishment in France and if, by not declaring a part of the activities conducted on French territory, it has failed in its fiscal obligations, notably regarding taxes on companies and value-added tax.”
In contrast to the £130m settlement with HMRC in the UK, French tax authorities are reportedly seeking €1.6bn (£1.2bn) in back-taxes from Google.
The raid on Google’s Paris office comes as the company prepares to appeal to the top French court to quash a fine and ruling by French privacy watchdog CNIL that requires Google to apply the right to be forgotten to all its websites.