PARIS: French investigators have raided Google’s Paris headquarters, saying the company is now under investigation for aggravated financial fraud and organised money laundering.
In a major escalation of France’s long running enquiry into Google’s tax affairs, magistrates revealed Tuesday that the software giant is suspected of evading taxes by failing to declare the full extent of its activities in France.
Prosecutors said they want to establish whether the Irish company through which Google funnels the majority of its European revenues does in fact control a “permanent establishment” in France.
Google maintains that its large offices in Paris, London and other European capitals are not fully fledged businesses, but operate as mere satellites of its international headquarters in Dublin, providing back office services like marketing.
Google routes most of its non-US revenue from activities such as advertising through Dublin, where the 12.5% corporation tax rate is low by European standards. The structure allows the company to avoid both European and US taxes on the income.
Google released a statement saying: “We comply with French law and are cooperating fully with the authorities to answer their questions.”
Investigators arrived at the tech firm’s offices in central Paris at 5am local time, police sources told french media. The raid involved 100 investigators and five magistrates, including 25 infromation technology experts.
The state financial prosecutor said in a statement Tuesday afternoon: “The enquiry is focussed 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.”
The investigation by prosecutors was opened on 16 June 2015, following a complaint from the french tax authorities over Google.
“The state financial prosecutor (PNF), assisted by the central office for the fight against corruption and financial and tax crimes (OCLCIFF) and 25 computing experts, today conducted searches at the offices of the company Google in Paris.”A
France, Britain and other countries have long complained at the way Google, Yahoo! and other digital giants generate profits in their countries but funnel these offshore.
In February it emerged that France was seeking €1.6bn (£1.2bn) in back-taxes from Google, which has been criticised for its use of aggressive tax optimisation techniques.
In January, Google agreed to pay £130m in back-taxes to the UK Treasury, but the announcement triggered uproar from tax campaigners and opposition MPs, because it meant that HM Revenue and Customs had effectively allowed the firm to continue routing its UK sales through Ireland.
France has clamped down on aggressive tax optimisation techniques by multinational companies, and – looking to shore up fragile state accounts – has launched a campaign to encourage taxpayers to come clean on previously undeclared assets held abroad. The crackdown has yielded €12.2bn in 2015, up almost a fifth from the previous year.
Big multinationals have not been spared. The French tax office, in seeking back-taxes from Google, has pointedly refused to strike a deal with the US internet giant as the UK has. Earlier this year, the finance minister Michel Sapin said: “The French tax authorities do not negotiate on the amount of tax.”
Google, which has been in the sights of the French tax authorities for around five years, has insisted that it conforms to tax law in every country where it operates.
French authorities recently sent McDonald’s France a €300m bill for unpaid taxes on profits believed to have been funnelled through Luxembourg and Switzerland, business magazine L’Expansion reported last month.
