French police raided Google's Paris offices this morning as part of an investigation into alleged tax fraud and money laundering, according to French authorities.
The raid is just another in a long series of regulatory conflicts Google has had with authorities in both the U.S. and France. The multi-billion dollar multi-national company has come under fire recently for its complex and convoluted tax arrangements in nations where Google does business. French authorities, after raiding Google's Paris offices today, announced that they suspect the search company may be involved in a complex scheme to evade taxes and launder money.
"These searches are the result of a preliminary investigation opened on June 16, 2015 relative to aggravated tax fraud and organized money laundering following a complaint from French fiscal authorities," said a statement from the French prosecutor's office.ABC News reports that the Google raid was an escalation of the legal battle between Google and French financial regulatory bodies, which have alleged that Google may be using an Irish business entity (Google Ireland Ltd.) to evade some of its tax liability in France.
"The investigation is aimed at finding out whether Google Ireland Ltd. is permanently established in France and if, by not declaring some of its activity on French soil, it has failed to meet its fiscal obligations, in particular with regard to corporation tax and value added tax," said the French prosecutor's office.
According to ABC News, today's raid at Google Paris was in part due to a business structure employed by the search engine giant – a common business technique for lowering tax liability. Along with other American tech companies, Google has based several subsidiaries in low-tax jurisdictions (including Luxembourg and Ireland). The practice allows companies like Google to do business with customers throughout the world, while effectively lowering their overall fiscal liability. Known as "profit-shifting," the practice has come under fire by European regulators in recent years, which have pressed bigger companies to pay taxes in the jurisdictions in which they do business, rather than in the jurisdiction where they are based.
French authorities have gone a step further in their Google raid, alleging that the search engine behemoth has done more than moved their profits around to evade taxes, French authorities allege that Google may have failed to declare the full extent of their activities within France. Google's subsidiary based in Ireland does business in France, but regulators are attempting to discern whether or not the Irish subsidiary does enough business in France to have a "permanent establishment," which would increase Google's tax liability.Google maintains enormous offices in London, Paris, and other European nations, but claims that the offices themselves are not permanent fixtures – they're only satellite offices to Google's Irish subsidiary, Google Ireland. According to the Guardian, Google routes most of its non-U.S. revenue through the Irish subsidiary, thereby ducking taxes from both the U.S. and the E.U.
French authorities raided Google early this morning after previously alleging that Google owes €1.6 billion in back-taxes to France, as a result of its aggressive "tax optimization" techniques. Today's raid comes after Google agreed to pay around 130 million euros in back-taxes to the United Kingdom earlier this year. U.K. regulators were willing to negotiate with Google in order to find an agreeable sum, but according to French authorities, France will not be negotiating with the search engine giant.
"The French tax authorities do not negotiate on the amount of tax," said French finance minister Michel Sapin.
According to numerous outlets, Google has refused to comment on the specifics of the Paris raid, addressing the action with a statement released earlier today.
"We comply with French law and are cooperating fully with the authorities to answer their questions," reads the statement from Google.
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