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Police raid Google offices in France investigating aggravated tax fraud
Google might be in hot water for violating international tax law. This morning the company’s Paris offices were raided by French police marking a climax in an investigation into suspicions of aggravated tax fraud and organized money laundering. The sultan of search was bombarded by a full anti-corruption unit assisted by 25 information technology experts, and the raid lasted from the morning until well into the afternoon. Reuters reports that one judicial source commented that “This is a heavy operation… quite an unusual one.” The French government believes that Google owes them substantial back taxes, but Google says that they “comply fully with French law.”
This story actually has its beginnings in Dublin. Google likes to base its European subsidiaries in Ireland because it’s a low-cost jurisdiction. This lets them conduct business with entities all across the continent without being beholden to local, more rigorous tax laws. It’s a loophole called profit-shifting, and although it sounds a bit shady, it’s technically legal.
Essentially, this raid is to determine whether or not Google Ireland Ltd. has a permanent HQ in the City of Light. To maintain the legality of the loophole they are running, all sales contracts must be concluded by staff in Dublin. If any France-based staff members have been finalizing contracts with local clients, then Google is subject to the relevant tax laws governing business in France. This police raid is to determine if any such activity has been occurring.
Perhaps one reason that the French government is suspicious of Google is because the tech titan recently forked over $140 million in back taxes to the British government. Now investigators all over Europe are turning their attention to the company to see if similar back taxes are owed in their nations. “We are cooperating fully with the authorities to answer their questions,” the company said in a statement.
This situation is still unfolding, and French authorities have not formally released any estimates regarding how much they believe Google might owe them. However back in February, an undisclosed source close to the issue told the Associated Press that the figure is somewhere in the ballpark of $1.7 billion. While we wait to see how this debacle sorts out, let us know what you think of it in the comments!