French police and officials raided Google’s French offices in Paris on Tuesday, escalating its ongoing tax-fraud probe amid claims that the tech giant has failed to pay its fair share of taxes across the EU.
The raids are part of an ongoing criminal investigation which was launched in June 2015 after French tax authorities raised a complaint against the company, according to France’s financial prosecutor. The review of Google’s tax arrangements is attempting to determine whether Google’s Irish hub is permanently established in France which could mean that the firm must declare its revenues in France.
Prosecutors are expected to chase Google’s management in Ireland if the allegations can be proven according to to lawyer Alain Frenkel who is based in Paris. “That doesn’t mean Google won’t also face a recovery order from France’s tax authorities,” he said in a phone interview.
The raids come as Alphabet, Google’s parent company faces anger across the European continent over the amount of tax it pays. France has since pushed for the company to backpay €1.6 billion ($2.4 billion) in taxes.
Whilst the case is still ongoing and no one from Google has been charged with wrongdoing France has raised its punishment for tax fraud with convicted executives facing up to seven years in jail and a €2 million fine.
Google in response to authorities has said it works within the French law and is “cooperating fully with authorities to answer their questions.” At the same time as the raids Alphabet Chairman Eric Schmidt was at a conference in Amsterdam just a few hundred miles away.
According to sources two unmarked cars with police signs in the windshield were outside Google’s Paris office on Tuesday afternoon after raids began at 5am. The nations government has been critical of Google which has fed its French revenue through its Irish subsidiary to make use of Irelands 12.5 per cent tax rate in comparison to 33.3 per cent in France. Google paid an estimated €5 million in French taxes last year whilst analysts estimated sales to French customers may have reached as much as €1 billion.
Google’s European subsidiaries are also believed to be structured so that it pays large royalty payments to another Irish subsidiary which is located in Bermuda and holds Google’s international intellectually property licensing rights which allows it to reduce the profitability of its European subsidiaries lowering its tax burden.