LinkedIn has become the latest company to catch the attention of France's taxman.
The Paris offices of the business social network were searched by the country's tax authorities late last month, it emerged recently. During the raid, LinkedIn was asked to provide access to material held employees' computers, according to the French weekly newspaper Le Point which broke the story.
LinkedIn France confirmed to the publication that tax authorities had visited its offices, adding: "We believe we are in compliance with all relevant French and international tax rules and we fully cooperated with the authorities. We'll do so again if necessary."
According to the French TV channel BFM TV, LinkedIn's turnover in France for 2011 was €2.2m, and it paid €35,415 in taxes for the year. While France accounted for 0.5 percent of LinkedIn's global turnover – during the year the company bought in $522.2m (€424m) worldwide – it accounted for a far larger proportion of its users. The business social network claims to have more than four million members in France, from a global total of more than 200 million – or two percent of its total user base.
LinkedIn acknowledges that it works to cut its taxes wherever possible. "Our corporate structure and intercompany arrangements, including the manner in which we develop and use our intellectual property and the transfer pricing of our intercompany transactions, are intended to reduce our worldwide effective tax rate," it says in its latest 10K form.
The company also acknowledges that "the taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements".
An investigation with a broad scope
While it's not known what the purpose of the search was – ZDNet has asked LinkedIn France for further comment but has received no reply so far – Le Point suggests it could be tax optimisation. France's tax authorities have targeted a number of technology companies recently, including likes of Google and Microsoft, over tax optimisation – the legal method by which companies run their local European businesses as sales and marketing focused subsidiaries of a main company based in a lower-tax rate country.
French tax authorities' recent interest in companies that use such tax optimisation practices are thought to be laying the groundwork for legislation on the subject. Le Point claims than "some are whispering that raids conducted during the past months at Microsoft, Google, Facebook, eBay and PayPal are helping to build a case for proposing a new and tougher bill. By monitoring tax optimisation practices - including the legal ones - [the French taxman] may be hoping to more effectively put a stop to them."
The French tax authorities declined to comment on the matter to Le Point. But a government inquiry set to look into the issue of taxation and the digital economy - called 'Colin et Collin' after the two civil servants appointed last July to lead it, Nicolas Colin and Pierre Collin - published its conclusions in January, providing hints on legal and tax measures the French government may implement in future.
France's tax battles are set against the backdrop of a growing number of countries trying to find ways to limit the extent and efficiency of companies' of tax optimisation practices. The OECD recently called better international co-operation in order to address taxation "base erosion and profit-shifting".