​Google Paris HQ raided in tax inquiry

French investigators raided the Google Paris headquarters as part of tax evasion investigations that started in June last year.
Written by Aimee Chanthadavong, Contributor

French investigators have raided Google's Paris headquarters as part of a tax evasion inquiry, the financial prosecutor's office has said.

Google said it was fully complying with French law.

Facing public anger at the way multinational companies use their footprints around the world to minimise tax, France, Britain, and others have sought ways to make sure Google, Yahoo, and other digital giants, who often have their tax bases in other countries, pay their taxes locally.

Investigators from the financial prosecutor's office and France's central office against corruption and tax fraud, accompanied by 25 IT specialists, took part in Tuesday's raid.

"The investigation aims to verify whether Google Ireland Ltd has a permanent base in France and if, by not declaring parts of its activities carried out in France, it failed its fiscal obligations, including on corporate tax and value added tax," the prosecutor's office said in statement.

Google has based its regional headquarters in Dublin where corporate tax rates are lower than elsewhere in Europe.

The company, now part of Alphabet Inc, has been under pressure in recent years over its practice of channelling most profits from European clients through Ireland to Bermuda, where it pays no tax on them.

The raid was carried out as part of an investigation that started in June last year.

"We are cooperating with the authorities to answer their questions," Al Verney, a spokesman for Google in Europe, said in an email. Google Executive Chairman Eric Schmidt, approached for a reaction at a conference in Amsterdam, declined to comment.

Investigators started their investigation of Google's offices in central Paris at 5am local time, a source close to the finance ministry said.

France is seeking some 1.6 billion euros (AU$2.48 billion) in back taxes from US internet giant Google, criticised for its use of aggressive tax optimisation techniques, another finance ministry source had said in February.

Google had agreed in January to pay £130 million settlement back taxes to Britain, which will account for all the missed taxes the tech giant did not pay since 2005.

In 2013, the United Kingdom government launched a parliamentary inquiry into Google's tax avoidance, following demands from the UK parliamentary Public Accounts Committee for Her Majesty's Revenue and Customs to look into Google's tax affairs. Google drew heavy criticism at the time for only paying $16 million in tax on turnover of $1.8 billion between 2006 and 2011.

In Australia, Google paid only AU$9 million in tax for 2014, despite revenue sitting at AU$357 million and pre-tax profit at AU$58.7 million.

Google, along with Apple, have previously been called out by the Australian government for using the so-called "Double Irish Dutch Sandwich" method of funnelling money through other countries from Australia in order to pay a lower tax rate.

From the start of 2016, multinational companies found to be avoiding tax in Australia will have to pay back the tax owed, plus a 100 percent penalty.

The laws are the Australian government's implementation of the recommendations from the Organisation for Economic Cooperation and Development (OECD) from its G20-commissioned base erosion and profit-shifting (BEPS) project. Under BEPS, the OECD expects to be able to retrieve as much as $240 billion in lost revenue each year through dodgy tax practices across the globe, which it claims represents up to 10 percent of global corporate income tax revenues. In August, it was revealed that AU$31 billion was funnelled from Australia to Singapore in a year by 10 multinational companies.

"There has to be consequences for these companies, for what they're doing," Jason Ward, who was part of a coalition that sought Freedom of Information documents over corporate Australia's tax avoidance, said at the time. "It's not illegal, but it's completely immoral."

A recent report by a trio of University of Technology Sydney academics revealed that foreign multinational companies and large private Australian companies involved in technology were getting away with paying an effective corporate tax of 7.6 percent. The report stated that in 2013 and 2014, Australia lost AU$5.36 billion in corporate tax revenue from just 76 multinational corporations, including Google.

"Out of Google's global revenues in 2014, only 0.54 percent was booked through Australia. The Australian economy generates almost 2 percent of the world's GDP," the report said. "For a company so closely integrated into all aspects of business, it would be expected there would be a closer correlation between Australia's share of GDP and our share of Google revenues."

Google Australia recently restructured its business so that local advertising revenue would now account towards the company's income.

"Effective 1 January 2016, Google Australia restructured its business such that it will recognise revenue from the marketing and selling of certain services and products to Australian based customers," the company stated in its 2015 financial report to the Australian Securities and Investments Commission released earlier this month.

Google Australia previously booked its advertising revenue from Singapore where the tax rate is lower. It said it has a service agreement with Google Inc for the provision of R&D services, and a service agreement with Google Ireland and Google Asia for the provision of services and marketing services.

Last month, the Australian Greens Party unveiled an 18-point policy plan in further efforts to stamp out tax avoidance by multinationals operating in Australia. It claimed the plan would raise at least AU$1.69 billion in additional revenue.

The policy proposed for changes to be made to tax law, public disclosure, enforcement, and global diplomacy.

"Whether you are Google or Chevron or Glencore, the time for paying your fair share starts now," said Greens spokesperson for Finance, Senator Peter Whish-Wilson. "When businesses don't pay their fair share of tax then governments can't provide the services we all rely upon."

Some of the suggested changes included reversing the Australian Taxation Office's staffing cuts in order to ensure there is a sufficient staff level to assure multinationals are paying what they owe, as well as to establish a high-level tax recovery unit made up of the top 20 tax accountants and legal specialists working in the private sector.

The Greens also believe the tax disclosure thresholds need to be lowered for both private and publicly listed companies, so that companies that make AU$50 million of income in a year will disclose their tax activities.

With AAP

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