Why was Google's office in Paris raided?

French authorities are accusing Google of not disclosing all the information about its dealings in the country, and are investigating to find out whether whether Google Ireland Ltd. is permanently established in France. 

Dado Ruvic/Reuters
People are silhouetted as they pose with laptops in front of a screen projected with a Google logo, in this picture illustration taken in Zenica October 29, 2014.

Google's troubles in France appear to be on the rise.

Just a few days after the Silicon Valley company appealed France’s highest court’s "Right to Be Forgotten" order, the company’s offices were raided by French prosecutors and police over allegations of “aggravated tax fraud” and money laundering, authorities said Tuesday.

So-called tax optimization methods are common among giant tech companies, including Apple, Amazon, Facebook, and others. Most of these companies base their European subsidiaries in low-tax jurisdictions. The cost center for Google’s European Headquarters, Google Ireland Holdings, for example, is based in Bermuda where corporate tax doesn’t exist. Google Ireland Limited, which is based in Ireland, is owned by Google Ireland Holdings, and pays its billions of royalties to the latter in order to lower its tax rate, according to TechCrunch.  

All these dealing aren’t illegal, and Google doesn’t conceal its use of such tactics, which are also used by other tech companies. Still, the companies are increasingly facing scrutiny for their “aggressive” tax optimization methods.

In France, authorities are accusing Google of not disclosing all the information about its dealings in the country. French authorities say that despite Google’s claim that its employees provide only support and don’t sign contracts in France, the company’s sales employees are based in France, and have in fact, they say, signed contracts with French clients. In addition, authorities say that some of the contracts are written in French and “and have a clause conferring jurisdiction to the French courts,” which means the contracts are considered French under French law.

“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,” the prosecutor’s office said in a statement obtained by the Associated Press.

The company now faces up to 1.6 billion euros (about $1.76 billion) in fines.

But Google has denied the claims saying that it abides by the rules of the countries in which it operates. “We comply with French law and are cooperating fully with the authorities to answer their questions," a Google spokesman told Mashable.

This isn’t the first time that Google has come under scrutiny in Europe. Last January, the tech company reached a deal with the British government to pay about $185 million that it has owed in taxes since 2005. According to the UK government, Google made $18 billion in UK revenue between 2006 and 2011, but paid only $16 million in corporate tax, Engadget reported.

And Google isn’t the only company that has come under scrutiny in Europe. Last December Apple, reached a deal with Italy’s fiscal agency to pay $346.6 million, following accusations that the company was underpaying its taxes. The Italian authorities claimed that Apple had failed to pay up to $900 million in taxes between 2008 to 2013.

The European Union recently initiated a plan that will require all the tech companies to disclose all their tax dealings in the region. A report by the commission estimated that the EU loses up to $57 billion to 80 billion each year to corporate tax avoidance.

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