French investigators launched a dawn raid on the Paris headquarters of US internet giant Google on Tuesday in a probe over tax payments.
According to local media reports the raid involved about 100 investigators, including 25 computer technology experts.
France’s financial prosecutor said this was part of a preliminary enquiry opened last June into whether Google paid all the tax it owed.
According to a finance ministry source they are chasing 1.6 billion euros in back taxes.
Google said: “We comply with French law and are cooperating fully with the authorities to answer their questions”.
“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.
Sales location is key
Google has based its regional headquarters in the Irish capital Dublin where corporate tax rates are lower than elsewhere in Europe.
Google, now part of Alphabet Inc, pays little tax in most European countries because it reports almost all sales in Ireland. This is possible thanks to a loophole in international tax law but it hinges on staff in Dublin concluding all sales contracts.
If staff in countries like France finalise contracts with local clients, then the company would be obliged to report the revenues nationally and pay taxes in each country.
Profits made, no tax paid
The company 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.
There has been widespread public anger at the way multinational companies use their footprints around the world and aggressive tax optimisation techniques, to minimise the amount they pay.
Responding to that anger France, Britain and European Commission officials have sought ways to make sure Google, Yahoo! and other digital giants pay their taxes locally.
In January Google reached an agreement with the authorities in Britain to pay just 130 million pounds (170 million euros) in back taxes on billions in turnover. The settlement prompting criticism from opposition lawmakers and campaigners who said it should have paid much more.