Google's Paris office raided in multi-billion tax evasion swoop

Search giant faces heat in France, the UK, Italy and Australia, but only a light sauté in New Zealand.

Google's Paris office has been raided in an operation involving 100 police, tax inspectors and IT specialists, Le Parisien reports (and NBR can read, thanks to Google Translate).

Inspectors from La Brigade Nationale de Répression de la Délinquance Fiscale (BNRDF), an agency popularly known as the "tax police" were looking for evidence of tax evasion.

The French government alleges the search giant owes €1.6 billion in back-taxes.

In a media statement issued soon after the raid, Google said: “We comply with the tax law in France as in every other country in which we operate. We are fully cooperating with the authorities in Paris to answer their questions, as always.”

A BNRDF statement said, "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."

Google has billed business in higher tax countries (including, at times, New Zealand) to its subsidiary in lower tax Ireland. 

The company faces pressure across Europe. The Italian government says Google owes €1.6 billion; Google recently reached a £130 million settlement with the UK government after a parliamentary committee criticised its tax payments as "disproportionately small" (the deal covered the tax years back to 2005).

And in Australia, it is one of several multinationals targeted in the so-called "Google Tax" bill introduced with the budget on May 3.

The Turnbull government says closing tax loopholes for profit and revenue-shifting multinational companies will raise $A3.9 billion to fund broader corporate tax cuts. These include lowering company taxes over 10 years from 30% to 25% and an immediate one-percentage point cut to 27.5% for small businesses.

The Australian government will hit multinationals deemed to have diverted profit offshore with a 40% penalty tax rate.

But while the heat is on Google and other multinationals elsewhere, in New Zealand it's more like a light sauté, if that.

Despite calls from Spark chief executive Simon Moutter and Catalyst IT director Don Christie to move faster and "level the playing field," the government has so far been content to avoid unilateral action in favour of participating in a multi-year OECD effort to coordinate changes to tax rules.

Responding to Mr Moutter's criticism, Revenue Minister Michael Woodhouse told NBR, “Inland Revenue is examining how New Zealand’s tax rules might be developed to help implement elements of the OECD’s recent 15-point action plan to combat base erosion profit shifting.”

He added, “We’re also in public consultation to advance the Automatic Exchange Of Information (AEOI), which aims to increase the transparency of international financial transactions.”

Submissions closed on March 31 and are now being assessed with an eye to possible reform from July 2017.

The search category, dominated by Google, accounts for the lion's share of the online advertising market in New Zealand, which the IAB estimates as worth $311 million.

In 2013, Google NZ – which bills to the company's Irish and Singapore subsidiaries – paid no tax, claiming a loss. In its most recent financial accounts, 2014, it reported a $160,000 profit (net of $361,542 in tax) on $14.8 million revenue.

NBR economics editor Rob Hosking has criticised debate on multinationals' NZ tax payments as heavy on "moral panic" and short on facts (read his take here).

In March, Prime Minister John Key said, "No, I don't think it's fair" when it was put to him that multinationals pay little tax in New Zealand. The prime minister hinted unilateral action could be taken after all but, since that interview, the issue has returned to its usual position on the back burner.

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