The raids are part of a preliminary criminal probe opened in June 2015 after French tax authorities lodged a complaint, according to a statement from France’s financial prosecutor. The investigation is seeking to verify whether Google’s Irish unit has permanent establishment in France and whether the firm failed to declare part of its revenues in France, according to the statement.
The raids come as Google, which is part of parent company Alphabet Inc., faces outrage in Europe and elsewhere in the world over the amount of tax it pays. France has called on the company to pay back taxes of about 1.6 billion euros ($2.5 billion).
Google said that it complies with French law and is ‘‘co-operating fully with the authorities to answer their questions’’.
Two unmarked cars with police signs on the windshield were still parked outside Google’s Paris office at 8 rue de Londres on Tuesday afternoon. The raids started at about 5am local time, Le Parisien newspaper reported earlier, citing an unidentified source.
French tax officials first raided Google’s Paris offices in 2011. The government has criticised Google for booking most of its sales to French customers through its Irish subsidiary. Irish corporation tax is just 12.5 per cent compared to France’s 33.3 per cent rate.
Last year, Google’s French subsidiary reportedly paid just €5 million in French tax, despite sales to French customers that analysts have estimated were more than €1 billion.
Google’s European subsidiaries also pay hefty royalty payments to another Irish subsidiary that is located in Bermuda and which holds Google’s international intellectual property licensing rights. This reduces the profitability of Google’s European subsidiaries, which means they pay less tax.
Earlier this year Google reached a controversial £130 million settlement with the British government over an audit covering 10 years of accounts.
Critics called the amount ‘‘derisory’’.
The scrutiny of Google’s tax affairs comes amid a European Union clampdown into how some nations may be offering special deals to big companies. Bloomberg
Double Irish Deception: How Google—Apple—Facebook Avoid Paying Taxes
For most average American’s, who earn around $42,000 per year, paying taxes is something that is done every year. After all, taxes help pay for schools, roads, infrastructure and more. Corporations throughout the country do the same, by not only abiding by the letter of the law, but the intent. This is known as corporate responsibility. However this is not the case with three of the top three U.S. technology companies.
Double Irish Defined
The Double Irish strategy, nicknamed because of the loose corporate tax laws in Ireland, is used by large companies based in the United States but operating all over the world. A loophole in the U.S. tax code allows them to avoid income a tax if that income (profit) was earned by a subsidiary overseas, even though the U.S. based company owns the subsidiary.
How Double Irish Works
The Double Irish strategy needs three companies (or more) to work. The U.S. company (company A), licenses its intellectual property to a subsidiary based in Ireland. This first Irish company (B) is legally based offshore, in a tax haven such as the Bahamas or Cayman Islands for instance. This company licenses the patent rights to a second Irish company (company C). The second company receives income from the first Irish company (B), but its taxes are low because of royalties and fees paid to the first Irish company (B). These royalties and fees are deductible expenses, so no taxes are paid on them. The U.S. company doesn’t pay any Federal taxes on the income from the Irish companies because the earnings were not made in the U.S.
The Cost of Double Irish
In recent years, three of the top U.S. tech companies have saved over $8 billion dollars in taxes. Had they paid their taxes like the rest of us, 4 million children could have health insurance, 6.5 million children could be vaccinated, 200,000 elementary teachers could be hired, a year’s worth of groceries could be purchased for 770,416 families, and the entire California Highway Patrol could be funded for four years.
What Double Irish Means For Your Family
If every American paid an equivalent tax rate of 0.7%, the average family would have an extra $3,575 per year to spend. Vacation? Pay off a car loan? Spend more? Maybe even save for a down payment on a house? All these options would be available to you. Oh, but taxes fund things like roads, clean air and water, public education, national defense, and legislation that protects individual freedoms.
So why don’t corporations have to pay?
That’s a good question.
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Double Irish Deception: How Google—Apple—Facebook Avoid Paying Taxes
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