Why do Google's offices keep getting raided in Europe?
The tech giant is one of a number of American companies being targeted by European officials for tax evasion.
Marcio Jose Sanchez/AP
As part of ongoing investigations by European governments into possible tax evasion schemes by US multinational companies, Spanish officials Thursday raided Google’s offices in Madrid.
The raid comes a month after French authorities raided the company’s offices in Paris as part of a probe into Google's international corporate structure, which allows it to funnel European profits through subsidiaries in low-tax or tax-free countries such as Ireland and Bermuda. French authorities have said that Google owes them $1.8 billion in back taxes.
Google, which says that it abides by the tax laws in the countries in which it operates, is not the only major corporation being targeted for tax evasion in Europe. Starbucks, Fiat Chrysler, Apple, Amazon, and McDonalds are among the firms being scrutinized.
McDonalds's French headquarters also were raided by authorities last month. The fast food giant is said to owe $334 million worth of unpaid French taxes that were diverted through Luxembourg and Switzerland, according to Reuters.
Overall, the European Parliament has estimated that up to $78 billion is lost in Europe annually through creative corporate structuring that allows companies to reduce their tax bills. Globally, approximately $240 billion per year is lost to such maneuvering, according to CNNMoney.
Ireland, which has one of the lowest corporate tax rates in Europe, is the site of Google's international headquarters.
Because of a loophole in international tax law, the internet search giant pays little tax in most European countries because it reports almost all of its sales in Ireland, where its Dublin staff completes sales contracts, reports Reuters.
Google reportedly saved $2.4 billion in worldwide taxes in 2014 by moving $12 billion in international revenues between its global subsidiaries headquartered in countries with low tax rates, Bloomberg reports.
In January, the company agreed to pay the British government a decade’s worth of back taxes totaling £130 million. Going forward, it will pay taxes based on revenue from UK-based sales.
“The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result,” an unidentified Google spokesperson told The Guardian at the time. “This settlement reflects that shift and is in line with recent OECD guidance.”