Google's Paris Office Raided By Investigators

[superclown2]

Not a lot of details at the moment, just a BBC news flash. It seems they're investigating a possible 1.6 Billion Euro tax fraud ..........

[Shepherd]

Lot's of reputable reporting there, non referred to google as drug dealers... wonder why, oh yeah, defamation. Also, no one ever referred to UPS or Fedex as drug dealers.

[jmccormac]

Lot's of reputable reporting there, non referred to google as drug dealers... wonder why, oh yeah, defamation.

There's a difference but probably a bit too subtle. They have not, nor have I, referred to Google as drug dealers. This is the relevant quote again but this time with the important part in bold text:

"This investigation is about the patently unsafe, unlawful, importation of prescription drugs by Canadian on-line pharmacies, with Google's knowledge and assistance, into the United States, directly to U.S. consumers," said Peter F. Neronha, United States Attorney for the District of Rhode Island."

He goes on to say ""It is about taking a significant step forward in limiting the ability of rogue on-line pharmacies from reaching U.S. consumers, by compelling Google to change its behavior. It is about holding Google responsible for its conduct by imposing a $500 Million forfeiture, the kind of forfeiture that will not only get Google's attention, but the attention of all those who contribute to America's pill problem."

Regards...jmcc

[Shepherd]

There is no difference, subtle or otherwise, between manufacturing the following hyperbole:

Google had to pay a US$500 million fine for drug dealing.

and calling google a drug dealer.

[EditorialGuy]

If only they had you to advise them?

I'm not "advising" anybody. I'm just commenting on the optics of the raid. This is the French equivalent of an American "perp walk": i.e., a public-relations exercise. It's also a display of the French state's power, like the busloads of riot police that one often sees parked around Paris.

The fact that 100 tax police or armed accountants raided Google's offices has nothing to do with the merits of the French government's case. Sending in cops or auditors is easy; proving "tax fraud" is a bigger challenge.

[jmccormac]

and calling google a drug dealer.

The only one here calling Google a drug dealer is you.

Regards...jmcc

[aristotle]

EditorialGuy wrote:
The raid smacks ...

It smacks of a smack in google's face

[lucy24]

illicit pharma ads

Mmm, well, it's about taxes again innit? US pharmaceutical companies may not pay a lot in (U.S.) taxes, but they certainly pay more to the US government than Canadian firms do.

[tangor]

The Google Canadian pharma was not for tax reasons ... it was advertising drugs and pharmacies that were illegal, or not allowed in the USA by the FDA. Let's not confuse the two! :)

_{(Some folks believe income taxes are illegal.So google wasn't paying them to avoid another fine/settlement!)}

[NickMNS]

As a Canadian I feel compelled to step into this conversation.

This investigation is about the patently unsafe, unlawful, importation of prescription drugs by Canadian

US pharmaceutical companies may not pay a lot in (U.S.) taxes, but they certainly pay more to the US government than Canadian firms do.

The pharmaceutical companies that operate in the US and Canada are the same companies, some Canadian, some US, some French, etc... The pharmaceuticals that are sold in Canada are exactly the same as those in sold in the US, except for a very few cases mostly due to the delays in approvals in Canada. So how are they patently unsafe (they are in fact protected by the same patents). So this illegal cross border pharmaceutical business, is simply a form of protectionism designed to maximize profits for the pharmaceutical companies, profits that are then off-shored and sheltered from tax.

Now back on topic.
From the right's perspective in France, the Google raid is about French Elitism. How dare two guys in garage build a company that is now pushing the French institutions such Le Monde and Le Figaro into financial difficulty. From left's it is an evil multinational corporation that is stealing personal information from the public and using it for profit. The French, hate Google, going after them for what ever reason is great politically.

Where are the raids on Societe General, PNB Paribas, or Airbus or Sanofi (pharmaceutical company). Oh yes, they are great French corporate citizen's that do not use off-shore accounts to avoid paying taxes. Airbus probably pays negative taxes, since it receives so much in grants from the French and European governments.

The French should put their money where there mouth is, ban Google outright in France and then go back to using their Minitel system. Vive la France!

[jmccormac]

This is the French equivalent of an American "perp walk": i.e., a public-relations exercise. It's also a display of the French state's power, like the busloads of riot police that one often sees parked around Paris.

It is not. It is a lot more serious than that. It is, no doubt, upsetting for you to see Google treated this way. You seem to think that Google can do no wrong but others, and it seems the French tax authorities, the FDA, the UK tax authorities and the European Commission, disagree with you. No matter how you try to write this off as being "optics" or "political theatre", the organisation investigating Google is a very serious one (think IRS combined with US Customs and FBI) and these people are going after Google in a big way. They consider that Google may be liable for approximately 1.6 billion Euro.

Regards...jmcc

[incrediBILL]

Wonder why it took the French a whole year before they goose stepped into Google with a swat team of forensic accountants?

Seems like it wouldn't take that long to figure out that their tax returns didn't smell right.

The topic triggered a rant I posted in foo:
[webmasterworld.com...]
It's a bit off the wall and long LOL

People forget that WE are those corporations. If you or I want to start a business, WE have to file to create that corporation but if WE grow it too big for some reason people freak out because WE are doing too good! Those corporations employ US, they are US, WE are them. However in the case of Apple it's more like a foreign country that has claimed sovereignty in California and could probably buy the state if they wished.




Now whether Google is trying to hide a few pennies from the government or not, it's almost the only way they have any left to invest in more products where they employ PEOPLE to build them. People forget that WE are the corporations. It's OUR money they're talking about that if it didn't go to taxes would end up back in OUR pockets eventually except the 99% the government keeps :D

However, it does piss me off when really big companies making really big money play really sneaky games just so Wall Street likes them better as they funnel that money into the top 1% of the 1%. If they'd just share a little more with more jobs and better wages we'd all be rooting for Google and not against them but they don't. They lay people off just like the rest as the bottom line is more important than the people they employ.

[edited by: engine at 2:05 pm (utc) on May 27, 2016]
[edit reason] Fixed link [/edit]

[jmccormac]

That's the mods forum, Bill,
However these investigations tend to take a long time to develop. Basically the investigators have to build the case. Would Google be quite as successful if it had been paying US corporation tax at the same rate as ordinary US corporations and businesses?

Regards...jmcc

[NickMNS]

@jmccormac
What constitutes an ordinary US corporation?
What effective tax rate does such a corporation pay?
How does it differ from Google's tax rate?

[jmccormac]

A corporation simply doing business within the US that is not a large multinational corporation with tens of thousands of employees.

From Wikipedia:
Taxable Income ($) Tax Rate[27]
0 to 50,000 15%
50,000 to 75,000 $7,500 + 25% Of the amount over 50,000
75,000 to 100,000 $13,750 + 34% Of the amount over 75,000
100,000 to 335,000 $22,250 + 39% Of the amount over 100,000
335,000 to 10,000,000 $113,900 + 34% Of the amount over 335,000
10,000,000 to 15,000,000 $3,400,000 + 35% Of the amount over 10,000,000
15,000,000 to 18,333,333 $5,150,000 + 38% Of the amount over 15,000,000
18,333,333 and up 35%

Google uses and Irish company for a lot of its revenue where it pays a lower corporation tax rate of approximately 12.5%. There is also a connection to Bermuda where the tax is effectively zero.

Regards...jmcc

[edited by: jmccormac at 2:24 pm (utc) on May 27, 2016]

[jmccormac]

This isn't the "two guys in a garage" operation that some would like to have people believe.

Google Moved Billions Of Dollars To Bermuda To Avoid Taxes... Again
[forbes.com...]

Google moved over €28bn through State in tax scheme
[irishtimes.com...]

[en.wikipedia.org...]

Regards...jmcc

[EditorialGuy]

Getting a bit off topic, aren't we? Or is this now a "kitchen sink" thread?

[jmccormac]

Getting a bit off topic, aren't we? Or is this now a "kitchen sink" thread?

Well this is a thread about international tax avoidance and the suspected underpayment of tax. This is a very serious loss to the US tax authorities and, as the French investigation would suggest, a possible loss to the French tax authorities of 1.6 billion Euro in taxes. You seem to want to push a "Move along. There's nothing to see here." approach when the facts and numbers on Google's activities are posted to show what is happening.

A quote from Bloomberg via Wikipedia estimated that Google was effectively paying 2.4% in tax in 2007-2009.
"Google cut its taxes by $3.1 billion in the period of 2007 to 2009 using a technique that moves most of its foreign profits through Ireland and The Netherlands to Bermuda. Google's income shifting—involving strategies known to lawyers as the "Double Irish" and the "Dutch Sandwich"—helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.[11][12]"

Google 2.4% Rate Shows How $60 Billion Is Lost to Tax Loopholes
[bloomberg.com...]

Google slips $3.1bn through 'Double Irish' tax loophole
[theregister.co.uk...]

This is how the Double Irish arrangement works:
1. An advertiser pays for an ad in Germany.
2. The ad agency sends money to its subsidiary in Ireland, which holds the intellectual property (IP).
3. Tax payable in Ireland is 12.5 percent, but the Irish company pays a royalty to a Dutch subsidiary, for which it gets an Irish tax deduction.
4. The Dutch company pays the money to yet another subsidiary in Ireland, with no withholding tax on inter-EU transactions.
5. The last subsidiary, although it is in Ireland, pays no tax because it is controlled outside Ireland, in Bermuda or another tax haven.
(Wikipedia)

Regards...jmcc

[NickMNS]

@jmccormac, yes those are the corporate tax rates, but there are not the effective tax rates paid by an ordinary company.

The answers to my questions is, I don't know, I don't know, and I don't know. Why? Because taxation is an extremely complex field that is very subjective and very emotional.

Over simplified example:
The CEO of Google goes for dinner with a few other CEO's from other companies at really expensive fancy shmancy restaurant in SF, the other CEO's are his buddies. Is that a business expense? Or should the corporation be taxed on that money.

The Sales manager of small firm goes for dinner with a few other CEO's from other companies at Applebee's restaurant (John Stewarts Favorite), the other CEO's are his buddies. Is that a business expense? Or should the corporation be taxed on that money.

Before doing this web thing, I worked as project manager for a multinational, for projects that spanned over many countries. In terms of man-hours, most work was done by the lowest paid workers, in terms of dollars, most work was completed by the highest paid workers. The low paying high volume work was done at or close to a loss in a high tax region, the high cost, high profit work was done at great profit in lowest tax region. Is this coincidence or by design? Is it tax avoidance?

The bottom line is every corporation is doing this, the French have targeted Google because the French hate Google and it gives the impression that the government is doing something to fight against tax cheats. So now most French people are proud of their government, standing up against evil Google.

And from my personal perspective, given that part of my income depends on Google, I see this a bad thing, because Google will end up paying a price (either paying a fine, or simply paying legal costs) and that cost will in part come out of my pocket, as I am sure that they will squeeze us the publishers to make up for any costs incurred.

[lucy24]

The French should put their money where there mouth is, ban Google outright in France and then go back to using their Minitel system.

I thought it was Exalead. Or whatever it is that the exabot crawls for.

[jmccormac]

The bottom line is every corporation is doing this, the French have targeted Google because the French hate Google and it gives the impression that the government is doing something to fight against tax cheats. So now most French people are proud of their government, standing up against evil Google.

It is not that simple. Google is only one company being investigated and it has already been investigated by the UK tax authorities. As a result of that, it had to settle for a payement of £130 million Sterling. The whole tax avoidance issue is quite an important topic in the EU and it is not just, as Editorial Guy claimed, "optics". These are serious investigations and there are other companies who are engaged in similar tax avoidance strategies that are being investigated. There have various attempts to unify the corporate tax rates throughout the EU but these have largely failed and very few large corporations do end up paying the stated rates. The French investigation into Google has been going on since June 2015. The raid was not a spur of the moment PR event and to dismiss it as such, as Editorial Guy did, is very misleading and quite wrong. However attributing this raid to the French resentment of Google is really oversimplifying matters.

On the entertainment expenses, I'm not sure about US tax law but in other tax jurisdictions, I don't think that they are deductable.

Regards...jmcc

[isellstuff]

LOL, as with most discussions, I find that middle of the road is the best place to be... So for example, in my opinion...

1) Google doesn't pay enough taxes
2) The French have a tendency to overstep their bounds for cultural reasons. (e.g. if it isn't French it sucks)
3) It was against the law to allow foreign pharmacy ads on Google
4) There should be nothing wrong with US citizens buying drugs from Canadian pharmacies.
5) In my opinion, publicly traded US companies have a tendency to become evil due to short term stock price goals and compensation that is tied to short term performance.
6) Some form of capitalism is necessary to ensure a well motivated and rapidly advancing society.

You know, middle of the road, yin and yang, that's the way life is...

[superclown2]

It seems that the French tax authorities raided McDonald's headquarters as well, on 18th May. So, they are not just picking on Google.

[MrSavage]

I'm sure McDonald's had a few burgers and fries for the ladies and gents conducting the raid. I heard Google offered up frowns and not smiles during their raid. Go figure.

[engine]

It seems that it will be going "all the way" according to France's Finance Minister, and it's not going to stop at Google.

In general, there does seem to be a shift towards clamping down on what might be said to be clever accounting.

France will "go all the way" to ensure that multinationals operating on its soil pay their taxes and more cases could follow after Google and McDonald's were targeted by tax raids, Finance Minister Michel Sapin said.

Sapin, speaking in an interview with Reuters and three European newspapers, ruled out negotiating any deal with Google on back taxes, as Britain did in January. France will "go all the way" [reuters.com]

[NickMNS]

Interesting... France is cracking down on mutlinationals operating on its soil, Airbus, SocGen, PNB Parisbas... No no sorry, that was a story in an alternate dimension. No so far France has targeted exclusively US firms. This is 100% politics and show.

[superclown2]

No so far France has targeted exclusively US firms

Could it be that it's just US firms which are using such 'clever' accounting? Just wondering ............

[NickMNS]

Could it be that it's just US firms which are using such 'clever' accounting?

Yes it could be, but the scenario seems extremely unlikely.

States, or should I say banking systems such as Switzerland do not live outside the EU solely for the benefit of Americans.

[jmccormac]

@NickMNS The operation of these financial schemes was explained above. The one this case has to do with revenues from France being booked in Ireland (France and Ireland are in the European Union while Switzerland is not.)and whether Google's French operation was liable for tax on this revenue. Though Swiss banking gets featured in a lot of movies, it was not part of the investigation.

Tax avoidance, aka clever accounting and tax planning, is legal. Tax evasion is something different and the French case is about suspected evasion. The rubbish about it all being "optics" and "political theatre" just distracts from the fact that this is a serious and official investigation into Google's activities. The raid on Google's French office apparently collected terrabytes of data from its devices so the investigation now has data to analyse and determine if there was any wrongdoing. What they are interested in proving is that deals were finalised/completed by Google France with local businesses.That would make them liable for French tax rather than Irish tax.

The Wall Street Journal explains the situation well:
[wsj.com...]

Regards...jmcc