Google’s Spanish tax affairs
Google is under investigation by tax authorities in Spain and France, after having recently made deals with UK and Italian authorities over back taxes, reports
Spain has joined the scrum of tax authorities examining Google’s accounts to see if the company has paid all that it should. A team of inspectors from the Spanish tax authority, raided Google offices on two sites in Madrid recently. They were investigating the tax liabilities of Google’s subsidiaries in Spain and Ireland, through which the company channels much of its European revenue.
It’s a relatively common business practice to locate profit-generating activities in jurisdictions with low rates of corporation tax, and keep loss-making functions where taxes are higher. Directing profit to low-tax jurisdictions in this way is not necessarily illegal, if the transfer can be justified.
The tax authorities are concerned that Google’s Spanish staff may be playing a greater role in the generation of revenue and profit than the company has declared.
Other countries too have been investigating Google’s tax affairs. French authorities conducted a dawn raid on the company’s Paris office in May as part of an investigation into whether Google should pay $1.8 billion in back taxes.
And in January Italy asked the company to pay € 228 million (then $257 million) in back taxes for the period 2009 to 2013. That request came as UK authorities concluded an investigation into the company’s tax payments over a 10-year period, resulting in a demand for £130 million (then $186 million) in back taxes.
With so many European Union tax authorities investigating the company, EU Competition Commissioner Margrethe Vestager said she would join in if she received an official complaint.
Google has issued a statement defending its tax practices. “We comply with the tax law in Spain, as in every other country in which we operate. We are cooperating fully with the authorities in Madrid to answer their questions, as always,” according to an email from a Google spokesman.