French raid Google in the latest probe of tech’s tax tactics
PARIS — Police raided Google’s French headquarters Tuesday looking for evidence of “aggravated tax fraud,” marking one of Europe’s most conspicuous attempts yet to cast a U.S. technology leader as a manipulative scofflaw.
The probe reflects an intensifying air of European indignation looming over Google and other U.S. tech companies as they amass huge amounts of cash while reducing their tax bills through complex maneuvers that shield their profits.
As it has consistently done when confronted about its tax strategy, Google issued a statement Tuesday maintaining that it complies with all laws. The Mountain View, Calif.based company, which is owned by Alphabet, also said it is cooperating with the French investigation.
Other major tech companies, including Apple and Facebook, also have been skewered in Europe for scrimping on their tax bills as the popularity of their products and services have lifted their fortunes during the past decade.
$777 billion in cash
At the end of last year, the U.S. technology sector had stockpiled $777 billion in cash, accounting for nearly half of the $1.68 trillion held by non-financial companies in the country, according to a study by Moody’s Investors Service.
Just five tech companies — Apple, Alphabet, Microsoft Corp., Cisco Systems Inc. and Oracle Corp. — accounted for $504 billion of that total.
Nearly 90 percent of the cash held by those five companies is being kept in overseas accounts, a strategy that has rankled some U.S. lawmakers who want the money brought back to home so it can be taxed and help reduce the country’s deficit.
Intellectual property
It’s easier for tech companies to legally lower their tax bills than manufacturers because their businesses revolve around patents, algorithms and other intellectual property that’s easier to move around than a plant, says Steve Gill, a San Diego State University accounting professor issues.
“When a company is making shoes, it’s pretty easy to tell where those shoes are being made,” Gill says.
“That’s not the case with intellectual property. It doesn’t really matter where a contract or algorithm sits. Tax laws have failed to adapt to this kind of environment.”