100 French police raid Google's Paris headquarters as part of £1.2 billion tax and money laundering investigation

A dawn raid was launched on Google's office in Paris yesterday as part of a probe into 'aggravated tax fraud' and money laundering.

Around 100 police officers, five magistrates, 25 computer experts and about 100 tax officials entered the US internet giant's premises at 5am as France ramped up its efforts to clamp down on alleged tax evasion.   

Google is accused of owing the French government £1.2billion in unpaid taxes.  

The raid is part of EU officials' attempt at cracking down on big businesses avoiding tax, with companies such as Apple, Amazon, Fiat and Starbucks in the firing line. 

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Investigation: Police officers were seen leaving the Paris offices of US internet giant Google last night

A police car outside the Google offices in Paris yesterday during a tax fraud raid at the company's premises. The prosecutor's office said it was to determine if Google Ireland had failed its financial obligations in France

'We respect French legislation and are fully cooperating with the authorities to answer their questions,' a Google spokeswoman said on Tuesday.  

The raid also prompted calls for an investigation into Britain's 'sweetheart' tax deal with the tech giant. 

In January, Google agreed to pay £130million to cover a decade of back taxes after a six-year probe by HM Revenue & Customs.

But France's socialist government has pointedly ruled out striking a similar deal with the company over back taxes.

Meg Hillier, chairwoman of the Commons public accounts committee, told The Times that MPs would ask HMRC representatives on June 13 whether they had requested from French officials any of the evidence that precipitated the raid. 

She said: 'HMRC has previously said it could revisit the deal if they receive more information from the French and Italians. We'll see if they have asked for it.'    

A source close to the matter said in February that French authorities believe the Californian group owed €1.6 billion in back taxes. 

A police car leaves the Paris office following officials' search of the premises yesterday morning

Members of the press and photographers wait outside the building during the raid involving 100 officers

A police car leaves the Paris offices of US internet giant Google after officers carried out a search yesterday

Its European operations are headquartered in Ireland, which has some of the lowest corporate tax rates in Europe.

The PNF said the probe, launched in June 2015, aimed to 'check' whether Google Ireland Limited, 'by not declaring part of its activity carried out on French territory... has failed in its tax obligations, notably in terms of company tax and value-added tax'.

Google France received a 'notification' of the investigation back in March 2014, which did not give any precise figures. 

Italy has demanded more than €200million from Google, which is accused of perpetrating tax fraud there for years. 

It has been raided by French authorities before, in June 2011, during an investigation into transfers to its Irish headquarters.

In January, Google agreed to pay £130million in back taxes to Britain, prompting criticism from opposition lawmakers and campaigners.  

At the time the U.S. online search firm, which has faced severe criticism of its UK financial arrangements, said the payment would cover back taxes from 2005 to 2015.

It also agreed to make changes so that future payments to HM Revenue and Customs will 'reflect the size and scope of our UK business'.

'We have agreed with HMRC a new approach for our UK taxes and will pay £130million, covering taxes since 2005,' said a spokeswoman for Google.

'We will now pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our UK business.

'The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result. This settlement reflects that shift and is in line with recent OECD guidance.' 

The EU has also been investigating 'tax rulings' by some member states that benefit multinationals.

Brussels is probing online retailer Amazon's tax arrangements in Luxembourg, one of a series of such probes targeting major global firms, including Apple, Starbucks and Fiat.

Google CEO Sundar Pichai defended the Internet giant's tax practices during a visit to Paris in February.

'We're a global company. We have to abide by tax laws everywhere, we do abide by local tax laws in every single country,' he said.

'We're advocating strongly for a simpler global tax system,' he added.

France has previously refused to negotiate the amount of back taxes it would request, with

However, a source inside France's tax authority said in February that bargaining may still be possible.

'This does not mean that Google will ultimately pay 1.6 billion,' the source told AFP. 'There will be appeals, and perhaps a negotiation in the end, in particular on penalties.' 

HOW GOOGLE FUNNELS ITS MONEY VIA A WEB OF COMPANIES TO SHRINK ITS TAX BILL

Web: This is Google's complicated web of holding companies that allows the web giant to reduce its international tax bill. Google US has set up two Irish companies, one of which is based in Bermuda, with a middle company in the Netherlands. The network allows revenue from around the world to be sent back to Bermuda via Ireland and Holland, with their generous tax rates, allowing Google to reduce its tax bill

Google manages to reduce its tax bill by using a set of subsidiary companies across the globe.

The network - nicknamed the 'Double Irish and Dutch Sandwich' - is hugely controversial but totally legal.

Google moved its headquarters for Europe, the Middle East and Africa to Ireland in 2008 to benefit from the country's lower tax rate on profits.

In Britain, its biggest market outside the US, Google is classified as having no 'fixed base' so none of its sales are technically made in the UK.

It means when a British company buys a Google advert for the UK, for example, the money goes straight to Dublin, meaning it pays little tax to the UK Treasury.

After paying Ireland's lower corporation tax rate of 12.5%, international profits are then funnelled via Google Netherlands Holdings, taking advantage of generous tax laws there.

The profits are then sent to Google's main overseas company, another Irish business domiciled in Bermuda - where the corporation tax rate is zero. 

This complicated arrangement is explained by experts as the Double Irish and Dutch Sandwich - with the Irish businesses being the bread and the Dutch subsidiary being its filling. 

It means that Google's overseas tax rate on all its profits falls to around five per cent when in the UK it would have to pay 20 per cent.

Though this process has been branded 'immoral' by MPs, it is not illegal and Google says it has abided by international tax rules. 

The company also says its Bermuda operation does not impact the tax it pays in the UK.

Executives say the reported UK profit margins are far below the group average because most of its algorithms and codes, which drive the company's profits, are developed outside the country.

Google still pays the majority of its taxes in America, but on its American profits only.