French tax authorities carried out searches at the Paris offices of the internet auction site eBay last week as part of their crackdown on multinationals that channel profits through low-tax countries.
The move against eBay, reported by the French weekly L’Express, follows two similar raids on Google premises in Paris by tax officials looking into the relationship between Google’s French subsidiary and its European headquarters in Dublin.
It comes amid growing scrutiny across Europe of multinational firms’ tax-avoidance practices. France made a $252 million (€193 million) tax claim against internet retailer Amazon last month, while Google, Amazon, Starbucks and eBay have all come under pressure over their tax affairs in Britain following a House of Commons committee inquiry.
The latest raids in Paris targeted two addresses linked to eBay and its subsidiary PayPal on December 7th, L’Express reported. The raids appeared to be linked to an inquiry into the company’s “tax-optimisation” practices between 2008 and 2010.
France’s National Digital Council, a state advisory body, estimates that eBay and PayPal, an online payment service, have combined revenue of between €200 million and €500 million in France.
However, eBay minimises its VAT bill by basing its operations in Luxembourg, while also channelling revenues through a Swiss-based operation, where it can pay a lower corporate tax rate.
A separate investigation by French tax officials, covering the period 2003-05, resulted in the state making a claim of €7 million against eBay – a decision the company is appealing. Responding to reports of the searches, eBay said it complied fully with all national, European and international tax rules.
Political pressure has been building on eBay and other multinationals over their tax avoidance practices. In London last month, Margaret Hodge, chairwoman of the powerful House of Commons Public Accounts Committee, called on tax officials to look into allegations that eBay avoided paying more than £300 million in VAT payments by basing its business in Luxembourg.
One of the biggest targets of France’s recent clampdown has been Google, which declares revenue from its European sales in Dublin, home to its regional headquarters.
Court documents seen by The Irish Times show French officials suspect Google’s French arm of selling advertising to major French clients while declaring revenue from such activities in Ireland, where the corporate tax rate is lower. Under a legal arrangement approved by US authorities, it also moves revenue through the Netherlands to the tax haven of Bermuda.
The set-up means that while Google generated €1.25 billion-€1.4 billion in revenue in France last year, according to estimates it paid just over €5 million in corporate tax to the French exchequer.
French police raided Google’s Paris offices last year and speculation is rife that the company faces a heavy tax claim.
Executive chairman Eric Schmidt said Google was fully compliant with the tax code in every country in which it operated.
