Scrutiny of Google's tax liabilities intensifies with Spanish raid

A team of 35 inspectors from Agencia Tributaria, the Spanish tax authority, raided Google offices on two sites in Madrid on Thursday, according to Spanish newspaper El País. The authority requested court approval for the raid on Tuesday, the report said.

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, according to El País.

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 US$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 2009-2013. 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.