>> French investigators raided Google's offices in Paris in the early hours of Tuesday looking into a possible tax fraud. I'm Tom Burrigan, specialist correspondent for Reuters in London, where I've been looking into Google's tax affairs. Google avoids billions of dollars every year in taxation through what's known as the double Irish Dutch sandwich.
This is a very common tax structure among big technology companies. Basically, what it involves is establishing two Irish companies. One which is registered and based with physical operations in Ireland. The other one which might be just a brass plate in Bermuda. The first company takes all the money in.
In Google's case, that could be up to $20 billion a year in revenue and then it pays out much or most, maybe of that money to the other Irish company. Because the first Irish company doesn't actually have very many profits, it doesn't have much of a tax bill.
The second company has a very large profit but it doesn't have a tax bill because it's invariably based in Bermuda or the Cayman's, where there is no income tax. Hence, we have the double Irish Dutch sandwich. It's very difficult to know what way the investigation, or indeed any court case, will go on this.
On Google, we have on one side saying that it has a highly contorted structure whereby sales are derived in France but they're saying they're actually being generated in Ireland. They'll have to show that the facts on the ground match what they're saying on their tax return. If the French investigators can show that what Google has said in its tax return is not accurate, then it can challenge that and it may be able to extract a lot of money from Google.
The kinds of figures that we've been hearing are in excess of $1 billion, so the stakes here are incredibly high. And it won't be just France, if France is successful there are other countries in Europe who would like to take some money out of Google as well.