GOOGL Alphabet Inc

Spanish tax case is latest sign that European officials are ratcheting up pressure on tech firms

By Matt Moffett and Sam Schechner 

MADRID -- Spanish tax inspectors searched the offices of Google here, the latest in a series of tax investigations throughout Europe targeting the search firm.

Inspectors swept into the company's headquarters in an office tower, as well as a campus it maintains in the Spanish capital, people familiar with the case said.

Investigators were looking for "possible evidence of taxation in Spain that is less than what is appropriate given [Google's] real activity in the country," a source involved in the investigation said.

The Spanish newspaper El Mundo reported Thursday the probe involved the possible evasion of the value-added tax and other levies.

"We comply with the tax law in Spain, as in every other country in which we operate," Google said in a statement. "We are cooperating fully with the authorities in Madrid to answer their questions, as always."

A Google spokeswoman added that the Spanish case was an administrative matter, not a criminal one.

The investigation in Spain follows a raid in May on Google's headquarters in Paris by French tax investigators. That escalated a tax dispute in which French authorities have sought more than EUR1 billion ($1.12 billion) from the company.

In May, a Google spokesman said the company was cooperating with French authorities. "We comply fully with French law," he said.

The Spanish case is the latest sign that European authorities are ratcheting up the pressure in long-festering disputes with Google and other tech companies.

Speaking at a conference Thursday in Paris, Eric Schmidt, executive chairman of Google parent Alphabet Inc., said that "I understand the anger and the frustration" at the level of taxes paid by multinational firms. But he added that Alphabet is "part of a global tax regime that all companies fit into" and "we fully comply with the law."

The French case is among the biggest in a series in which tax authorities are seeking similar back taxes and tax-evasion fines against Google and other companies. Italy, which reached a tax settlement with Apple Inc. late last year, is also pursuing Google for around EUR300 million in back taxes.

In January, a Google spokesman said that the company complies with the tax laws in every country where it operates and that it continues to work with Italy's authorities.

The European Union's executive arm has also been investigating alleged sweetheart tax deals enjoyed by Amazon.com Inc. and Apple., cases that could lead to orders to repay years of back taxes. Both companies deny receiving any special treatment.

The threat of legal action -- coupled with new tax rules proposed by the Organization for Economic Cooperation and Development, and a new "diverted profits tax" in the U.K. -- has also raised pressure on companies to change their tax structures.

Write to Matt Moffett at matthew.moffett@wsj.com and Sam Schechner at sam.schechner@wsj.com

(END) Dow Jones Newswires

July 01, 2016 02:48 ET (06:48 GMT)

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