The French investigators who raided Google’s Paris offices last week have revealed the extreme security measures taken to keep their investigation hidden from the technology group, with teams working offline and never referring to the company by name.
Codenamed operation Tulip, the investigation was named after the shell company in the Netherlands through which Google routes billions in revenues each year to avoid taxes on most of its overseas income.
France’s chief state financial prosecutor, Eliane Houlette, said her team had worked under the strictest secrecy since receiving an official complaint regarding Google from the finance ministry in June 2015.
The measures, which included using computers only for word processing and avoiding all internet connections, ensured there were no leaks during the year-long investigation.
Houlette said during a video interview: “We treated the complaint in total confidentiality, taking into account the activity of this company.
“In order to ensure this total confidentiality ... we decided not to ever use the name Google, but to use another name, Tulip, and we managed this operation entirely off-grid, offline. With a computer, but a computer that was text-only, that was disconnected.”
Speaking to French media group Europe 1, she described her department’s efforts as a David v Goliath battle.
French prosecutors suspect Google of aggravated financial fraud and organised money laundering. In a dawn raid last week, officials descended on the firm’s Paris head office in a day-long search, which Houlette revealed resulted in a haul of information at least as large as the Panama Papers.
Google said of the allegations: “We comply with French law and are cooperating fully with the authorities to answer their questions.”
The allegations of fraud are a major escalation of a long-running, Europe-wide campaign to secure a larger slice of Google’s revenues. Its parent Alphabet has reportedly received a bill for €1.6bn in unpaid taxes from the French government.
Last Tuesday, 96 people marched in through the gates of the Hôtel Vatry, the vast mansion built for a French count where the majority of Google’s 700 French staff are based. The raid involved six magistrates, 25 IT experts and officers from the central office for the fight against corruption and financial and tax crimes (OCLCIFF).
In the UK, the chancellor, George Osborne, has come under fire from Labour and the Scottish National party for accepting a top-up payment of £130m including interest from Alphabet, which brought the company’s total tax bill for 2005-2015 to around £200m. During this time, the company reported UK revenue of £24bn.
The shadow chancellor, John McDonnell, described the settlement as “derisory”. He wrote to Osborne last week saying HM Revenue and Customs must “urgently” liaise with the French authorities to see if they have evidence that could reopen the British tax case against Google.
Houlette said that with “several terabytes” of information to process, the investigation would stretch into months but she hoped it would not last years.
She said that Google hardly paid any taxes in France because its French company “serves as a screen”, securing contracts with advertisers but booking the revenue from those contracts via Ireland.
Google says that for tax purposes, it does not have what is known as a permanent establishment in France. This allowed the company to book an estimated €1.7bn from French advertisers in 2014, but report revenues in country of just €216m. As a result, its tax bill was just €5m.
The same arguments have slashed Google’s tax bills in the UK, Italy and other major European markets. From Ireland, its revenues are sent to Google Netherlands Holdings BV. Using an accounting technique known as the “double Irish, Dutch Sandwich”, the Dutch company then sends its cash to a Bermuda-based but Irish-registered affiliate called Google Ireland Holdings.
In 2014, €10.7bn was moved through the Netherlands subsidiary to Bermuda, which does not charge offshore companies income tax.
Houlette’s department is pursuing 358 cases, including a major tax inquiry into McDonald’s. She said: “We lead investigations of great magnitude, of great geographical magnitude and of great technological magnitude.”
The prosecutor told the French senate that other governments were not always helpful, saying France has not received the cooperation it needs from the governments of Russia, Qatar, Mauritius or Switzerland.