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Google’s Madrid Office Hit by Tax Probe Raid

As YouTube comes under fire from Coldplay, Abba, Lady Gaga, for ‘siphoning value’ from artists

MADRID — Spanish tax authorities raided Google’s Spanish headquarters in Madrid on Thursday as challenges mount in Europe for the U.S. technological giant.

The Madrid raid took place at Google’s offices in Torre Picasso, the highest skyscraper in central Madrid, just a little more than a month after France’s justice department and anti-corruption authorities sent officials to search Google’s headquarters in Paris on May 24.

Tax officials also struck at Google Campus in Madrid, the tech giant’s Spanish startup company incubator which launched late last year on the premises of a former factory dating back to the nineteenth century.

Google Spain said in a statement that it “complied with Spanish tax laws” and was “co-operating with authorities in Spain in order to answer all their questions.”

According to El Mundo, the Spanish newspaper which broke the story, tax authorities were looking for evidence of tax evasion by Spain-based employees not registered as residents in Spain.

Spain’s Google probe also forms part, however, of ongoing investigations by national tax authorities into whether the search-engine behemoth has evaded tax payments by being based out of Ireland, a low-tax jurisdiction, where it concludes sales contracts. Spanish tax authorities opened an investigation into Google in 2011, with Google eventually paying an extra €1.9 million ($2.1 million) on 2007 and 2008 tax returns.

French tax authorities claim Google owes as much as €1.6 billion ($1.8 billion) in back tax. This January, the tech colossus settled with British authorities on a payment of €172 million in back taxes and agreed to recognize income from advertising booked with U.K. companies as subject to British tax. Some British lawmakers have called the deal inadequate.

The raid on Google’s Madrid office comes just a day after Coldplay, Lady Gaga, ABBA and more than 1,000 other acts that regularly perform in Europe signed a letter to European Commission President Jean-Claude Juncker saying that music consumption was “exploding” thanks to digital distribution. However, “the future is jeopardized by a substantial ‘value gap’ caused by user upload services such as Google’s YouTube that are unfairly siphoning value away from the music community,” the letter said, citing the services’ misuse of “safe harbor” exemptions to prosecution for copyright infringement.

The artists’ letter comes as Universal Music Group, Sony Music and Warner Music negotiate new licensing deals with YouTube, which pays far lower royalty rates per play than Spotify or Apple Music, though offering artists a far larger user base.

Exacerbating Google’s regulatory woes, E.U. competition commissioner Margarethe Vestager looks set to issue two charges against the company before Aug. 1, accusing it of abusing its dominant position with regard to its Android smartphone system and its online advertising services and search engine, which allegedly directs European consumers to Google’s own in-house shopping service. Google may now respond to such charges. The charges could lead to an official antitrust ruling and a possible fine by the European Commission.

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