Alphabet's (GOOGL) troubles in Europe continued Tuesday after French officials raided the company's Paris offices as part of the country's investigation into "aggravated tax fraud" and money laundering.
France has been seeking 1.6 billion euros ($1.76 billion) in back taxes, according to a February Reuters report that cited an anonymous source. That report came just weeks after Alphabet reached an agreement with U.K. tax officials over back taxes in that country.
In January, Alphabet -- a key holding of the Action Alerts PLUS charitable trust portfolio -- announced it had reached a $190 million tax settlement with the U.K. over back taxes between 2005 and 2015. However, that settlement received staunch criticism due to the fact that the U.K. is Alphabet's second-largest revenue generator and the company cleared about $70 billion in revenue in 2015 alone.
The settlement did not sit well with French officials, with Finance Minister Michel Sapin saying the settlement "seems more the product of a negotiation than the application of the law." During a conference earlier this year, Sapin delineated his country's position in contrast to the U.K.'s settlement. "The French tax administration does not negotiate the amount of taxes owed. It applies the rules."
Apparently, applying those rules consists of raiding Google's Paris offices today with up to 100 investigators including five magistrates from the French justice authority, police officers and 25 IT specialists.
"The investigation aims to verify whether Google Ireland Ltd. has a permanent base in France and if, by not declaring parts of its activities carried out in France, it failed its fiscal obligations, including on corporate tax and value added tax," a statement from the prosecutor's office today read.
Google declined to comment on the raid, except to say in an email that "we comply with French law and are cooperating fully with the authorities to answer their questions."
"Raiding the office in that manner seems a little theatrical, almost as if they want to show their citizens that they are willing to put France first, ahead of a foreign company," said Action Alerts PLUS senior analyst Scott Berman. "There are a lot of politics present in making the raid such a big show."
This isn't the first time Alphabet has run into tax questions in France. In late 2014, Alphabet CEO Larry Page met with French officials concerning the company's tax situation. Then, as now, U.S. tech companies were under heavy scrutiny in the EU for tax issues.
In June 2014, the European Commission (EC) opened formal investigations into tax deals granted to fellow AAP holding Apple (AAPL) in Ireland. Three months later, the EC detailed that it had reached a "preliminary view" that tax deals Apple struck in 1991 and 2007 constituted state aid. "The commission is of the opinion that through those rulings the Irish authorities confer an advantage on Apple," the EC's letter read.
However, the EU's scrutiny of Alphabet goes beyond its tax practices.
The European economic bloc has previously accused the company of anti-competitive behavior, saying Alphabet has been "systematically favoring its own comparison shopping product in its general search results pages," which in turn "stifles competition and harms consumers."
Last week, The Sunday Telegraph reported that the EU could announce a record fine of $3.4 billion against Alphabet as early as June, a move that would conclude a seven-year monopoly abuse investigation into the company.
Whether deserved or not, Alphabet has become a target in Europe. However, it is still too early to know whether its legal troubles will affect the company's bottom line. Short of changing the way the company generates revenue through its search-engine cash cow, any fine the company is likely to see will not affect its prime position as one of the most profitable companies in the world, according to Berman.