French criminal investigators raided Google’s Paris headquarters on Tuesday as part of a probe into allegedly unpaid taxes. The move comes as a part of a broader, Continent-wide anti-Google moment. Politico.eu reports:
Public anger in Europe over aggressive corporate tax strategies has been boiling since the financial crisis left national treasuries strapped for cash. That forced eye-watering cuts in government budgets and demands for more tax transparency across Europe.
Google has found itself at the center of that debate. In January, it paid the U.K. £130 million in back taxes and promised to pay a higher rate going forward.
Last month, Paolo Tancredi, a center-right member of the Italian parliament, cited allegations that Google could owe €227 million in taxes to the country’s coffers.
French inspectors put Google’s under payment at around $1.6 billion, according to Reuters, while other news outlets have said the Silicon Valley company has set aside some €500 million to settle its tax bill in France.
Now, perhaps Google does legitimately owe that money. But it’s hard not to see this as at least partially a cash grab from the productive parts of the global economy—and as signaling. Those “eye-watering cuts” occurred because the fiscal crisis showed the European system is unsustainable on its old, Blue-Model foundations; moves like this help the bottom line right now but also reassure Europe’s peoples (and its leaders) that if wicked multinationals only paid their fair share, all would be well, truly.
And it’s particularly hard not to see a bit of envy and self-interest when these raids viewed in light of other recent developments. As we’ve covered, this winter the European Commission has launched investigations into Google and other Silicon Valley companies with the more-or-less explicit aim of clearing the way for European competitors.
Unfortunately, those competitors have, to the great frustration of Europe’s great and good, largely failed to emerge. Europe does not have its own Googles; in fact, Europe has severe gaps in the number of billion-dollar startups (“unicorns”), venture capital availability, and other key measures by which one can chart the emergence of the tech economy. (As Politico.eu’s Ryan Heath notes, Google President Eric Schmidt was ironically speaking at a conference in Amsterdam on how to encourage European startups when his company was raided.)
The problem is, Europe continues to try to do so in top-down, mandate-and-regulation-heavy ways that are singularly unsuited for the digital age. One day after the Paris raid, the EU unveiled its new proposed strategy for a European digital single market. Vice President Andrus Ansip promised that, “I want online platforms and the audiovisual and creative sectors to be powerhouses in the digital economy, not weigh them down with unnecessary rules.” It’s a good thing he said that, because otherwise, we might have been confused:
There will be greater restrictions on adverts appearing on streaming services for products harmful to children, as well as stronger protections against hate speech. Video-on-demand platforms will fund the production of local content and guarantee at least 20 percent of their catalogue showcase European works.[..]
Most controversially, the new rules could force on-demand streaming services to contribute to EU nations’ cultural budgets. This could make life very expensive for a company like Netflix, which offers services across the EU’s 28 member countries.
Per Politico, this is the EU’s third attempt since 2006 to come up with a pan-European digital rulebook; we’re beginning to see why. Much of the rest of the document had to do with evening out the rules for e-commerce across the continent, but absent the lowering of protectionist barriers on shipping—something that’s being fought tooth and nail—the Commission had to settle for mandating that online retailers must agree to sell to anyone in Europe, but not necessarily ship to them.
From the raids on Google to the protectionism at home, this is all very Bismarckian, in the sense of being guided by the cooperative influence of established industry on the government (and protecting the culture.) But Bismarck was trying—successfully—to replicate the conditions that allowed for the economic changes, the Industrial Revolution, that were transforming Continental Europe’s Anglo-American competitors. And in that sense, the spirit of Bismarck is wholly absent from Europe’s digital efforts.