Alphabet Inc. (NASDAQ:GOOG) executives must have popped up champagne when the British tax authorities slapped Google with a light £140m ($185m) in back taxes. As they celebrated, British lawmakers united to condemn the deal, lending a political angle to the debate.
This political fires seemed to have spread to the European Union, which is considering expanding investigations to determine if Alphabet abused its dominance via its Android mobile operating system and its Adsense ad service.
In January, the Scottish National Party’s deputy chief Stewart Hosie wrote to Brussels asking for a probe into Google’s tax deal with the UK revenue authority.
EU competition czar Commissioner Margrethe Vestager, who has proved a thorn in Google’s flesh with her numerous attempts to investigate the latter’s malfeasances, suggested on Monday that she could initiate formal charges against Google.
Last April, Ms. Vestager took Google to court for unfairly leveraging on its market dominance to direct search results in favor of its own shopping service.
Alphabet Investigated over Android Practices
She also launched a formal investigation into Google’s behavior with Android and revealed she would monitor its conduct in other aspects, such as whether it obstructs or prevents website owners from signing up for ads that compete with Adsense.
The EU recently mailed queries to firms asking for further information concerning Google’s conduct in its advertising unit. Some of the information asked further details beyond whether Google deliberately forced website owners to sign up for its service.
However, Ms. Vestager said she is unsure of when the investigation into Google’s conduct on Android will be completed. One aspect the EU competition commission is investigating is whether Google requires users to sign up for Google apps if they buy Android products.
Google has frequently been criticized over allegations that it asked tablet and smartphone manufacturers to preinstall its own range of apps for search, messages and email. Manufacturers who wish to include their own apps that offer similar services are thought to be asked to preinstall such apps.
Ms. Vestager, widely accused of targeting American companies, has refuted the claim. She used the case of Russian energy monolith Gazprom PAO, which being investigated for breaching antitrust laws, to rubbish such claims.
U.S. firms that are being investigated for questionable tax practices include Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc.(NASDAQ:AAPL). The U.S. Treasury Secretary Jack Lew had in February lodged a complaint with the European Union, accusing it of unfairly zeroing on U.S. companies over tax breaks.
Intense Lobbying Prompted Lew’s Letter
Lew decision to write the later could have been prompted by intense lobbying by US business leaders and Silicon Valley organizations, which argued the EU was discriminating against U.S. multinationals.
Apple is currently being investigated over its tax breaks in Ireland. Amazon is being investigated over its tax deal in Luxembourg, where it employs 1,000 workers. The online shopping giant has been accused of paying £11.9m in taxes in Britain, despite the fact that its Luxembourg unit reporting £5.3bn in sales in UK alone.
Amazon’s UK sales amounted to 9.4 percent of its global revenues, and were channelled via its Luxembourg unit Amazon EU Sarl. The unit also received billions in revenue from France, Germany and other strong EU economies without being subjected to taxes on any profits earned there.
The EU is currently investigating if tax breaks offered by its member countries, such as Luxembourg and Ireland, break laws governing state aid to businesses. If the tax breaks are found to be illegal, the EU will ask the affected countries to recover such tax funds from the involved corporations.
Other U.S. companies that have been subjected to investigations by the EU include McDonald’s Corporation, The Coca-Cola Co (NYSE:KO), Walt Disney Co (NYSE:DIS), PepsiCo, Inc. (NYSE:PEP) and Facebook Inc (NASDAQ:FB).