February 11, 2016 / 4:10 PM / a year ago

Italy opens tax probe on Google managers: sources

3 Min Read

The neon Google sign in the foyer of Google's new Canadian engineering headquarters in Kitchener-Waterloo, Ontario January 14, 2016.Peter Power

MILAN (Reuters) - Prosecutors are investigating five managers at Alphabet Inc's Google as part of a probe into allegations the firm evaded taxes worth 227 million euros ($257 million) in Italy, investigative sources said on Thursday.

Lawmakers across Europe are looking for ways to change tax rules which allow multinationals to shift untaxed profits into low-tax jurisdictions.

Meanwhile, tax authorities in some countries, including Italy, are also trying to use existing tax rules to force companies to pay more tax on the profits generated by sales in their countries.

In response to a request for comment on the investigation, Google said in a statement, "Google complies with the tax laws in every country where we operate. We continue to work with the relevant authorities."

It made the same statement in response to reports last month that the Italian authorities were accusing the company of evading paying 227 million euros in taxes between 2009 and 2013.

Italy believes the company failed to declare some 100 million euros in revenues over five years which would have fallen into a 27 percent corporate tax bracket, investigative sources said in January.

Finance police also suspect the company should have disclosed some 600 million euros of royalties which would have led to a tax demand for some 200 million euros.

During a parliamentary hearing in London on Thursday, Google declined to confirm Italy's tax claims and a similar discussion in France.

Google has based its regional headquarters in Dublin, where corporate tax rates are much lower than in Italy. The firm says its Italian presence merely provides consulting and marketing services for Google Ireland, the Middle East and Africa.

In January Google agreed to pay the British government 130 million pounds ($188 million) in back taxes in a deal which opposition parties criticized as too little.

Last year Apple, which also has its European base in Ireland, agreed to pay Italy's tax office 318 million euros to settle a tax dispute, a source with direct knowledge of the matter said.

The European Union is expected to bring forward new rules on tax and financial disclosure to curb corporate avoidance which the European Parliament estimates costs the bloc 70 billion euros a year.

Reporting by Manuela D'Alessandro in Milan and Tom Bergin in London; Writing by Isla Binnie; Editing by Greg Mahlich and Crispian Balmer

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