Netflix Europe offices raided in tax fraud probe

Netflix’s offices in Paris and Amsterdam were raided by French and Dutch authorities as part of an ongoing tax fraud investigation, judicial sources in France confirmed. The two countries have been working together on the case since November 2022, with authorities focusing on potential tax violations by the streaming giant.

Although Netflix has yet to make an official statement about the raids, the company has reiterated its commitment to complying with tax laws in all countries where it operates. The French investigation is being led by the National Financial Prosecutor’s Office (PNF), a specialized unit responsible for investigating major financial crimes, including tax fraud. The PNF is probing allegations of “serious tax fraud” and “off-the-books work” linked to Netflix’s operations in France.

The investigation centers on Netflix’s tax filings for the years 2019, 2020, and 2021, with authorities examining whether the company took steps to minimize its tax liabilities inappropriately. This is part of a broader effort to scrutinize the company’s financial practices in relation to its European operations.

The Netflix office in Amsterdam, which serves as the company’s headquarters for its operations in Europe, the Middle East, and Africa, was also searched by investigators. Both the French and Dutch authorities have worked closely on the case, with coordinated actions over the past several months to address the allegations.

The tax probe follows previous reporting by French media outlet La Lettre in 2022, which claimed that Netflix had been using a strategy to lower its tax burden in France by declaring the revenue it earned in France as part of its total turnover in the Netherlands. According to La Lettre, this arrangement continued until 2021, at which point Netflix allegedly changed its approach. In 2020, the company declared a modest €47.1 million ($51.3 million) in turnover in France. However, after the reported tax strategy was abandoned, Netflix’s declared revenue in France surged to €1.2 billion in 2021.

The surge in reported revenue prompted further scrutiny, with investigators now trying to determine whether Netflix continued to employ methods to minimize its profits and, by extension, its tax payments after the 2021 financial year. The French authorities are looking closely at whether Netflix adjusted its tax reporting to ensure more accurate and transparent declarations in the wake of the 2021 shift.

Netflix, which entered the French market over a decade ago, opened its official office in Paris in 2020. The company has since become one of the leading streaming services in France, with around 10 million subscribers in the country, according to the AFP news agency. Its rapid growth in the French market has raised questions about the company’s financial practices, particularly given the ongoing scrutiny of large multinational corporations and their tax arrangements in European markets.

The raids and subsequent investigation come amid increasing public and governmental pressure on major tech companies, including Netflix, to pay their fair share of taxes in the countries where they generate significant revenue. Europe, in particular, has been a focal point for investigations into how companies like Netflix, Google, and Amazon allocate profits and avoid excessive tax liabilities by funneling earnings through countries with lower tax rates, such as the Netherlands and Luxembourg.

In recent years, European authorities have intensified efforts to curb tax avoidance schemes used by multinational corporations. This includes investigating the transfer pricing practices that companies use to shift profits between different jurisdictions. The case involving Netflix adds to the growing list of corporate investigations, with authorities keen to ensure that businesses contributing to the economies of European countries are fulfilling their tax obligations appropriately.

While the investigation is ongoing, the outcome could have significant implications for Netflix’s operations in Europe and for the broader tech industry, as governments continue to press for stronger tax compliance and more equitable financial practices. If wrongdoing is found, Netflix could face hefty fines or adjustments to its financial reporting, which could affect its future tax filings and business strategies in the region.

The investigation also highlights the challenges of regulating global companies that operate in multiple jurisdictions with varying tax laws. As Netflix and other tech giants continue to grow their international presence, their financial practices are increasingly under the microscope, with governments eager to ensure that they contribute to the public coffers in proportion to the profits they make in these markets.

For now, Netflix is cooperating with authorities, but the outcome of the investigation will likely have wider implications for how international companies approach tax strategy and transparency in Europe.