(Credits: Venti Views)

French investigators have been deployed to search the Netflix offices in France in and Netherlands on Tuesday, with prosecutors opening an investigation into suspected tax fraud.

The streaming giant are being looked into for ‘serious tax fraud and off-the-books work’, an investigation that was opened in 2022 by the Parquet National Financier, who are often employed to investigate global companies and was led by their team who specialise in financial crime and corruption.

A spokesperson for Netflix responded to the allegations, saying, “We are cooperating with the authorities in France, where Netflix is a significant contributor to the local economy, and we comply with the tax laws and regulations in all the countries in which we operate”.

A similar raid was also carried out in their Amsterdam headquarters, the main base for the European branch of the company. This was said to have been prompted by a request from the French authorities, although the specific reasoning behind the investigation is not yet clear, although problems have arisen before between tax authorities and international tech companies.

However, the French news outlet La Lettre reported last year that tax authorities had reported suspicions around Netflix’s low tax payments despite a having a high number of paying subscribers. The French branch of the company allegedly paid less than €1 million in corporate taxes, which was made possible by declaring their turnover from France to the Netherlands. However, this practice ended in 2021 and their tax payments changed from €47.1 million in 2020 to €1.2 billion in 2021. 

The company had also previously faced problems with the Italian tax authorities in 2022, which was settled through a one-off payment of €55.8 million.

Netflix currently employs over 40 people at their Paris office, which was opened in 2020. France has ten million subscribers after its arrival in the country a decade ago. Last year, the company spent €250 million on producing French shows, with €50 million spent on feature films. The company has maintained that they are following the entertainment laws and adding to a thriving creative industry in France. 

Given their previous issues, the investigating team will be looking into whether Netflix has made illegal attempts to minimise their tax payments. However, the method of billing a share of profits to companies outside France can be a tax optimisation strategy that is legal under certain circumstances.

While an investigation has been launched, this does not mean that the case will go to trial or lead to criminal charges.