Tax fraud and illegal employment? Raids on Netflix
Tax investigators in Amsterdam and Paris coordinated forces and searched Netflix offices in Paris and Amsterdam on Tuesday. Where do the billions belong?
Netflix voucher cards on a supermarket shelf
(Image: Daniel AJ Sokolov)
Dutch and French tax investigators carried out parallel searches at Netflix on Tuesday. They are investigating suspected tax evasion, and in France also suspected money laundering and illegal employment.
This was reported by French media with reference to unnamed members of the judiciary and Dutch media with reference to the public prosecutor's office there. Netflix denies the allegations and emphasizes that it complies with all tax laws. In Italy, Netflix reached an agreement with the local tax authorities two years ago and paid 55.8 million euros. Last week, officials from the South Korean tax authorities paid a visit to Netflix's branch there. South Korea has already penalized Netflix for tax evasion, which Netflix has appealed against.
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At the heart of the conflict is the fundamental question of where international corporations should and may book their profits. In the case of Netflix, the matter is complicated by the fact that it purchases rights to films and series centrally for several countries. In some cases, it also produces the titles itself and often films in several countries. The company then makes the result available to subscribers in numerous other countries. This opens up scope for interpretation as to which revenues from one country are to be offset against costs in other countries, especially as Netflix does not rent out individual titles, but charges flat-rate subscription fees for the entire portfolio and also generates advertising revenue. Computer games are also part of the offering.
Amsterdam hub
Amsterdam is Netflix's headquarters for Europe, the Middle East and Africa. Around half of all global subscription revenue is booked via this branch. However, the company forwards over 90 percent of this back to sister companies in other countries, which the Dutch tax authorities are not taking lightly.
Netflix's global tax rate in 2023 was 12.9 percent, or not quite 800 million US dollars, according to its own figures. The Netherlands has introduced a minimum tax on global profits of 15 percent, but this will not apply to US companies until 2026. Nevertheless, tax investigators already want to know whether everything has been above board so far.
Netflix also booked French subscription fees via Amsterdam until 2020, which the French tax authorities did not agree with. In 2021, Netflix reported the French subscriptions in France for the first time. As a result, French revenue exploded from a good 47 million euros in 2020 to 1.2 billion euros in 2021, according to the Huffington Post. Nevertheless, tax investigators suspect that Netflix France may have continued to use abusive methods to reduce its tax burden.
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