Google saved US$3.7 billion in tax payments last year due to legal loopholes Google saved US$3.7 billion in tax payments last year due to legal loopholes

Google saved US$3.7 billion in tax payments last year due to legal loopholes
19 Jan 2018

Although Google claims it has paid all due taxes, it is under scrutiny from regulators and authorities around the world.

Alphabet’s Google shifted €15.9 billion (US $19.1 billion) to a Bermuda shell company in 2016, shielding it from at least US$3.7 billion in taxes, regulatory filings in the Netherlands show.

The company used techniques known as a ‘Double Irish’ and a ‘Dutch Sandwich’ to protect the majority of its international profits from taxation by shifting revenue from an Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Irish-registered company, The Irish Times said.

While the Irish government closed the tax loophole that permitted ‘Double Irish’ tax arrangements in 2015, companies already using the structure are allowed to continue employing it until the end of 2020 – and Google moved 7% more money through this tax structure in 2016 than the year before, according to company filings with the Dutch Chamber of Commerce.

Google claims it has paid all due taxes, but is under scrutiny from regulators and authorities around the world. Last year, it was able to avoid a €1.12 billion (US$1.34 billion) French tax bill after a court ruled its Irish subsidiary, which collects revenue for ads sold in France, had no permanent base in the country.

According to US financial filings, Google’s global effective tax rate in 2016 was 19.3%, partly because it was able to shift the majority of its international profits to the Bermuda-based firm. The total pool of foreign earnings Google was holding overseas, free from taxation, was $60.7 billion at the end of 2016, the company said in its SEC filings.

A US tax law passed last month creates an incentive to repatriate much of that cash by offering the company a one-time, 15.5% tax rate. After that, foreign earnings would be taxed at a rate of 10.5%, although companies can deduct foreign tax liabilities from this amount.

The new law will also impose a 13.1% tax on certain international patent royalties that could hit Google’s tax arrangement, under which its Bermuda-based subsidiary licenses the firm’s intellectual property to its other foreign subsidiaries.

Although Google claims it has paid all due taxes, it is under scrutiny from regulators and authorities around the world.

Alphabet’s Google shifted €15.9 billion (US $19.1 billion) to a Bermuda shell company in 2016, shielding it from at least US$3.7 billion in taxes, regulatory filings in the Netherlands show.

The company used techniques known as a ‘Double Irish’ and a ‘Dutch Sandwich’ to protect the majority of its international profits from taxation by shifting revenue from an Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Irish-registered company, The Irish Times said.

While the Irish government closed the tax loophole that permitted ‘Double Irish’ tax arrangements in 2015, companies already using the structure are allowed to continue employing it until the end of 2020 – and Google moved 7% more money through this tax structure in 2016 than the year before, according to company filings with the Dutch Chamber of Commerce.

Google claims it has paid all due taxes, but is under scrutiny from regulators and authorities around the world. Last year, it was able to avoid a €1.12 billion (US$1.34 billion) French tax bill after a court ruled its Irish subsidiary, which collects revenue for ads sold in France, had no permanent base in the country.

According to US financial filings, Google’s global effective tax rate in 2016 was 19.3%, partly because it was able to shift the majority of its international profits to the Bermuda-based firm. The total pool of foreign earnings Google was holding overseas, free from taxation, was $60.7 billion at the end of 2016, the company said in its SEC filings.

A US tax law passed last month creates an incentive to repatriate much of that cash by offering the company a one-time, 15.5% tax rate. After that, foreign earnings would be taxed at a rate of 10.5%, although companies can deduct foreign tax liabilities from this amount.

The new law will also impose a 13.1% tax on certain international patent royalties that could hit Google’s tax arrangement, under which its Bermuda-based subsidiary licenses the firm’s intellectual property to its other foreign subsidiaries.