Google keeps tax low with bite of a double Irish/Dutch sandwich

Wheeze moved €12bn in and out of Ireland by way of Netherlands and Bermuda

A new Google data centre in Eemshaven. The Netherlands was only one stop in a whirlwind movement of billions in company profits. Photograph: EPA/Vincent Jannink

A new Google data centre in Eemshaven. The Netherlands was only one stop in a whirlwind movement of billions in company profits. Photograph: EPA/Vincent Jannink

 

Does there ever come a point when big multinationals feel obliged to pay more tax? Or will the need to maximise shareholder return always trump (excuse the pun) all other considerations?

The week was dominated by the final European Commission judgment of the Apple tax affair. Who knows what the European courts will decide in the years ahead on the legalities of this. But the fact remains that Apple had a structure that allowed it to pay tiny amounts of tax on profits earned outside the US.

Now we hear that Google continued its own tax avoidance play in 2015, moving some €12 billion in funds out of Ireland, to the Netherlands, back to Ireland and then on to Bermuda. As a result, Google’s tax rate of profits earned outside the US was just 6.4 per cent.

The fundamental reason for this remains the fact that US tax legislation allows US companies to avoid US corporation tax on their profits – subject to certain restrictions – provided the money remains outside the US.

Google achieved this through a mechanism knows as the “double Irish/Dutch sandwich.” This involved Google’s Irish arm, which collects the bulk of its advertising revenue earned outside the US, and another Google company in Singapore transferring money to a Dutch Google company.

The Dutch company then sends it to an Irish-registered Google subsidiary, which is tax resident in Bermuda. This subsidiary owns the right to use Google’s intellectual property outsider the US – and so is effectively charging the other companies for the use of this.

Tax advantage

The continued use by Google of the Dutch company in the middle of this is unusual. The tax advantage of the mechanism was removed in 2010 by a change in Irish withholding tax practices. We can only presume that Google is still doing it this way because that is always the way it has done it.

And, of course, the double Irish structure itself was abolished in 2014, although companies already using it, such as Google, can continue to do so until 2020.

Given the international fuss about all this, the pity is that the Government did not decide to end this all more quickly. Surely a two- or three-year phase-out would have been sufficient?

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.