EU scrutinises Google’s tax arrangements in Ireland

The European Union has taken a closer look at how Google uses operations in Ireland to help reduce its corporate tax obligations within the trade bloc, two people familiar with the matter said.

Officials from the European Commission held in-depth talks with Irish authorities late last year about whether the internet-search unit of Alphabet Inc complies with rules limiting tax perks provided by individual European governments, according to one person, who asked not to be named as the matter is private.

The review was preliminary and might not lead to any formal investigation, the person said. According to another person, an EU investigation isn’t imminent and some Irish authorities are optimistic that initial conversations proved sufficient to avoid a more extensive probe of the company’s tax arrangements.

Ministern for Finance Paschal Donohoe discussed a potential tax case with EU competition commissioner Margrethe Vestager, one person said.

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Google declined to comment, as did the European Commission.

EU officials have been cracking down in recent years on efforts by big global companies to limit their European tax burdens. Ms Vestager ordered Apple Inc to pay back billions of euros to Ireland, and she backed a push by France to tax internet firms more heavily.

Apple, Google and Facebook Inc all base their European operations in Ireland, which has a low basic corporate tax rate. Ireland has successfully resisted efforts by other European states to align tax calculations across the region. Vestager’s probes have provided another way for the EU to put pressure on low-tax states – including Ireland, Luxembourg and the Netherlands – that may lure firms away from other European nations.

Regulatory Scrutiny

Ms Vestager has been a key figure in Google’s regulatory woes in Europe, stepping up an antitrust probe when she took office in 2014 that her predecessor had been willing to end. She finished the third and last probe into the company’s behavior with a €1.5 billion fine in March, a day before she started campaigning to become president of the European Commission or win another senior EU post.

Until recently, Google has seen little scrutiny of whether its Irish operations violate the EU’s so-called state-aid arrangements. Apple has been the biggest target so far. The company was ordered to pay as much as €13 billion for deals with Ireland that reduced its effective corporate tax rate. Apple and Ireland are appealing the decision. The EU has also taken aim at Amazon.com Inc’s tax deals with Luxembourg.

Google arrived in Ireland in 2003, with 100 employees. Now, it employs about 7,000 in Ireland. The company’s European headquarters is in Dublin and its sprawling campus close to the south docks has been dubbed Googletown.

In 2017, Google Ireland Ltd recorded a profit of €1.2 billion on revenue of €32.2 billion, according to company filings. The firm paid €167 million in corporation tax.