Recent documents filed with the Netherlands’ Chamber of Commerce show that in 2017 American Internet giant Google moved close to 23 billion dollars to Bermuda via a Dutch shell company to avoid taxes.
This amount was 4 billion dollars greater than the figure transferred in 2016 as part of the legal tax structure known as the “Double Irish with a Dutch Sandwich,” which allows the US firm to avoid both income taxes back home and Europe’s withholding tax.
As reported by Reuters, this set up has permitted “Google owner Alphabet to enjoy an effective tax rate in the single digits on its non-U.S. profits, around a quarter the average tax rate in its overseas markets.”
More specifically, Google Netherlands Holdings BV has been used by Alphabet to “shift revenue from royalties earned outside the United States to Google Ireland Holdings, an affiliate based in Bermuda, where companies pay no income tax.”
Bloomberg Tax further explains that “Google Ireland Limited and Singapore-based Google Asia Pacific Pte. Limited made royalty payments to Google Netherlands Holdings B.V.” and the latter shell company, which employs no one and is a branch of Bermuda-controlled Google Ireland Holdings, “then paid that royalty amount to Google Ireland Holdings Unlimited Co.”
Following pressure by the European Union and the United States, however, the “Double Irish with a Dutch Sandwich” tax structure is being phased out and will no longer be a viable tax planning strategy come 2020.
In a statement, the American multinational said, “We pay all of the taxes due and comply with the tax laws in every country we operate in around the world.”
“Google, like other multinational companies, pays the vast majority of its corporate income tax in its home country, and we have paid a global effective tax rate of 26 percent over the last ten years,” it added.
Moody’s Investor Services reports that “as of June , 949 non-financial companies held $1.8 trillion overseas – a 9.5 percent decline from the end of 2017,” with Alphabet holding an “international cash stockpile” of 102.3 billion dollars during that time period.
Google Fails to Reveal Income in Japan
In related news, Japanese tax authorities revealed that Google had failed to disclose close to ¥3.5 billion in income for 2015.
According to The Japan Times, the American tech giant’s branch in Japan allegedly “reduced its income by shifting locally derived ad revenue to Google’s branch in Singapore, where tax rates are lower.”
More specifically, a government source explained that “although the unit sold advertising and offered consulting services domestically, payments by its clients were allegedly made to the Singapore entity.”
Furthermore, the Google branch in Japan “received remunerations equal to its total business expenses plus an 8 percent commission from the Singapore office, according to the source.”
However, Google’s Japanese office has already paid close to ¥1 billion in back taxes and fines incurred.
What does the future hold for Google and other tech giants? What do you think they will resort to now that tax policy is tightening up across the globe?
Provide us with your forecast in the comments section!