‘Double Irish’ and ‘Dutch Sandwich’ loopholes save Google billions in tax

Apple might have gotten the majority of the European Commission’s attention for ‘creative’ accounting strategies, but Google is not innocent after shielding €16 billion from the tax man.

Over the course of 2016, the internet search giant saved itself as much as €3.7 billion by moving cash between various shell organizations in Ireland, the Netherlands and Bermuda. According to Bloomberg, Google is making use of various structures in Ireland and the Netherlands, known as ‘Double Irish’ and ‘Dutch Sandwich’ respectively, to duck and dive around the tax man.

Such tax strategies have become infamous over the last couple of years, as Silicon Valley giants reap the benefits of the shifting digital economy in various countries without paying (or a substantially smaller amount) local taxes. Many of these loopholes have now been closed, though the tech giants are free to continue using the ‘Double Irish’ structure until 2020.

Essentially, the strategy breaks down like this; advertising revenues from various countries in Europe is collected in Ireland (where there is a lower corporation tax), before being immediately shifted to a Dutch subsidiary, where it is held. The revenue is then eventually shifted onto another shell organization in Bermuda, a subsidiary of the Irish business, where it is reported. Google is finding tax relief in some countries as there isn’t a physical presence. This is certainly the case in France, where it won a legal battle over roughly €1 billion recently.

€3.7 billion could have been saved on €15.9 billion in revenues over the course of 2016, a 7% increase on the 2015 figures. Considering the growth which Google has been experiencing over the course of 2017, Q3 saw a 24% year-on-year jump for total revenues, it shouldn’t surprise many if this number was larger for the last 12 months.

Of course, Google has released a statement where it has said it complies will all local tax laws and regulations, though the question at whether this is an ethical way to do business in international markets still lingers.

While this is a common practise for international businesses, it could all be set to change over the next couple of months. With the introduction of President Trump’s new tax laws, companies like Google could see lower tax bars on overseas profits. The move has been made by the Commander-in-Chief to encourage the repatriation of profits, and hopefully investment in the US. That said, few organizations have made any substantial, concrete commitments to reinvest in the domestic market.

Perhaps it would surprise few if organizations such as Google move the cash back to take advantage of tax relief, before moving elsewhere when a better deal is available. President Trump seems to be putting a lot of faith into these organizations, few of which have demonstrated any precedent for really caring that much outside of the spreadsheets. These are the most profitable businesses on the planet for a good reason after all.

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