Google might be tangled with the European Commission for investigation of anti-trust issues with its products but it’s been exempted from intrusions into their tax deals with authorities across Europe. Due to the same, the tech behemoth has been able to exploit an intricate set of loopholes in Irish and Dutch tax policies. This has helped it save over $3.6 million in worldwide taxes for the year 2015, reports Bloomberg.
The loopholes known as “Double Irish” and “Dutch Sandwich” enable major U.S corporations to funnel money through subsidiary holdings located in low-tax countries like Netherlands and Ireland. These cuts from the profit are then transferred to tax havens in locations such as Bermuda or the Cayman Islands. Thus, Google operates most of its non-U.S profit business out of these regions and exploits these infamous tax loopholes.
According to regulatory filings made with the Dutch Chamber of Commerce, Google managed to shuffle 40 percent more capital to their tax haven in Bermuda through its Dutch subsidiary, Google Netherlands Holdings BV. Last year, the company was able to funnel $15.5 billion to its shell company incorporated in the aforementioned tax haven. This has led the company to reduce its tax rate outside of the United States to 6.4 percent.
The process of funneling capital to subsidiaries in tax havens is extremely complex, which starts off with U.S technology majors — let’s say Google — siphoning their international profits through an Irish subsidiary. The taxation policies here are relaxed and rates are also quite low, so the money is moved through these countries to another location. This money is then moved to its subsidiary in Netherlands — which also enjoys low taxations. Finally, all the profits are moved to the shell company, which has been granted the right to license Google intellectual property
Finally, all the profits are moved to the shell company called Google Ireland Holdings Unlimited, which has been granted the right to license Google intellectual property. It can, thus, claim ownership of profits and save the company from troubles. The company has been using this loophole in tax rules since 2004 and the total taxation amount sheltered from U.S taxation policies now stands at a whopping $58.3 billion. With accordance to the same, a Google spokesperson has dispensed the following statement,
Google complies with the tax laws in every country where we operate.
Plus, the U.S technology behemoths only have until 2020 to discover another loophole in the tax rules of these countries as the double Irish loophole has been closed by the government last year. Apple is currently caught up in a lawsuit against the EU, who has instructed it to pay over $14.5 million in illegal tax benefits to the Irish government. But Apple as well as the government both have rebuked the decision and filed a complaint (allegation) against the Commission just recently.
