Business Irish

Thursday 18 September 2014

Google pays just 0.14% tax in seven years

Global giant paid less than €70m in tax on sales of €47bn through its Irish operations

Roisin Burke

Published 09/12/2012 | 05:00

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John Herlihy, left, head of Google Ireland, with Taoiseach Enda Kenny

GOOGLE Ireland paid a puny 0.14 per cent tax on sales of over €47bn in seven years, the Sunday Independent has found.

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While people reel in the aftermath of another austerity budget, entirely legal accounting magic allowed the multibillion-earning multinational to pay fractional tax to the Irish Exchequer.

On turnover of €47.44bn, Google Ireland paid total tax of €69.91m between 2005 and 2011. And in spite of its massive earnings, profit before tax during that period is an astonishingly small €114m.

Google keeps tax bills low through a system of transfer pricing – royalty payments filtered through Ireland, the Netherlands and ultimately Bermuda.

"Ireland has the laxest transfer pricing rules of anywhere in Europe because of the objective of employment there," said Richard Murphy of Tax Research UK. "So it can't turn around and say 'you're not paying enough tax.'

"Ireland doesn't ask questions of companies that are located there," he said. "Politicians of all parties in Ireland have nailed their colours to the low tax-rate mast, so Ireland is unable to take to task large corporations that are taking it for a ride. It can't then turn around and say 'now we're going to give you a tough time in audit'."

Concerns about Google's elaborate but entirely legitimate 'double Irish/Dutch sandwich' tax strategy are well aired, but the search engine behemoth is attracting new attention as coffee giant Starbucks has been taken to task in Britain for using complex but legal methods to declare losses and avoid tax there.

Ireland may not want to tackle a global giant that employs 2,500 people here, but France has reportedly slapped Google with a €1.68bn tax bill and has raided its Paris offices several times. It also has Facebook and Amazon in its sights. In Italy, an official told parliament that tax police inspecting Google's books have found millions in undeclared income and unpaid tax.

Apart from paying minimal tax to the Irish Exchequer, the accusation levelled is that countries all over the world are down billions in tax thanks to Google's legal tax practices in Ireland, dubbed "utterly immoral" in recent days by a British parliamentary body.

"Like all multinationals, Google is shifting profits from the locations where they do business to tax havens," US economist and former US Treasury staffer Martin Sullivan said.

"They do this by transferring their intangible assets such as patents and trademarks into holding companies. We do not have an inside view as to exactly what they are doing but we can observe their financial statements and see high turnover and low taxes.

"It's common practice and not illegal, but the Starbucks episode in the UK is really changing the politics of international taxation. There is big debate in the US about Google and whether to allow it to continue to this," he added.

Parent company Google Inc paid a worldwide tax of just €2.5bn on €26.4bn in profits in 2011.

In response to questions from this newspaper, Google Ireland said: "We make a big contribution to the Irish economy by employing around 2,500 people in our European HQ in Dublin, helping hundreds of thousands of businesses to grow online and we've invested €75m in our recently opened data centre and another €226.9m in the acquisition of three office buildings in Dublin in 2011 alone.

"We have an obligation to our shareholders to run our business efficiently and we comply with all the tax rules in Ireland."

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