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Monday 28 July 2014

Google avoided $2bn taxes worldwide in 2011

Jesse Drucker and Peter Flanagan

Published 11/12/2012|05:00

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GOOGLE avoided about $2bn (€1.55bn) in worldwide income taxes in 2011 by shifting $9.8bn in revenues through Ireland into a Bermuda shell company, almost double the total from three years before, filings show.

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By legally funnelling profits from overseas subsidiaries into Bermuda, which doesn't have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80pc of Google's total pre-tax profit in 2011.

The increase in Google's revenues routed to Bermuda, disclosed in a November 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and the US over corporate tax dodging. Governments in France, the UK, Italy and Australia are probing Google's tax avoidance as they seek to boost revenue during economic doldrums.

The internet search giant has avoided billions of dollars in income taxes around the world using a pair of tax shelter strategies known as the Double Irish and Dutch Sandwich.

The tactics move royalty payments from subsidiaries in Ireland and the Netherlands to a Bermuda unit headquartered in a local law firm.

Multinational companies cut their tax bills using "transfer pricing," paper transactions among corporate subsidiaries that allow for allocating income to tax havens and expenses to higher-tax countries.

In Google's case, an Irish subsidiary collects revenues from ads sold in countries like the UK and France. That Irish unit in turn pays royalties to another Irish subsidiary, whose legal residence, for tax purposes, is in Bermuda. The pair of Irish units gives rise to the nickname "Double Irish". To avoid an Irish withholding tax, Google channelled the payments to Bermuda through a subsidiary in the Netherlands – thus the "Dutch Sandwich" label.

Google Ireland last year reported profits of just €2.1m on revenue of just under €12.5bn. The company paid royalties of a little more than €9bn to a Bermuda based firm.

Last week, the EU's executive body, the European Commission, advised member states to create blacklists of tax havens and adopt anti-abuse rules.

Irish Independent

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