As Apple defends its own actions related to its Ireland tax maneuvering, new filings from Google show that it saved $3.6 billion in worldwide taxes during 2015 by using infamous Dutch & Irish tax loopholes. The move is a continuation of a scheme Google has been running since 2004.
Since 2004, Google has been funneling money through its Google Netherlands Holdings BV subsidiary, but in 2015, the amount funneled through was 40 percent greater than in 2014, according to filings obtained by Bloomberg. The company runs the majority of its non-U.S. profits through this subsidiary using a tax loopholes referred to as a “Double Irish” and a “Dutch Sandwich.”
The process starts with profits being siphoned through the Google Ireland Limited subsidiary, which allows Google to pay a lower corporate tax rate. From there, the money is sent to the aforementioned Netherlands subsidiary. Finally, the money is moved to a company called Google Ireland Holdings Unlimited in Bermuda. Google granted this subsidiary the right to license Google intellectual property, which is why it can claim ownership of the international profits. There is no corporate income tax in Bermuda.
The convoluted process allowed Google to cut its effective tax rate outside of the United States to 6.9 percent in 2015.
Alphabet filings show that the total amount of profit Google has sheltered from United States taxation hit $58.3 billion in 2015. For its part, however, Google stated that it “complies with the tax laws in every country where we operate” in a statement.
Nevertheless, the Irish government closed the tax loophole that allows for the “Double Irish” scheme in 2015, though companies have until 2020 to stop using it.
Google is no stranger to tax maneuvering. In January of this year, the company struck a questionably legal deal with UK tax authorities to pay £130 million in back taxes after a six-year investigation by the British government. Indonesia, Russia, and France have also come after Google to collect back taxes.
Google is among many companies that use the “Double Irish” and “Dutch Sandwich” scheme to lower taxes, but come 2020, things may have to change.