Google Paid Just $3.1m EU Tax on $13 Billion Revenue: Report
Search giant Google – now a subsidy of Alphabet Inc. (NASDAQ:GOOG) – transferred around 11.7 billion euros ($13 billion) from its European operations to its accounts in Bermuda in 2014, in order to limit the tax burden on this income. This tax avoidance practice is often known as “Double Irish with a Dutch Sandwich,” and helps corporations avoid what they see as excessive tax rates in their home countries.
Reuters reports that as per recent filings, the transfer allowed Google to pay only 2.4% in tax on this sum, amounting to just 2.8 million Euros ($3.1 million). Google attained this tax advantage through the differences that exist between the US and Irish tax codes.
Google pays a certain amount of its profits to an Ireland-based affiliate. These payments are dubbed patent royalties, on which lower tax rates are normally applied. To further save tax on these amounts, the money is reportedly routed to Google Netherlands Holding BV, which is Alphabet’s Dutch subsidiary.
Tax costs are lowered even more when funds from the Netherlands are channeled to another associate in Ireland, Google Ireland Holdings. This entity is based in Bermuda, which is a tax haven for most corporations due to its zero-tax policy. Even though Ireland put an end to these double Irish/Dutch sandwich arrangements in 2015, companies such as Google continue to benefit from the original tax rules that will continue to function for them till 2020.
Latest reports also suggest that Google CEO, Sundar Pichai is set to meet the European Commission’s (EC) anti-trust boss Margrethe Vestager next week on Thursday. The EU anti-trust office has also accused the search giant of favoring its own preferred businesses when displaying search results on its platform, thereby violating fair competition policies.
This case has been ongoing for the past five years. If found guilty, Google could end up having to pay fines worth 10% of its global revenue, with some sources estimating it to be over $6.6 billion. It will also be obliged to change its business practices. Google tried to end the dispute by offering several concessions, but no settlement has been reached yet.
Moreover, Google has also been criticized for the low taxes it pays all over Europe. Google reached a controversial back-taxes agreement with UK authorities last month, under which it will pay only $260 million to end all tax disputes. Ms. Vestager is expected to raise this issue with Mr. Pichai as well, following a complaint from several British parliamentarians and the Scottish National Party saying the amount is too low considering Google’s revenues in billions.
Google maintains that all taxes it has paid comply with local laws and regulations; that there is no misdoing on its part.
