Alphabet Inc’s Google moved 15.9 billion euros ($19.2 billion) to a Bermuda shell company in 2016, regulatory filings in the Netherlands show — saving the company billions of dollars in taxes that year.
Google uses two structures, known as a “Double Irish” and a “Dutch Sandwich,” to shield the majority of its international profits from taxation. The set-up involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Ireland-registered company.
The amount of money Google moved through this tax structure in 2016 was 7 per cent higher than the year before, according to company filings with the Dutch Chamber of Commerce dated December 22 and which were made available online on Tuesday. News of the filings was first reported by the Dutch newspaper Het Financieele Dagblad.
“We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” a Google spokesman said in a statement. “We remain committed to helping grow the online ecosystem.”
Google is under pressure from regulators and authorities around the world for not paying enough tax. Last year, the company escaped a 1.12 billion euro French tax bill after a court ruled its Irish subsidiary, which collects revenue for ads the company sells in France, had no permanent base in the country. The European Union has been exploring ways to make US technology companies, many of which use similar tax shelters, pay more.
The Irish government closed the tax loophole that permitted “Double Irish” tax arrangements in 2015. But companies already using the structure are allowed to continue employing it until the end of 2020.
According to US financial filings, Google’s global effective tax rate in 2016 was 19.3 per cent, which it achieved in part by shifting the majority of its international profit to the Bermuda-based entity. Applying that tax rate, Google would have saved $3.7 billion via the 2016 transfer.
Tax expert Robert Willens said a better way to calculate Google’s savings would be to apply Ireland’s 12.5 per cent tax rate to the amount of money shifted to Bermuda because the income would otherwise have been taxed there. Under that scenario, Google would have saved about $2.4 billion in taxes.
Google held $60.7 billion overseas at the end of 2016 on which it hadn’t yet paid US income taxes or “foreign withholding taxes,” the company said in a filing with the US Securities and Exchange Commission.