Google pumps $19 billion through tax optimization scheme in 2016
The company uses subsidiaries in Ireland, Singapore and the Netherlands to shield most of its international profits from taxation, reports Bloomberg. Advertising revenue is generated by its Irish and Singapore branches, and then funneled through the Dutch branch, which has no employees. It is then sent to a Bermuda mailbox called Google Ireland Holdings Unlimited. The scheme, which is legal, has been given monikers like the “Double Irish” and “Dutch sandwich” by financiers.
In 2016, Google moved €15.9 billion ($19.2 billion) from the Netherlands to its Bermuda shell, according to company filings with the Dutch Chamber of Commerce, which were published on Tuesday and reported by local media. The company saved $3.7 billion in tax that it avoided paying in Ireland and Singapore as a result.
In 2015, the same tax optimization scheme moved €14.9 billion ($15.5 billion) to the Bermuda entity and saved Google $3.6 billion. The Irish government closed the loophole that allowed such an arrangement two years ago, but Google will be able to use it until 2020.
The US company is estimated to have paid an effective tax rate of 19.3 percent in 2016, Bloomberg said, which is achieved by shielding international profit from taxation. Google had $60.7 billion in tax-free foreign earnings held overseas at the end of 2016.
The tax reform passed last month in the US gives companies like Google an incentive to repatriate foreign earnings by paying a once-off 15.5 percent tax rate. It also imposes a 13.1 percent tax on some international patent royalties, which are essential for tax schemes like the one used by Google.