According to documents filed at the Dutch chamber of commerce, an arrangement that allows Google to reduce its foreign tax liability was used by the US tech company to move €19.9bn ($22.7bn) to Bermuda in 2017 through a Dutch shell company.
The documents, filed on 21 December, showed that the amount of money that was moved to Bermuda by the company through Google Netherlands Holdings BV was about €4bn more in comparison to the amount that it had moved a year earlier.
“We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” Google said in a statement. “Google, like other multinational companies, pays the vast majority of its corporate income tax in its home country, and we have paid a global effective tax rate of 26% over the last 10 years.”
Google’s owner, Alphabet has been allowed to pat taxes at an effective tax rate which is in the single digits on its non-US profits because of the arrangement that has been in force for more than a decade now. That rate is about one forth of the average tax rate in its overseas markets.
Revenue earned by the company from royalties outside the US is helped to be shifted to Google Ireland Holdings, which is an affiliate of the company based in Bermuda, through its subsidiary in the Netherlands. There is no corporate or income tax for companies in Bermuda and hence Google pays no tax on the money shifted there.
This tax arrangement is however within the legalities and is known as the “double Irish, Dutch sandwich”. This arrangement allows Google to legally avoid getting liable to pay income taxes in the US or for the European withholding taxes on the funds, which account for a huge part of the profits made by the company.
However, this tax advantage for Google would come to an end in 2020 as the Irish government had decided in 2014 to phase out the tax arrangement following sustained pressure from both the European Union and the United States.
The documents showed that on a gross profit of €13.6m, the taxes that were paid by Google Netherlands Holdings BV in the Netherlands in 2017 was €3.4m.
(Adapted from TheGuardian.com)