Google putting an end to controversial Dutch, Irish tax scheme

The company however states it had already deserted the “Double Irish, Dutch Sandwich” back in 2017

As of 2020 Google’s parent company Alphabet would no longer exercise an intellectual property licensing scheme called as the “Double Irish, Dutch Sandwich” - a technique to avoid taxes by using Irish and Dutch subsidiaries to shift profits to low or no tax jurisdiction areas, which had been allowing the California-based Alphabet Inc. and other big tech companies to delay paying off taxes in the United States.

The name comes from the strategy of moving money from an Irish subsidiary to a Dutch holding company, and then back to an Irish shell company located in Bermuda that has the rights to license Google intellectual property, thus the “Dutch sandwich” in between. Bermuda has no corporate income tax, making it a lucrative final stop to report income. The whole process effectively avoids paying US income tax and European withholding taxes on overseas profits, although some money is still paid to the Irish government. According to Reuters, Google has this way moved $23bn to Bermuda in 2017 alone using this tax avoidance strategy. 

In 2014, facing mounting pressure from the EU and the US, Ireland closed these loopholes. Companies were given until 2020 to comply with the new regulations, which is why Google is just changing its tax structure now.

“We’re now simplifying our corporate structure and will license our IP (intellectual property) from the US, not Bermuda. Including all annual and one-time income taxes over the past ten years, our global effective tax rate has been over 23%, with more than 80% of that tax due in the US”, the spokesman said this week.

Meanwhile, in the US, the Trump administration has also tried to incentivise companies to return profits to the US by lowering the corporate tax rate from 35% to 21%. The Tax Cuts and Jobs Act of 2018 allowed companies to return money made overseas to the US without facing more US taxes. These changes could prove critical for Google, which is sitting on tens of billions in overseas earnings. 

“A date of termination of the Company’s licensing activities has not yet been confirmed by senior leadership, however, management expects that this termination will take place as of 31 December 2019 or during 2020”, the however said in its filing.

Similar articles

  • Covid-19 vaccine makers slump on expected patent waiver

    Covid-19 vaccine makers slump on expected patent waiver

    The stocks of all companies involved in production of Covid-19 vaccines fell, as US and EU backed the call from the World Health Organisation to waive patent rights claims over the jabs production, Reuters reported. The share slumps came even as some analysts raised doubts about any near-term pressure on Covid-19 vaccine sales from discussions of waiving intellectual property rights, given the manufacturing complexity and scarcity of raw materials. Combined, Pfizer and Moderna have forecast a total of over $45 billion in sales this year for their Covid-19 vaccines.

    37
  • Tesla misses key technology target

    Tesla misses key technology target

    The producer of electric cars Tesla admitted it would miss a target set by its majority owner Elon Musk - to develop full self-driving vehicles by the end of 2021, Reuters reported. The announcement seriously undermines Tesla ambitions to influence the global EV market. Documents released in media earlier this week showed that the company is falling behind announced deadlines while incidents with EVs continue to rise.

    28
  • Bayer loses court fight over EU pesticides

    Bayer loses court fight over EU pesticides

    The German chemical conglomerate Bayer lost an appeal in EU court against a ban related to the usage of pesticides amid growing concerns linked to the extinction on bees, Reuters reported. The European Union's top court upheld the EU's partial ban on insecticides linked to harming bees, preventing their use on certain crops. Bayer appealed to overturn a lower EU court's 2018 decision to uphold the EU ban.

    61