Google overhauls its global tax structure by calling it a day on double Irish

Google has overhauled its global tax structure and consolidated all of its intellectual property holdings back to the US, putting an end to the winding-down of a loophole estimated to have saved the US groups hundreds of billions of dollars.

The company said this week that the move was designed to simplify its corporate tax arrangements and was in line with OECD efforts to limit international tax avoidance as well as changes to US and Irish laws.

Google’s actions came ahead of the close of the double Irish loophole, which has been used by US groups to channel international profits through Ireland and onto havens like Bermuda putting them outside the US tax net. This loophole led US groups to amass more than $1tn offshore as of the end of 2017 when Donald Trump’s tax reform changes the treatment of overseas profits.

Ireland bowed to pressure five years ago and agreed to close the scheme, which was popular with tech and pharma businesses, but companies that already used it were given until the end of 2020 to end the practice.

A lack of disclosure requirements meant that little was known about how specific companies had adjusted their tax arrangements and according to a report from the IMF last year, one avoidance arrangement involved companies injecting intellectual property into new subsidiaries in Ireland known as IP onshoring.

Under double Irish arrangements, companies could place IP such as patents and trademarks in separate subsidiaries that were legally based in Ireland, but not treated as domiciled here for tax purposes, as long as they were managed and controlled from abroad. That IP could then eventually be channeled through to havens like Bermuda.

The Trump administration’s reform passed two years ago, imposed new taxes on companies’ excess profits from IP held overseas, partly to encourage US businesses to bring IP back to the US.

The Double Irish Dutch Sandwich

The advertising money and billions more from elsewhere in the world goes to Google Ireland Ltd which pays it to Dutch subsidiary which in turn pays it back to another Irish company, Google Ireland Holdings,  thus avoiding Irish Tax and is notoriously called Double Irish Dutch Sandwich. Google Ireland Holdings is a “ dual resident” company for US tax purposes, it is an Irish corporation but for Irish tax purposes, Ireland Holdings became a resident of Bermuda.

Bermuda is where Google Ireland Holdings says its “mind and management” are located. Bermuda has no corporate income tax.

Google’s millions

Google claimed revenues of $201 million in Australia, but to have made a $3.9m loss, since it bills its advertising worth an estimated $100miilion to $1bn, from Ireland.