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A tax loophole allowed Google to avoid paying $3.6 billion last year

Image used with permission by copyright holder
Don’t blame the player, blame the game. That would appear to be Google’s mantra, at least when it came to the hefty tax savings the firm achieved in 2015 by taking advantage of a tax loophole known as a “Double Irish” and a “Dutch sandwich.”

Essentially, this involved moving most of the company’s international profits through an Irish subsidiary, then sending the money to a Dutch subsidiary (Google Netherland Holdings BV), and on to a Bermuda-based company known as Google Ireland Holdings Unlimited. The presence of two Irish subsidiaries that sandwich the Dutch intermediary give the loophole its name. This scheme allowed Google to decrease its effective tax rate to a measly 6.4 percent last year, translating to a savings of $3.6 billion worldwide. And you wonder why their offices are so nice.

In examining new regulatory filings in the Netherlands, officials discovered that Google moved $15.5 billion to the Bermuda shell company, a sum 40 percent larger than that moved to the same shell company in 2014.  According to a Bloomberg report, Google’s parent company Alphabet transfers most of its international profits through Google Netherlands Holdings BV, which has exactly zero employees. The subsidiary, however, has been used to Google’s tax benefit for over a decade — since 2004, in fact.

“Google complies with the tax laws in every country where we operate,” a Google spokesman said in a statement.

While the tax loophole was closed last year, companies that have already taken advantage of the arrangement are permitted to do so until the end of 2020, which seems like great news for Google. That said, however, the tech giant has come under fire from many other countries for its tax practices, and in Indonesia, Google is fast approaching a deadline to reach an understanding in a tax dispute which could include a $223 million fine.

But considering that Google managed to shelter $58.3 billion from American taxation in 2015, as per Alphabet’s SEC filings, a few hundred million may not be such a big deal after all.

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Lulu Chang
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