Google Criticized for Using Dutch Sandwich to Avoid Tax

Google Criticized for Using Dutch Sandwich to Avoid Tax

Recent regulatory filings in the Netherlands show that Google avoided close to $3.7 billion in taxes by moving approximately $19 billion to a shell company based out of Bermuda.
 
According to Bloomberg, the American tech giant avoided its tax obligations by combining two popular structures—the Double Irish (loophole that has been eliminated by the Irish government and will stop running in 2020) and the Dutch Sandwich.
 
As reported by Bloomberg’s Jeremy Kahn, this combination “involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Ireland-registered company.”

Source: The New York Times

Documents released by the Dutch Chamber of Commerce also show that Google moved 7 percent more money via these structures in 2016 as compared to the sums transferred during the previous year.

Following this revelation, a Google spokesperson said, “We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” adding that the company “[remains] committed to helping grow the online ecosystem.”

Google to Benefit from Trump’s Tax Reform

Despite this criticism, the American tech company expects to benefit from the recent tax reform passed in the US.
 
As explained by Kahn, Trump’s new tax plan “will require companies to pay taxes on the overseas income they’ve stockpiled to date at one of two rates: 15.5 percent for income held as cash or cash equivalents and 8 percent for less liquid assets.”
 
Furthermore, as a result of this tax reform, American firms “that pay relatively low global effective tax rates—a sign that they’re using tax havens—would pay a minimum U.S. tax. That new tax, which begins at a rate of 10.5 percent, wouldn’t apply in cases where a company’s global effective tax rate is 13.125 percent or higher.”
 
Recent US financial records show that the US tech giant’s 2016 global effective tax rate was 19.3 percent.

Plenty Speak Out Against Google’s Tax Avoidance Policies

Plenty of politicians and tax justice advocate showed their displeasure towards Google’s tax avoidance tactics.
 
Sir Vince Cable, Head of the Liberal Democrats and a UK MP, said, "This is just another example of a big internet company showing total disregard for national tax authorities.”
 
“It is beyond galling for small business owners and ordinary people who pay taxes but these technology giants consider themselves to be above national jurisdictions.”
 
“They can get away with it and will continue doing so until governments cooperate to tackle this issue,” Cable concluded.
 
Furthermore, Tax Justice Network’s Alex Cobham said, “It is not clear whether the transactions underlying these practices are lawful tax avoidance because it has never been properly tested in court.”
 
“But clearly shifting enormous profits in this way is against the spirit of the law and demonstrates how completely broken the international tax system is.”
 
“What is interesting is that Google has been the poster boy for this kind of aggressive profit shifting but it does not seem to have cost them. I think the reason for that is many people do not buy things directly from them – most of their money is made in advertising.”
 
What’s in store for American tech giants in 2018? Let us know your thoughts below!
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