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TWO YEARS AFTER the controversial ‘double Irish’ loophole was closed to new entrants, Google continued using the system to funnel billions in untaxed profits to Bermuda.
Since it set up a small satellite office in Ireland in 2003, Google’s local operation has swelled to become one of the State’s biggest employers and corporate taxpayers.
Last week, new accounts for the US search giant’s main local arm, Google Ireland, which sells advertising across the Europe, Middle East and Africa region, showed that the firm had booked pre-tax profits of €1.33 billion on revenue of €32.2 billion.
Its tax charge for the year stood at €170.9 million, up from €163.8 million in 2016.
However, for the first time since Google’s early foundation in Dublin, separate accounts for its main Irish holding company reveal the enormous profits that have been siphoned tax-free offshore through its local subsidiaries.
The figures for Google Ireland Holdings, the parent company for Google Ireland and a string of other locally incorporated firms, include $14.5 billion in untaxed profits last year on turnover of $22.3 billion.
The tally was a substantial increase on the $8.9 billion profit the company declared in 2016 on turnover of $17.6 billion.
Due to its unlimited share structure, the company was previously not required to lodge public accounts, however an EU directive introduced into Irish law last year required many of these firms to start filing detailed records.
Google Ireland Holdings, which had zero staff on its books for both years, is incorporated in the Republic but domiciled in Bermuda, previously labelled by Oxfam as the world’s worst corporate tax haven.
The company holds and licenses intellectual property to its subsidiaries, whose increased turnover had in turn fuelled higher royalty income for the holding firm in 2017, according to its latest accounts.
The structure is typical of a so-called ‘double Irish’ setup, which involves two or more locally-registered firms where profits are transferred to the one domiciled in a low- or no-tax jurisdiction.
The accounts, audited by EY, noted that no corporate tax charges applied for the past two years as the standard rate in Bermuda was 0%.
At the standard Irish rate of 12.5%, the company’s 2017 tax bill would have stood at more than $1.8 billion, or €1.6 billion at current exchange rates, while the tally for 2016 would have come to $1.1 billion.
A spokeswoman for Google Ireland said that, as a US company, it paid the majority of its corporate tax in the US.
She noted that until the end of last year, the US tax system had allowed companies to defer taxation of their international profits.
These rules meant no US corporate tax was due until the money was transferred back onshore, however a President Trump-led change introduced this year meant the stockpiled cash could be returned at a reduced, one-time rate of 15.5%.
“Google’s international profits have now been taxed in the US, increasing our tax charge last year by $10 billion and raising our 10-year effective tax rate to 26%,” the spokeswoman said.
Filings for Google’s parent company, Alphabet, show its tax provision leapt from $4.7 billion in 2016 to $14.5 billion last year, pushing its effective tax rate for the year to 53% – up from 19% in 2016.
All but $1.7 billion of the money was due to be paid in the US. The company listed its “two major tax jurisdictions” as the US and Ireland, however it noted that from this year on, its “earnings realised in foreign jurisdictions will be subject to US tax”.
The double Irish
In his 2014 budget speech, then finance minister Michael Noonan bowed to international pressure and announced that the ‘double Irish’ loophole would be closed to new firms from 2015.
However companies already using the structure were given a “transition period” of until the end of 2020 to get their affairs in order.
The loophole involves multinationals using two or more Irish subsidiaries to ship their cash offshore while paying little or no tax on their profits.
One of the subsidiaries, generally used to handle sales across Europe or a wider swathe of territories, pays taxes in Ireland, while its partner is also registered in the Republic but is domiciled offshore.
The second firm often houses the company’s valuable intellectual property and charges fellow offshoots for its use, lowering those subsidiaries’ tax bills while also ensuring its own royalty-derided profits remain outside the tax net unless they are repatriated.
From 2021, all Irish-registered companies will also be required to be tax resident in the country. The Google Ireland spokeswoman did not respond to a question on when the company planned to discontinue its use of the structure.
Meanwhile, Google has repeatedly come under pressure from overseas authorities over its use of Ireland-based structures to slice its tax charges in other territories.
In 2017, a French court declared Google was not liable for €1.15 billion in unpaid taxes the state claimed the company owed. The court ruled that the company’s Irish subsidiary was not taxable in France.
Google earlier agreed to pay £130 million in back taxes to Britain following a settlement with the country’s tax officials. As part of the deal, it agreed to register more of its sales in Britain, rather than in Ireland.
Many European policymakers have been looking at tactics to claw back more taxes from tech giants like Google and Facebook, which also has its European headquarters in Dublin, including a blanket digital sales tax based on where the firms’ users are based.
Ireland and an alliance of other small EU states have vigorously opposed the plans, which represent an escalation in the transatlantic tug-of-war over where US firms should pay tax on their European trade.
The Exchequer stands to lose up to €210 million in corporate taxes each year from the changes, according to Revenue.
Meanwhile, Google Ireland recently hailed its “strongest hiring year ever” as its total workforce swelled to 8,000 people, including both full-time staff and contractors. It had 3,428 direct employees on its books at the end of last year.
The tech firm has also been buying swathes of property in Dublin’s docklands, following up its purchase of the entire Bolands Quay development – with space for up to 2,500 staff – with the acquisition of two more offices near its existing headquarters. It also operates two data centres in Dublin.
Written by Peter Bodkin and posted on Fora.ie
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A list of DB schemes that have solvency problems would be a useful thing…
Mark the solvency of a particular Scheme is none of your business unless you are a Member. Thus you quite rightly have no access to such information.
It would be my business if I was a prospective member; if I can’t find out if the scheme is about to fold and give my contributions to other members, why would I ever invest a cent in it?
And once you accept that; and once you accept that any DB scheme that collapses leaves its members dependent on the State; the practice of keeping open financial healthchecks on pension schemes stops being “none of our business” and starts being a logical requirement to run a pension scheme.
We’ve seen in the US what happens when there’s insufficient transparency around pension funds – they wind up insolvent because a company raids its piggybank for operating capital.
Are there DB schemes out there which still accept new entrants? I was under the impression they are rare as hens teeth.
As for existing schemes it never ceases to amaze me that the pension providers never take a hit on their often exorbitant charges and fees when things start to go downhill.
Expect a push into private pensions or DC schemes from DB schemes and the resulting bonuses to the providers for generating “new business”.
What a con.
Jaysus, Mick, what a bizarre viewpoint.
Tim your bowels are LOOSE regularly but most of your trolls LOSE the interest of readers quickly. Try an education or just give up trolling.
Why would any fool save for a pension?
The government taxes your money on the way in, by not refunding your income tax paid.
The government then taxes your money while it is in your pension fund, the pension levy.
The government then taxes your money on exit from your pension fund, income tax again.
One tax is fair enough but only a fool would sign up for three.
Take your money out when you can and get it out of the country so this thieving government can’t take it from you!
Cash-in-hand sounds better. I know people earning cash and they get to keep it all.
This ideally would serve to scare people into actually getting up and doing something!
Tax the top 10% and increase taxes on the rich and corporations to help the working people pay into their pensions. Ireland is loosing tax because of tax breaks under the Fine Gael administration.
eh Tim tell me how exactly taxing the rich and corporations will help working people pay into their pensions?
In detail please?
Any actual figures to go with that, Tim? Or is it the usual “classist” bile?
Right, defined pensions are only a promise with no financial penalty to the administrators if they make a mess of it. My big issue with DB is the culture, everyone in power has one. Civil servants, judges,politicians , hospital consultants, large financial instuitional directors.
My opinion,Is that politicians should be the first to stop getting them. The superannuation scheme is a mess, costs a fortune and is funded directly out of public funds. Also no government levy on their funds, the capitalisation factor of 20 for them is ridicules and is no reflection of the true values of their pensions. Top end civil servants like turkeys don’t vote for Christmas and that is why most of them left if they could when the saw the changes coming in. Still not enough changes made.
The hybrid scheme for new public servants is a step in the right direction but I feel it should be targeted at the lower end of the pay scale in the public sector. I still think the pension is a very important part of attracting good people into the public services and should be protected and valued in equal measure.
When will a government party with real reform ideas lead by example, go dc on their pension benefits. Then they can look on the rest of the pension sector with real conviction and help a sector where the least important person is the pension holder.
The 0.6% levy is a disgrace, for so many reasons. The investment advise around pensions is very poor in general and people will loss far more through bad investment decisions. That is why I feel the first thing the government should do is regulate properly those who have vested interested in the pensions industry. The policy holder should be protected. It is easier to get into selling pensions than it is to get a taxi licence, there is no barrier to entry in the pensions industry. The bar needs to be raised.
one earlier contributor said pensions are not worthwhile, I disagree, it is very simple do the Maths. If you earn enough, there are significant advantages to taking out a pension but contributions should be reviewed on a year by year basis, if you are in a employer sponsored scheme, it makes even more sense, employer contributions are not subject to the USC or BIK.
Sorry for the waffle but rant over now.
You advocate the failed policies that got us into this mess (Tax breaks for the rich).
The idea that the top 10% “create jobs” should be swept aside. Over the past 20 years, taxes on the rich have been falling despite a ballooning deficit due to tax shortfalls on the wealthy.
No I don’t believe in tax breaks for rich but the rules are the rules. The thresholds have been reduced significantly so pensions are no longer the play thing of the rich. Each person should assess their own situation and make an informed decision. Try and save for your future and if there is a tax advantage take it.
I am not making sweeping generalisations just giving an informed decision on an area that I am very concerned about.
“No I don’t believe in tax breaks for rich but the rules are the rules”
lol. So you basically go along like a sheep blindly accepting a corrupt, failed system of tax breaks. The rules aren’t written in stone.
It doesnt surprise me to read this. Ireland has become unbalanced as older people are living longer and thus drawing pensions for longer than ever intended. There are not enough people working to support this therefore pensions will be effected. It doesnt take a masters degree in economics to figure this one out. There wont be a state pension in 10-15 years either as the government are spending it on roads and infrastructure at the moment. The question is has anyone any solutions?
Tax the rich. We currently have the lowest corporate tax take in western Europe. We also have little tax on wealth which the top 10% still hoard. Capital gains and dividends again are low-taxed. We cannot ignore these untouchables. We must sweep aside the irrational notion that taxing them somehow leads to “job losses”. It doesn’t.
Aer lingus defined benefit pension scheme is in the s**t too, a deficit of nearly a billion and want the staff to switch to a defined contribution the worker gets screwed again
Pensions are indeed the worst gamble of the herd mentality. The truth is that only the civil service pensions are worth having as they make every state employee with one an instant millionaire. only the very wealthy could afford such a guaranteed scheme as this and would pay through the nose for it.
Forget tax the rich there Tim, tax the civil service on the market value of this one hell of a benefit in kind !!
My man Eddie, will have to disagree. Forget the word pension for a minute and look at tax advantages. If there are none don’t do one. Plan for your future in some way though. I have seen a lot of people who put nothing in place, save for your future be it a simple savings account, property, your business. Ensure what ever you do that you have structured it to suit you.
Organised people know at the start of the year how much they are going to set aside and make it a priority. Saving is a habit and if you can gain a tax advantage then use products that allow this. If not suitable look else where.
ha ha Robbie don’t you know that 80 is the new 60 :-). I will spend my hoard of green shield stamps and post office savings on a total body transplant and live forever.. …
Rob……you must not get fooled by this old chestnut! Sure by all means put arrangements in place for your twilight years but make sure that the vehicle you set up for this will (to completely murder the analogy) pass the NCT now and in 30/40 years time. Two facts; 1) the value of money halves every10 years (average over last century). 2) the real rate of inflation is much higher than the published figures which DB pensions are pegged against.
Spend your money now at full value or in 10 years time at half value or quarter value in 20 or 12.5 % in 30 years. answer. …buy appreciating assets that have a chance at offering an income while remembering how many of the world top 100 companies from 30 years ago are now even in existence. buy land , Commercial centre city property or share spreads
Eddie you can put you want in a pension. Not just shares, i agree with you. They are not for everyone. By the way you don’t have to wait 40 years. I know how old you are!
have your say