We need your help now
Support from readers like you keeps The Journal open.
You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.
If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.
Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
By continuing, you are indicating that you accept our Terms of Service and Privacy Policy.
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
To embed this post, copy the code below on your site
Sure heaven forbid a massive company should ever pay tax.. bloody joke
@Barry Zuckerkorn: As Paddy Cosgreave said in his podcast Ireland operates like 17th Century Feudal State. Tax breaks for corporate barons off the backs of over taxed people who get up early in the morning.
@Barry Zuckerkorn:
Did you read the article?
They paid €176 million in Corporate Tax here. That implies a declared Irish profit of €1.4 billion. Seems about right.
Plus they’d have paid massive amounts of Employer PRSI, VAT etc and the wages they pay to 5,000 Irish employees would have huge Income Tax and USC deducted.
They paid $10 billion in tax worldwide last year.
Ten billion.
How is that not paying tax?
@Brinster:
Sorry have to correct myself.
They didn’t pay $10 billion in tax worldwide last year.
They paid $10 billion in tax in the US.
They paid $14.5 billion worldwide.
@Brinster: they paid an effective rate of 0.4 per cent by using clever accounting methods to off load profits to a different jurisdiction..how is that paying tax???
Banana Republic.
Every time, every single time news of the ordinary Irish worker being attacked be it by tax evasion , vulture funds or some other method the sneering whisper of Noonan appears like Jacob Marley at Christmas.
@Gods Curse: Without companies like Google there would be hundreds of thousands more on the dole, university courses in high skilled programming would be a waste, the pay massive rate bills, PRSI for Thier employees and they also provide steady well paid jobs for thousands of people.
@Philip Morgan: they also have a very low rate of corporate tax in this country. Why can’t they just pay it? Just because they’re a big employer shouldn’t excuse them from their tax obligations.
@Brian Scott: they are paying it, they took advantage of a system that was put into place, which as the article states ends for everyone in 2020. If someone said to you, you can take advantage of this and it will significantly reduce your tax bill, would you not do it?
@Philip Morgan: I disagree. Yes, if they weren’t here now people would be unemployed but if they never set up here in the first place, another industry, company(s) would be here and possibly just as large. Maybe many more domestic companies would have got tax breaks or more financal backing to succeed.
@Philip Morgan: cool so just let the average worker make up the deficit then is it? with a whole rake of new taxes? Water taxes, property taxes, death taxes…. tax taxes…. Google a multi billion dollar corporation can get off the hook yet revenue will hunt you down for a grand…. the extremely generous terms the multinationals enjoy for setting up shop in Ireland yet they still refuse to pay and yet you’ll work all your life and at the end of it revenues still going to take its cut of whatever meager means you’ve managed to amass to pass on to loved ones…
@Alan Kenny: No other companies would not be here just like they were not here before all the multinationals came, if these companies left we would be a basket case in no time at all, you think the last crash was bad the one we would face would make the Greek meltdown look like a Teddy bears picnic.
I wouldn’t lose any sleep over it.. if they continue their investment in the country and continue to employ the number of people it does in high quality/highly paid jobs who cares? While morally questionable, anybody arguing they should pay the full tax rate should be careful of what they wish for.
@Stephen Duffy: I wonder what their annual rates bill is for all those offices?
Or how much PRSI they pay for their well payed employees. There’s more to tax than just CT.
@Stephen Duffy: That attitude has the world the way it is. Turn a blind eye to it as long as I’m alright jack.
@Reg: yep our low CT is a way to lure companies here, but the money it brings in is a very small portion of the overall collected from tax, with VAT and Income Taxes being the biggest
@Stephen Duffy: Indeed. In relation to the tax they do pay I’d have more concern on how the government is spending it. Companies like Google want to comply with laws and pay their share but they don’t make the policies.
@Reg: what about the unfair advantage it gives when they don’t have to pay the full (low) CT rate of 12.5%. An Irish tech startup cannot compete when they are subjected to the full rate while Apple or Google only pay 1 or 2% on their profits
@Alan Lawlor: there are reliefs for start up companies specifically created to help ease the burden of paying tax within the first few years of incorporation
@Alan Lawlor:
Doubt if any new Irish Tech start-up would secure the seed capital for a budding enterprise intending to compete directly against Apple,Google.
Once the S/U’s new service offering is unique, patentable, with marketplace possibilities, and capable of solid margin delivery, it should thrive regardless of flatness of CT tax playing field.
It appears as if a Tech giant’s Intellectual property, held by a 100% subsidiary company registered in a tax haven, has a standard charge of 90% of Group worldwide profits generated annually, for some reason!
Yes, Ire Inc should be very pleased to earn 12.5% CT on the 10% declared profits in Irish operations, considering as mentioned already on this thread, how we also gain from Paye, prsi, Vat, Rates and the spending from 000’s of jobs
@Alan Lawlor: they do pay the full whack on Irish profits. Ultimately it’s a us company so profits will be Isis there not in Ireland
@Derek Poutch: that attitude has the Republic of Ireland a major player in the competition for inwards investment… adopted your attitude and allow these multinationals to go elsewhere, and we can feel great about ourselves and be p!ss poor…
Is the journal just for Leo FG trolls brigade
Google and any taxpayer should be lauded for reducing the amount paid in taxes to Governments be they Irish, American or others who take hard earned money and squander it keeping lazy people in needless public service jobs or on welfare. I applaud and congratulate the tax advisors who made this happen. As regards this notion of corporate social responsibility, it belongs in the museum of stupidity along with socialism and Marxism.
@: steady on there Bono we need taxes to maintain this kip
@: yes, now you’ve got it. Delighted they’re keeping money out of the hands of greedy hospital patients. Why do we even need hospitals? Should be survival of the fittest on this flat earth. The moon landings were a hoax. 9-11 etc…
@Brian Scott: we have inefficient hospitals that do not provide the care needed by the citizens. The public health system in Ireland is broken and the medics and nurses who provide excellent care are underpaid and take the blame for mismanagement and union domination. The blame starts in Leinster House and runs right through the administrators and Department of Health. Private hospitals have higher average salaries, yet lower overall staffing costs, lower charges than public hospitals (in public hospitals the taxpayer pays the bill so who cares what it costs), lower maintenance costs, lower car parking charges hospitals that are clean and food that is edible. The point is instead of criticising Google or any other taxpayer focus on the real issue, the squandering of taxpayers money.
@: yes well done google for evading your tax obligations to this country, it’s ridiculous to think a company operating in this country should be expected to pay taxes that fund public hospitals. Close all public hospitals, healthcare should only be available to those who can afford it. Elvis lives, illuminati etc…
Cease their assets and investigate the politicians who allow that to happen.
@Dominic Leleu: what they did wasn’t illegal though so why would they seize their assets?
@Sam Harms: because our days that is the only pressure they understand.
And maybe it was legal but I am pretty sure that avoiding the tax at that level is abusive as they have shown many times already.
@Dominic Leleu: So you want a company who created hundreds if not thousands of jobs in Ireland to have their assets seized eventhough what they did was wiithin the rules of Irish tax legislation? Right so.
@Dominic Leleu: You do realise what the implications would be if these companies left here?, there would be no money for your dole, no money for the PS, no money for anything, we have massive debts and the only way there are getting paid is because of these companies and nothing much else. They go things would be real serious here and you would experience pain that your worst nightmares could not dream up.
@Dominic Leleu: cease posting elliptical messages and it’s ‘seize’ ffs… and check what Bunreacht na h-Éireann, as adopted by the people of this fair land, has to say about property rights. This isn’t friggin’ Zimbabwe.
@Dominic Leleu: cease posting elliptical messages and it’s ‘seize’ ffs… and check what Bunreacht na h-Éireann, as adopted by the people of this fair land, has to say about property rights. This isn’t bleeding ’ Zimbabwe.
@Peter Hughes: what I do realise is that they would do anything to avoid tax.
And the thousands of jobs you speak of are not that well paid.
The billions out of Europe however are real.
Let them go if they don’t pay the tax they should and God bless.
Many have already left for east European countries when it comes to advantages.
They only stay here for the deal they got on tax
Stop dreaming people.
With 3,500 employees and salaries of probably 120k on average the State gets 200-250m in PAYE/PRSI. While Corporate tax rate in Irl is modest one should look at all taxes and Ireland has high income tax and vat rates. UK corporate tax rate will be 18% from 2020 and will continue to go down. Jobs are more important than corporate tax
@Frank Greene: The numb skulls who give about about these companies don’t know how lucky we are to have them here, its government corruption that has living standards so poor and tax so high here……we are now paying 1 billion more than boom time wages to the PS, they will bankrupt us in the coming years again……so many snouts in the trough and it will always be like this as long as FF and FG are running the show.
@Peter Hughes: What’s the alternative ? Solidarity or SF ? Who want to nationalise Google ? Who will tax them until they leave tax those in well paid jobs until they leave too all while Thier core vote gets dole increases ?
@Philip Morgan: Don’t buy into this lie that people on the dole are costing you a fortune in tax, it’s a tiny tiny fraction in comparison to white collar crime and “legal” tax evasion thats facilitated by loopholes that FFG have refused to close and in some cases have created, the middle class in this country are now the working poor thanks to the likes of Noonan.
@Peter Hughes: it was the numb skulls as you referred to them that bailed out the banks and who work tirelessly day in day out to keep this kip running all while paying 52 per cent effective tax on sweet dam all earnings..the googles of this world will come and go while paddy and Mary small will still continue unabated.Dell came and went and now is not even remembered for the mess they left behind..it’s ti we looked after our own first .
Sure the capitalist system is rigged to increase & protect the wealth of the few at the expense of the many.
The US & its allies have no problem militarily invading or otherwise debilitating states which do not toe their line, especially where oil & other resources are at stake.
We need to consider why these tax havens are not also subjected to similar actions ,or even trading restrictions, when they undermine the social fabric of other states which are due the taxes “avoided” by these financial devices, & also why the individuals doing these deeds are not also subjected to travel & monetary controls.
Sure don’t these major states regularly apply restrictions & controls on Russians & others accused of financial corruption, so what’s the problem about tackling similar domestic corruption?
Google it
have your say