European authorities, both individual countries and the union, continue to come down on tech companies, yet tech companies continue to bend the rules. The continent has taken a harsh stance against broken regulations and Google has once again been found out.
In case mirroring Apple's Ireland tax debacle, Alphabet Inc. subsidiary Google has been caught fudging taxes. Or so an accusation from a Netherlands-based regulator suggests. A filing from 2016 shows the company has been using a Bermudan shell company to shield profits.
This tax shield has hidden profits from countries around the world, not just in Europe. During 2015, the search juggernaut increased the amount of money it filtered offshore to around seven percent.
According to the filing, there is a path in which the movement of profit takes. It starts when Google moves revenue from an Irish subsidiary to a Dutch firm. It is worth noting before continuing that the Dutch company has no employees. Next, Google transfers the money to a Bermudan mailbox owned by another company in Ireland.
If it all seems a bit shady, that's because it probably is… at least according to regulators. The involvement of Ireland is not without significance considering the countries situation with Apple.
In August 2016, the European Commission concluded a three-year investigation into Apple. It found the company had received illegal state aid from Ireland. Specifically, Apple allegedly only paid between 0.005 percent and 1 percent in taxes between 2003 and 2014. For perspective, Ireland usually has a 12.5 percent corporate tax rate.
According to regulators, Apple received a tax break from Ireland and has since been ordered to pay back to 13 billion euros ($14.8 billion). Apple has since appealed the case, taking it to the General Court in Luxembourg. The company has also asked the US government to intervene while Ireland has pushed for an escrow account which Apple will pay into.
A Double Irish and Dutch Sandwich Please
While Google's case is not specifically the same, it has similarities. The company's money movement scheme is also known as “a Double Irish and a Dutch Sandwich”. However, search provider insists it has done nothing wrong and pays taxes accordingly.
“We pay all of the taxes due and comply with the tax laws in every country we operate in around the world. We remain committed to helping grow the online ecosystem.”
SEC filings suggest Google was able to amass $60.7 billion without taxation through 2016 alone.