UPDATED 20:01 EDT / JANUARY 02 2018

NEWS

Google saved itself $3.7B in taxes in 2016 thanks to Irish legal loophole

Google LLC reportedly saved itself $3.7 billion in taxes in 2016 after shifting around 16 billion euros between its accounts in Ireland, the Netherlands and Bermuda.

The company exploited a couple of well-known legal loopholes in those countries that allow it to sidestep its tax responsibilities in foreign countries, Bloomberg reported Tuesday. According to the report, Google used the “Double Irish” and “Dutch Sandwich” loopholes to save 7 percent more in taxes than it did the year before, at a tax rate of 19.3 percent.

Google’s strategy involves funneling money its made in Europe to its banks in Bermuda, which offers companies a corporate tax income rate of zero, via accounts held in Ireland and the Netherlands. To do this, Google uses what is basically a shell company in Ireland to collect its overseas advertising revenues. It then uses a Dutch subsidiary to hold those revenues, and a second Irish shell company located in Bermuda that licenses its intellectual property to report the money as income.

“We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” a spokesperson for Google told Bloomberg. ”We remain committed to helping grow the online ecosystem.”

Google’s use of these legal loopholes has come under scrutiny before, so much so that in 2014 Ireland said it would change its rules to close them off. That decision went into effect in 2015, but companies have been given until 2020 to comply. That means Google still has three more years to exploit the loopholes until they’re finally closed off.

That extended grace period should give Google ample time to repatriate a reported $60.7 billion in overseas revenue it has yet to bring home. The company has avoided doing so as it fears its tax bill will be too big. However, Google is set to benefit from the new tax bill passed in the House and Senate last month that offers a greatly reduced minimum tax rate on overseas profits. That bill should allow Google to bring home its overseas earnings on a more regular basis at vastly reduced rates.

Image: Robert Scoble/Flickr

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