Google’s controversial advertising sales business in Dublin earned revenues of €22.6bn (£20.1bn) from Europe, the Middle East and Africa last year but paid just €47.8m in tax, according to company filings in Ireland.
Revenues at Google Ireland Limited rose 23% in 2015, to €22.6bn, and were equivalent to a third of the search group’s global income. Of this Irish income, more than $7bn (£5.6bn) is thought to have come from transactions with advertisers in the UK.
Google has continued to route its sales from British advertisers through Ireland, despite efforts by the former UK chancellor George Osborne to crack down on multinational tech groups that “abused the trust of the British people”.
Google Ireland Limited is one half of the search group’s so-called “double Irish” tax structure. Although Google reported booming revenues, its taxable profits were only €341m. This profit figure was small in large part because the company had to meet administrative expenses of €16.9bn.
These expenses are thought to be dominated by royalty fees paid to other Google subsidiaries – income which eventually makes its way to a business called Google Holdings Ireland, the second company in Google’s “double Irish” structure.
Almost no information is made public about Google Holdings Ireland, which is an unlimited company. It is registered to the address of a law firm in Dublin, but is thought to pay no tax in Ireland as it is tax-resident in Bermuda.
Because it is unlimited, Google Holdings Ireland is not required to file accounts, under Irish company law. However, Bermuda does not charge corporation tax, so the billions of dollars of income Google is able to move into Google Holdings Ireland each year go untaxed.
Google has told investors that, at the end of last year, it had amassed an offshore cash pile of $42.9bn.
Under pressure from world leaders, Ireland agreed two years ago to start phasing out the tax benefits of such structures. However, Irish ministers have awarded generous “grandfathering rights” which ensure Google and others are able to pour income into their offshore tax havens up until 2020.
Google, which is ultimately owned by the holding company Alphabet Inc, insists it’s business in Ireland are much more than a tax structure. At the end of last year, Google Ireland Limited employed 2,763 staff, an increase of 6% in 12 months.
“As Google grows, Ireland continues to benefit,” said Ronan Harris, who is shortly moving from Ireland to lead Google operations in the UK. “In 2015 we opened our second data centre, bringing total investment in capital assets in Ireland to over €750m.”
Ahead of the UK election in 2015, George Osborne promised to stop tech firms routing sales from customers in Britain to gateway jurisdictions, such as Ireland or Luxembourg, from where income can then be easily transferred to offshore tax havens.
As UK chancellor, Osborne introduced a new punitive tax, known as the diverted profits tax, which he said would hit companies found to be artificially shifting UK income overseas.
In January, UK tax inspectors reached a £130m tax settlement with Google over taxes stretching back 10 years. Osborne initially heralded as a “major success”, though many others condemned it as too lenient.
Separately, Google has promised significant investment in the UK, which some tax campaigners fear may have been a factor in the minds of those at HMRC reaching the settlement.
A more serious challenge to the “double Irish” tax avoidance method – or at least the most significant instance of it – came from European competition commissioner Margrethe Vestager. In August she ruledthat Apple’s long-standing tax arrangements in Ireland relied on illegal state aid. As a result, the Irish government would have to collect €13bn in back taxes from the iPhone maker, she said.
This article was written by Simon Bowers, for theguardian.com on Friday 4th November 2016 19.18 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010
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