Google to end ‘double Irish’ tax scheme
Google will stop using an intellectual property licensing scheme that let it delay paying US taxes, marking a major change in international tax practices.
“We’re now simplifying our corporate structure and will license our IP (intellectual property) from the US, not Bermuda,” a spokesman said in a statement.
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For more than ten years, Dutch, Irish and US tax law let Google pay an effective tax rate in the single digits on its non-US profits.
Yet international efforts to limit tax avoidance, spearheaded by the OECD, have led governments to change their rules, causing firms like Google to reappraise their approach.
Google’s changes to its tax structures came as Ireland closes its so-called “double Irish” tax loophole. This let major US companies channel global profits through Ireland via tax havens such as Bermuda, letting them avoid US tax.
Ireland in 2014 decided to phase out the arrangement, ending Google’s Irish tax advantages in 2020. The decision came after pressure from the European Union and the US.
Google has always said it pays all its taxes. “Including all annual and one-time income taxes over the past ten years, our global effective tax rate has been over 23 per cent, with more than 80 per cent of that tax due in the US,” the spokesman said.
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In another sign of the shifting global approach to tax, The Trump administration’s Tax Cuts and Jobs Act, which came into effect in January 2018, ended the reason for US companies to keep foreign profits offshore.
Now profits that have been made and taxed abroad are not subject to tax when returned to the US.