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Tax shelter saved Google billions in 2016


Google moved €15,9 billion ($19.2 billion) ­to a Bermuda shell company in 2016, regulatory filings in the Netherlands show — saving the company billions of dollars in taxes that year, Bloomberg reports.

Google uses two structures to shield the majority of its international profits from taxation. It involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Ireland-registered company.

The amount of money Google moved through this tax structure in 2016 was 7% higher than the year before, according to company filings with the Dutch Chamber of Commerce dated 22 December.

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

Google is under pressure from regulators and authorities around the world for not paying enough tax. Last year, the company escaped a €1,12 billion French tax bill after a court ruled its Irish subsidiary, which collects revenue for ads the company sells in France, had no permanent base in the country. The European Union has been exploring ways to make US technology companies, many of which use similar tax shelters, pay more.

The Irish government closed the tax loophole that permitted the tax arrangements in 2015. But companies already using the structure are allowed to continue employing it until the end of 2020.

According to US financial filings, Google’s global effective tax rate in 2016 was 19,3%, which it achieved in part by shifting the majority of its international profit to the Bermuda-based entity. Applying that tax rate, Google would have saved $3.7 billion via the 2016 transfer.

Google held $60,7 billion overseas at the end of 2016 on which it hadn’t yet paid US income taxes or “foreign withholding taxes,” the company said in a filing with the US Securities and Exchange Commission.

The US tax law giving American companies an incentive to keep their foreign earnings offshore by allowing them to defer US taxes until they return those profits to the US will change this year. The US tax law passed last month will require companies to pay taxes on the overseas income they’ve stockpiled to date at one of two rates: 15,5% for income held as cash or cash equivalents and 8% for less liquid assets.