Google uses Ireland to slash its tax bill

By added on 22/10/2010

Internet giant Google slashed its tax bill by US$3.1bn (€2.6bn) over the past three years -- by moving a lot of its profits through Ireland, it has emerged.

Google, the world's most popular search engine, cut its tax bill by legally channelling money through Ireland and the Netherlands and then on to tax haven Bermuda, Bloomberg reported.

The company ended up cutting its corporate tax bill to just 2.4pc, and tax experts are amazed at how little tax the company has managed to pay overall.

"It's remarkable that Google's effective rate is that low," said Martin Sullivan, a tax expert who previously worked for the US Treasury. "We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20pc,'' he added.

Google used methods that take advantage of Irish tax laws to legally move profits in and out of companies here, escaping Ireland's 12.5pc corporate tax rate.

The profits eventually end up in tax havens where there is no corporation tax at all. The methods used by Google are highly complex and are expected to be copied by other large multinationals.

The Irish company involved in the complex web of transactions is called Google Ireland Holdings. While this firm is an Irish company, its management is located in Bermuda -- which exempts it from Irish taxes. Google employs about 2,000 people at its office in Dublin.

Its Irish operations, Bloomberg reported, receive royalty payments and they then move to the Netherlands and these payments are then paid out to a company in Bermuda, where corporation tax is virtually nil.

In a statement last night, the company said: "Google complies completely with the tax laws of all the countries in which we have operations. As a result, we make a very substantial contribution to local and national taxation and provide employment for thousands of people outside the US."