What is „Google Tax”?

In our recent articles, we try to broaden our topics with online actualities that are happening nowadays. Last time it was the Facebook law we discussed, this time we would like to add a little more to the topic of Google Tax and its surrounding happenings.

Google tax is a popular term, used to refer to Internet companies that avoid taxes legally by shifting profits overseas. The story about the topic started to spread at the end of 2015, but as of today, there have been consequences and new developments.

The story behind it

When the story broke it was quite a surprise to the public. Multinational digital businesses pay billions of dollars in royalties to jurisdictions where they are not taxed. The aim to do something against this came after international criticism of the taxes paid by huge digital businesses such as Google and Amazon, which route their profits through low-tax states. The push to get more taxes from digital businesses appeared in several country’s administration, and for example in the UK measures have still been in progress as of today. By the end of 2019, they aim to force huge tech companies to pay as much as 200 million more Pounds a year for taxes.

How does it work?

So, at the beginning, Google saved $3.6 billion in taxes in 2015 alone by moving $15.5 billion offshore. However, the move is absolutely legal and has been used by many other tech companies from the Silicon Valley.

Google moved money through a Dutch and a Bermuda company. However, the Dutch company, Google Netherlands Holdings BV has no employees and was only used for moving US profits since 2004. After a newspaper in the Netherlands published this strategy, which was named the Dutch Sandwich, the company faced difficulties from all the countries that were missing out on taxes from the company.

Google defended itself, and there has been a long discussion about the Dutch Sandwich and the Double Irish (which was also a method for reducing tax fees for the company). International parties weighed in on the topic, and the G20 countries already announced plans to crackdown on the issue. The OECD proposals will also force multinationals to reveal to tax authorities where they make their money and pay their taxes in an effort to expose those that shift profits to tax havens or low tax regimes.

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