13 ms·

Google to end 'Double Irish, Dutch' tax scheme: filing

128 points by thefounder 7y ago

thefounder 7y ago
In 2017, Google’s Dutch filings showed that it had moved $23 billion through a shell company to Bermuda, a strategy that allowed it to delay paying U.S. taxes. In the 2018 filings seen by Reuters on Tuesday for both Ireland and the Netherlands, the company said it would end the practice.
rolltiide 7y ago
I wonder why? Seems like the central EU government has grown stronger against the autonomy of member states as they have been challenging Republic of Ireland's role in this for some time? And/Or the US tax regime is favorable enough now? Which is nice that you can wait it out. Easier to offset a 20% US corporate tax than a 35% one.
- hn_throwaway_99 7y ago
  From https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut... : Special Considerations Due largely to international pressure and the publicity surrounding the use of the double Irish with a Dutch sandwich, the Irish finance minister passed measures to close the loopholes in the 2015 budget. The legislation effectively ends the use of the tax scheme for new tax plans. However, companies with established structures can continue to benefit from the old system until 2020.
- wolfi1 7y ago
  there is no "central government". Ireland was not so long ago a receiver of large EU subsidies and at the same time permitted tax evasion. The EU Commission now ruled that those tax evasion schemes are illegal subsidies to the companies, if these ruling holds, is another matter.
  - throwawaymanbot 7y ago
    Incorrect. Its not evasion. Its a tax agreement which every state in the EU is free to establish. And if we are going down the road to "illegal subsidies"... where do we even start?
  - rolltiide 7y ago
    > there is no "central government" You're right, I meant The EU Commission flexing its autonomy over the member states using its own courts, governing abilities, and physical location. If only there was a word for that.
    - antientropic 7y ago
      The European Commission was created by the member states to ensure that the rules that they collectively agreed upon are enforced; it is not "flexing its autonomy". Any member state that no longer wants this is free to invoke Article 50 and leave the union.
      - rolltiide 7y ago
        The US Federal Government was formed by its member states too. Turns out it got way richer and noticed that all commerce is interstate commerce over the last century and uses that to flex its autonomy over all facets of life within the states. EU isn't acting that different, one ruling at a time.
Gladdyu 7y ago
Not Google being good - Irish law has been changed such that it's no longer permitted. "The legislation passed in Ireland in 2015 ends the use of the tax scheme for new tax plans. However, companies with established structures can continue to benefit from the old system until 2020." https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut...
- josefx 7y ago
  > Due largely to international pressure and the publicity surrounding the use of the double Irish with a Dutch sandwich, the Irish finance minister passed measures to close the loopholes in the 2015 budget. The EU ordered them to collect taxes from Apple after it came out that Apple ran an optimized double Irish with special exceptions (private rulings) granted by the Irish tax office. This law change is the result of them getting caught violating European trade agreements that predate the EU itself.
- bagacrap 7y ago
  If "being good" means intentionally paying more tax than legally obligated, I don't think any corporation fits the bill.
  - jsjohnst 7y ago
    > means intentionally paying more tax than legally obligated You have an unusual definition of “legally obligated” if you feel they were 100% following the law doing this. Sure, it used to be legal in Ireland, but intentionally moving IP to claim revenue in a different tax jurisdiction than where the money was earned was a legal grey area at best.
    - chatmasta 7y ago
      It was explicitly, intentionally legal. Ireland enacted these laws so companies like google would move IP and high paying jobs to Ireland. And the Irish economy benefitted from it. You can’t have a fair discussion of the ethics of this scenario without considering the “tax havens” themselves. Shouldn’t a sovereign country like Ireland have the right to enact laws that benefit its economy? For small jurisdictions like the caymans, what looks like a “tax haven” to outsiders is actually a huge boon to their economy and objectively good for their citizens.
codesuela 7y ago
The question is: what's the new scheme? It's not like these tech megacorps will just start paying regular taxes
- tchaffee 7y ago
  If they can't find a legal loophole, they will indeed just start paying regular taxes. As many companies do around the world.
  - sverige 7y ago
    That initial 'if' is extremely unlikely. There are hundreds of jurisdictions that would love to be persuaded to pass favorable laws.
    - jjoonathan 7y ago
      Yes, but that takes time, and it involves the company trusting their money to a third party that is trustworthy in inverse proportion to how much tax leniency they are willing to grant. "You can't stop us from dodging taxes so don't even try" is what they want us to believe, because if we believe it then they can dodge taxes every year without inconvenience.
      - sverige 7y ago
        Do you think that the accountants at Google, Apple, et al. have failed to foresee this sort of pushback? I personally don't doubt they've been planning alternative tax-avoidance scenarios for years. That would include lobbying other jurisdictions for favorable tax treatment in any rational scenario. To date, they have suffered no serious financial or reputational consequences for tax evasion, so there's no reason to think they won't continue to avoid taxes as part of their overall financial strategy.
        jjoonathan 7y ago
        > Do you think that (strawman) No, I do not. The correct move is to push harder, not roll over.
amelius 7y ago
This scheme is hacking, except not with computers but with the financial system.
- m12k 7y ago
  If you define hacking broadly as 'repurposing a system in a way that is significantly different from its originally intended use' then it certainly covers it - and you sort of need to define it broadly to encompass both the 'hacker ethos' and 'blackhat' meanings in tech anyway.
  - artursapek 7y ago
    That's pretty much it. Snowden has a fun line in his new book about how he "the first thing I ever hacked was bedtime".
- buboard 7y ago
  it's the opposite of hacking, it's using its giant piles of money to secure preferential treatment. small fish don't have access to such tricks If google wanted to hack the financial system and improve it, they could , using their giant international cash reserves. Same with apple. Yet they both decided to go with the status quo
- solarkraft 7y ago
  A term for "hacking finance" (because it is more about setting up the infrastructure to support a found exploit) is actually financial engineering.
hailhash 7y ago
When was the last time a corporation went to local Starbucks to drink a cup of coffee from all of the tax savings from the double Irish Dutch sandwich? When you tax a corporation that gets passed on to its employees and its customers, who already pay those taxes.
- criddell 7y ago
  Google and other big tech companies that were doing this shady accounting stuff are sitting on the money. If they had paid taxes on it, they would just be sitting on less money and we would have a little bit more money for public programs. Public programs that are run by people that stop at Starbucks some mornings.
  - hailhash 7y ago
    Google employees pay the taxes Google shareholders pay the taxes Google customers pay taxes Wonder where is all that tax money going to? Just curious?
  - Gigablah 7y ago
    Or maybe you could siphon just a teeny little bit from your military-industrial complex.
    - criddell 7y ago
      It isn't an either-or situation. Everybody should pay their taxes and we (government) should spend the money carefully.
- jeffnappi 7y ago
  Starbucks also used similar (the same?) tax loopholes... https://www.reuters.com/article/us-britain-starbucks-tax/special-report-how-starbucks-avoids-uk-taxes-idUSBRE89E0EX20121015 https://www.reuters.com/article/us-britain-starbucks-tax/spe...
  - hailhash 7y ago
Freestyler_3 7y ago
Very nicely packaged to not sound to negative about google. Google saying: we have done nothing illegal Yeah, that's not the point. The point is that normal people can't afford to dodge taxes like google (and others) so they are not happy about it.
- hailhash 7y ago
  >>The point is that normal people can't afford to dodge taxes like google (and others) so they are not happy about it. If your assumption is all of 98,771 Google employees are dodging their income taxes on the extra money Google "saves" from Double Irish Dutch Sandwich, you could not be farther from the truth. Someday the money "saved" from this "dirty evil" scheme has come-out in the form of * Stock buy back * Dividend * Employee Salaries/Bonus * R&D Investment * Merger and Acquisition * New Hires All of the above are taxed anyway. We are talking about extra "Corporate" tax whatever that means. Google "Milton Friedman and Corporate Taxes" he has a much better explanation than me.
  - humanbeinc 7y ago
    I disagree. The surplus stays in the war chest (not last for times like these when new tax evasion structures have to be set up and lobbied for). The taxes lost on Googles EBIT in the EU per year equals to 2-3 Million working citizens not paying a single Euro in income taxes.
    - hailhash 7y ago
      With all its great tax policies EU posted 1.8% GDP growth rate in 2018. It's definitely working gangbusters, so lets double down on everything. There is a lot of room below zero.
crazygringo 7y ago
> A Google spokesman on Tuesday confirmed it would scrap the licensing structure, saying this was in line with international rules and followed changes to U.S. tax law in 2017... The tax strategy was legal and allowed Google to avoid triggering U.S. income taxes or European withholding taxes on the funds, which represent the bulk of its overseas profits... Under pressure from the European Union and the United States, Ireland in 2014 decided to phase out the arrangement, ending Google's Irish tax advantages in 2020. This is fantastic news because laws were changed and that worked. The criticism towards Google, Apple etc. for minimizing their tax burdens has always been misplaced. Corporations are supposed to maximize profits. And governments are supposed to collect taxes in effective ways. It's always been a derelection of duty of governments when these loopholes exist in the first place. So it's great news that with enough publicity, democratically elected lawmakers felt the pressure from voters to fix this. In other words, this is democracy working -- which is always nice to see.
- stefano 7y ago
  > The criticism towards Google, Apple etc. for minimizing their tax burdens has always been misplaced. It's a valid criticism if you don't think that "Corporations are supposed to maximize profits" should be true. When anything can be justified because it maximizes profits it becomes very, very easy to be a technically law abiding unethical company which is a net negative on society.
  - cracker_jacks 7y ago
    How about "corporations are supposed to take advantage of things they can take advantage of to better their position"? If a corporation believes they are a net positive for society, then any advantage they can get furthering their own abilities is viewed as a net positive.
  - growse 7y ago
    > > The criticism towards Google, Apple etc. for minimizing their tax burdens has always been misplaced. > It's a valid criticism if you don't think that "Corporations are supposed to maximize profits" should be true. When anything can be justified because it maximizes profits it becomes very, very easy to be a technically law abiding unethical company which is a net negative on society. Isn't this why society comes together to form a government and pass laws to prevent these sorts of behaviours? Not every corporation will be looking to maximize profits, but they're generally all looking to maximize something typically at the expense of something else. From a selfish perspective, externalising your costs is a good thing.
C14L 7y ago
Did they find something "better"?
Cactus2018 7y ago
Pulitzer winning article explaining the “Double Irish With a Dutch Sandwich” "How Apple Sidesteps Billions in Taxes" 'Funneling Earnings to Low-Tax Regions' New York Times, April 29, 2012, Charles Duhigg and David Kocieniewski https://www.pulitzer.org/files/2013/explanatory-reporting/04ieconomy4-29.pdf https://www.pulitzer.org/files/2013/explanatory-reporting/04...
EETruth 7y ago
If Google doesn't pay enough tax - give them the same treatment. Someone steals Googles IP - send a bored policeman to investigate. Someone kidnaps Googles' CEO kids - send a bored policeman to tell them to pay up.

128 points by thefounder 7y ago

In 2017, Google’s Dutch filings showed that it had moved $23 billion through a shell company to Bermuda, a strategy that allowed it to delay paying U.S. taxes. In the 2018 filings seen by Reuters on Tuesday for both Ireland and the Netherlands, the company said it would end the practice.

rolltiide 7y ago

I wonder why? Seems like the central EU government has grown stronger against the autonomy of member states as they have been challenging Republic of Ireland's role in this for some time? And/Or the US tax regime is favorable enough now? Which is nice that you can wait it out. Easier to offset a 20% US corporate tax than a 35% one.

hn_throwaway_99 7y ago
From https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut... : Special Considerations Due largely to international pressure and the publicity surrounding the use of the double Irish with a Dutch sandwich, the Irish finance minister passed measures to close the loopholes in the 2015 budget. The legislation effectively ends the use of the tax scheme for new tax plans. However, companies with established structures can continue to benefit from the old system until 2020.
wolfi1 7y ago
there is no "central government". Ireland was not so long ago a receiver of large EU subsidies and at the same time permitted tax evasion. The EU Commission now ruled that those tax evasion schemes are illegal subsidies to the companies, if these ruling holds, is another matter.
- throwawaymanbot 7y ago
  Incorrect. Its not evasion. Its a tax agreement which every state in the EU is free to establish. And if we are going down the road to "illegal subsidies"... where do we even start?
- rolltiide 7y ago
  > there is no "central government" You're right, I meant The EU Commission flexing its autonomy over the member states using its own courts, governing abilities, and physical location. If only there was a word for that.
  - antientropic 7y ago
    The European Commission was created by the member states to ensure that the rules that they collectively agreed upon are enforced; it is not "flexing its autonomy". Any member state that no longer wants this is free to invoke Article 50 and leave the union.
    - rolltiide 7y ago
      The US Federal Government was formed by its member states too. Turns out it got way richer and noticed that all commerce is interstate commerce over the last century and uses that to flex its autonomy over all facets of life within the states. EU isn't acting that different, one ruling at a time.

Gladdyu 7y ago

Not Google being good - Irish law has been changed such that it's no longer permitted. "The legislation passed in Ireland in 2015 ends the use of the tax scheme for new tax plans. However, companies with established structures can continue to benefit from the old system until 2020." https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut...

josefx 7y ago
> Due largely to international pressure and the publicity surrounding the use of the double Irish with a Dutch sandwich, the Irish finance minister passed measures to close the loopholes in the 2015 budget. The EU ordered them to collect taxes from Apple after it came out that Apple ran an optimized double Irish with special exceptions (private rulings) granted by the Irish tax office. This law change is the result of them getting caught violating European trade agreements that predate the EU itself.
bagacrap 7y ago
If "being good" means intentionally paying more tax than legally obligated, I don't think any corporation fits the bill.
- jsjohnst 7y ago
  > means intentionally paying more tax than legally obligated You have an unusual definition of “legally obligated” if you feel they were 100% following the law doing this. Sure, it used to be legal in Ireland, but intentionally moving IP to claim revenue in a different tax jurisdiction than where the money was earned was a legal grey area at best.
  - chatmasta 7y ago
    It was explicitly, intentionally legal. Ireland enacted these laws so companies like google would move IP and high paying jobs to Ireland. And the Irish economy benefitted from it. You can’t have a fair discussion of the ethics of this scenario without considering the “tax havens” themselves. Shouldn’t a sovereign country like Ireland have the right to enact laws that benefit its economy? For small jurisdictions like the caymans, what looks like a “tax haven” to outsiders is actually a huge boon to their economy and objectively good for their citizens.

codesuela 7y ago

The question is: what's the new scheme? It's not like these tech megacorps will just start paying regular taxes

tchaffee 7y ago
If they can't find a legal loophole, they will indeed just start paying regular taxes. As many companies do around the world.
- sverige 7y ago
  That initial 'if' is extremely unlikely. There are hundreds of jurisdictions that would love to be persuaded to pass favorable laws.
  - jjoonathan 7y ago
    Yes, but that takes time, and it involves the company trusting their money to a third party that is trustworthy in inverse proportion to how much tax leniency they are willing to grant. "You can't stop us from dodging taxes so don't even try" is what they want us to believe, because if we believe it then they can dodge taxes every year without inconvenience.
    - sverige 7y ago
      Do you think that the accountants at Google, Apple, et al. have failed to foresee this sort of pushback? I personally don't doubt they've been planning alternative tax-avoidance scenarios for years. That would include lobbying other jurisdictions for favorable tax treatment in any rational scenario. To date, they have suffered no serious financial or reputational consequences for tax evasion, so there's no reason to think they won't continue to avoid taxes as part of their overall financial strategy.
      - jjoonathan 7y ago
        > Do you think that (strawman) No, I do not. The correct move is to push harder, not roll over.

amelius 7y ago

This scheme is hacking, except not with computers but with the financial system.

m12k 7y ago
If you define hacking broadly as 'repurposing a system in a way that is significantly different from its originally intended use' then it certainly covers it - and you sort of need to define it broadly to encompass both the 'hacker ethos' and 'blackhat' meanings in tech anyway.
- artursapek 7y ago
  That's pretty much it. Snowden has a fun line in his new book about how he "the first thing I ever hacked was bedtime".
buboard 7y ago
it's the opposite of hacking, it's using its giant piles of money to secure preferential treatment. small fish don't have access to such tricks If google wanted to hack the financial system and improve it, they could , using their giant international cash reserves. Same with apple. Yet they both decided to go with the status quo
solarkraft 7y ago
A term for "hacking finance" (because it is more about setting up the infrastructure to support a found exploit) is actually financial engineering.

hailhash 7y ago

When was the last time a corporation went to local Starbucks to drink a cup of coffee from all of the tax savings from the double Irish Dutch sandwich? When you tax a corporation that gets passed on to its employees and its customers, who already pay those taxes.

criddell 7y ago
Google and other big tech companies that were doing this shady accounting stuff are sitting on the money. If they had paid taxes on it, they would just be sitting on less money and we would have a little bit more money for public programs. Public programs that are run by people that stop at Starbucks some mornings.
- hailhash 7y ago
  Google employees pay the taxes Google shareholders pay the taxes Google customers pay taxes Wonder where is all that tax money going to? Just curious?
- Gigablah 7y ago
  Or maybe you could siphon just a teeny little bit from your military-industrial complex.
  - criddell 7y ago
    It isn't an either-or situation. Everybody should pay their taxes and we (government) should spend the money carefully.
jeffnappi 7y ago
Starbucks also used similar (the same?) tax loopholes... https://www.reuters.com/article/us-britain-starbucks-tax/special-report-how-starbucks-avoids-uk-taxes-idUSBRE89E0EX20121015 https://www.reuters.com/article/us-britain-starbucks-tax/spe...
- hailhash 7y ago

Freestyler_3 7y ago

Very nicely packaged to not sound to negative about google. Google saying: we have done nothing illegal Yeah, that's not the point. The point is that normal people can't afford to dodge taxes like google (and others) so they are not happy about it.

hailhash 7y ago
>>The point is that normal people can't afford to dodge taxes like google (and others) so they are not happy about it. If your assumption is all of 98,771 Google employees are dodging their income taxes on the extra money Google "saves" from Double Irish Dutch Sandwich, you could not be farther from the truth. Someday the money "saved" from this "dirty evil" scheme has come-out in the form of * Stock buy back * Dividend * Employee Salaries/Bonus * R&D Investment * Merger and Acquisition * New Hires All of the above are taxed anyway. We are talking about extra "Corporate" tax whatever that means. Google "Milton Friedman and Corporate Taxes" he has a much better explanation than me.
- humanbeinc 7y ago
  I disagree. The surplus stays in the war chest (not last for times like these when new tax evasion structures have to be set up and lobbied for). The taxes lost on Googles EBIT in the EU per year equals to 2-3 Million working citizens not paying a single Euro in income taxes.
  - hailhash 7y ago
    With all its great tax policies EU posted 1.8% GDP growth rate in 2018. It's definitely working gangbusters, so lets double down on everything. There is a lot of room below zero.

crazygringo 7y ago

> A Google spokesman on Tuesday confirmed it would scrap the licensing structure, saying this was in line with international rules and followed changes to U.S. tax law in 2017... The tax strategy was legal and allowed Google to avoid triggering U.S. income taxes or European withholding taxes on the funds, which represent the bulk of its overseas profits... Under pressure from the European Union and the United States, Ireland in 2014 decided to phase out the arrangement, ending Google's Irish tax advantages in 2020. This is fantastic news because laws were changed and that worked. The criticism towards Google, Apple etc. for minimizing their tax burdens has always been misplaced. Corporations are supposed to maximize profits. And governments are supposed to collect taxes in effective ways. It's always been a derelection of duty of governments when these loopholes exist in the first place. So it's great news that with enough publicity, democratically elected lawmakers felt the pressure from voters to fix this. In other words, this is democracy working -- which is always nice to see.

stefano 7y ago
> The criticism towards Google, Apple etc. for minimizing their tax burdens has always been misplaced. It's a valid criticism if you don't think that "Corporations are supposed to maximize profits" should be true. When anything can be justified because it maximizes profits it becomes very, very easy to be a technically law abiding unethical company which is a net negative on society.
- cracker_jacks 7y ago
  How about "corporations are supposed to take advantage of things they can take advantage of to better their position"? If a corporation believes they are a net positive for society, then any advantage they can get furthering their own abilities is viewed as a net positive.
- growse 7y ago
  > > The criticism towards Google, Apple etc. for minimizing their tax burdens has always been misplaced. > It's a valid criticism if you don't think that "Corporations are supposed to maximize profits" should be true. When anything can be justified because it maximizes profits it becomes very, very easy to be a technically law abiding unethical company which is a net negative on society. Isn't this why society comes together to form a government and pass laws to prevent these sorts of behaviours? Not every corporation will be looking to maximize profits, but they're generally all looking to maximize something typically at the expense of something else. From a selfish perspective, externalising your costs is a good thing.

C14L 7y ago

Did they find something "better"?

Cactus2018 7y ago

Pulitzer winning article explaining the “Double Irish With a Dutch Sandwich” "How Apple Sidesteps Billions in Taxes" 'Funneling Earnings to Low-Tax Regions' New York Times, April 29, 2012, Charles Duhigg and David Kocieniewski https://www.pulitzer.org/files/2013/explanatory-reporting/04ieconomy4-29.pdf https://www.pulitzer.org/files/2013/explanatory-reporting/04...

EETruth 7y ago

If Google doesn't pay enough tax - give them the same treatment. Someone steals Googles IP - send a bored policeman to investigate. Someone kidnaps Googles' CEO kids - send a bored policeman to tell them to pay up.