'Dutch Sandwich' Tastes Like 16B Euros to Google

DooKey

DooKey

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Google has shielded almost 16B euros in profits in 2016 by utilizing the 'Dutch Sandwich' tactic. Basically, they move their profits from an Irish subsidiary to a Dutch company without employees, and then to an Ireland-registered company with a Bermuda mailbox. This is a lot of money that's not taxed and the EU wants part of it, but after prevailing in court over a French effort to get 1.12B euros in taxes - I'd say that Google is going to get to keep this little tax haven for a few more years.

“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.”
 
Montu said:
Google has shielded almost 16B euros in profits in 2016 by utilizing the 'Dutch Sandwich' tactic. Basically, they move their profits from an Irish subsidiary to a Dutch company without employees, and then to an Ireland-registered company with a Bermuda mailbox. This is a lot of money that's not taxed and the EU wants part of it, but after prevailing in court over a French effort to get 1.12B euros in taxes - I'd say that Google is going to get to keep this little tax haven for a few more years.

“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.”
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You know what google, you might be doing something legally. Doesn't mean it's ethical. The loophole should be closed.
 
it's up to governments to fix loopholes.

until then the EU or whomever is letting it happen.
 
I am pretty sure it is not a loophole, but by design in order to allow those who have, a means to escape giving to those who do not have.

Let me read that a couple of times to make sure I said it right....it made by brain hurt to type it.

All of us who cannot afford that type of tax shelter like to think it is a loophole, after all,....who would create such a thing as it only benefits those who,....wait a minute,....nevermind.
 
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Let's see, the governments wrote the tax laws, the companies followed them, and now the governments want more tax money?

When it's time for these elected officials to file their tax returns, I'm sure they'll follow the same expectations they have for Google by paying more taxes through not taking the deductions they're legally allowed. ::crickets::
 
Montu said:
“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.”
Click to expand...

Translation: "We're doing everything you're accusing us of, but its all legal so piss off."
 
Surely they can be prosecuted for tax evasion.
Its clear they should be paying a substantial sum in tax and are doing what they can to avoid it.
Not legal.
 
It would be nice that instead of going down on a dutch sandwich Google was about the dutch rudders. (Yeah.. you can go urbandictionary search that one.)
 
Side note - if anyone wants a slightly clear infographic on how this works look here.

x427g3f6-1413353779.jpg
 
Nenu said:
Surely they can be prosecuted for tax evasion.
Its clear they should be paying a substantial sum in tax and are doing what they can to avoid it.
Not legal.
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No. There is nothing illegal about what they are doing. The tax code is so complicated that these types of scenarios are created because they try to fix others. Get over it. If you had a team of accountants and lawyers, you'd do it too. It is everyone and every companies obligation to pay as little tax as possible. It is the government's responsibility to spend within their means and not constantly run in a deficit. Start cutting the social wellfare and free shit for people, spend within your means and stop stealing from responsible tax payers and companies.
 
Jarod888 said:
It is the government's responsibility to spend within their means and not constantly run in a deficit. Start cutting the social wellfare and free shit for people,
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Oh come on.. that's a great 50k ft view of things, but don't forget it is part of the government's job to protect and help the people that make up said government.
 
That's some high-level tax evasion. Not illegal tax evasion, but legal tax evasion - the best type! If divorces has taught me anything, having the law on your side makes all the wrongs right.

Google's evasion is like going to an amusement park, stealing an old lady's purse (Your mother's gramgram), leisurely walking to another ride- riding it and flirting with the hot blonde in the next section and getting her number for a little frisking, getting off, and walking back to the old man (Old Lady's Husband) and giving him the purse. They can share a cold refreshing Bud Light, joke about the times they had together... memories made by all.
 
Jarod888 said:
No. There is nothing illegal about what they are doing. The tax code is so complicated that these types of scenarios are created because they try to fix others. Get over it.
...
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Um.
Get over what?
Its up to the EU to chase this, I dont get anything.
 
It's a great day when relentless social engineering has convinced a significant portion of society that demanding good corporate citizenship is just wrong.
 
Twisted Kidney said:
It's a great day when relentless social engineering has convinced a significant portion of society that demanding good corporate citizenship is just wrong.
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"We live in an immoral country, we need religion!"

"Oh, when thousands of people act immorally, so long as it's under a corporate entity in the name of profit, well alright then..."
 
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Twisted Kidney said:
It's a great day when relentless social engineering has convinced a significant portion of society that demanding good corporate citizenship is just wrong.
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Interesting perspective.

As a stock holder, you want your company to do well, financially. You benefit from it. If keeping your cash in a country who only charges a 25% tax rate, and avoiding a country who charges a 39% tax rate (highest in the world), then that would appear to be good business. It makes the stock holders happy.

Now, with the new tax rate of 21%, we may see these companies pulling thier cash back into the U.S.
 
I just personally dont have an issue with companies using loopholes. They have a legal job to their shareholders.

We should be mad at the loopholes and demand them closed.
 
BSmith said:
Interesting perspective.

As a stock holder, you want your company to do well, financially. You benefit from it. If keeping your cash in a country who only charges a 25% tax rate, and avoiding a country who charges a 39% tax rate (highest in the world), then that would appear to be good business. It makes the stock holders happy.

Now, with the new tax rate of 21%, we may see these companies pulling thier cash back into the U.S.
Click to expand...

Any, and I mean any, non-zero tax rate will always be too high for those tech giants.

Not that I'm against that cut. Tech giants simply refuse to pay taxes as a rule, suspending billions in a strange, digital limbo for all eternity. The previous rate in the US was withering for the small businesses I deal with cross-border, though. Those people deserve a break. I bring a lot of product into Canada and I like the Americans I deal with. Seeing them able to invest in their companies more is kind of nice.

It's a strange welfare system indeed that demands the little guy pay for the big guy and the poor support the rich.
 
I am not aware of any companies getting a zero tax rate. Google appears to have been paying the 25% rate to the Netherlands. Moving the money to a Bermuda bank just insured no further taxes on that money and to protect it from unscrupulous entities who would try and tie it up in court(s).

Google (all large coporations really) is very good at making sure their paper trail is clean. There is no benefit to try and cheat it when there are legal methods to protect their cash.

All these hoops corporations go through came about due to the stupid high tax rate the U.S. had imposed. The highest in the world. A few decades ago, the U.S. started wittling away at tax write-offs for corporations and states jumped on the band wago finding new ways to tax those companies. Even local governments are getting creative in tax assessment (for example; Tarrant County, in Texas, charges businesses a tax based on the furniture/fixtures used in the business).

All this has forced companies to find ways to keep thier profits they earned as Wall Street reacts very violently to low profit reports.

The entire system has been geared towards forcing corporations to find ways to protect thier profits. The best way has been to get it off shore. Of course, the rich also use these types of manuevers to protect thier own money. Some say it is a side effect of coporations finding these legal paths, others say it is the other way around. I am not in a position to make comment one way or the other on that mark.
 
BSmith said:
Interesting perspective.

As a stock holder, you want your company to do well, financially. You benefit from it. If keeping your cash in a country who only charges a 25% tax rate, and avoiding a country who charges a 39% tax rate (highest in the world), then that would appear to be good business. It makes the stock holders happy.

Now, with the new tax rate of 21%, we may see these companies pulling thier cash back into the U.S.
Click to expand...

The new US corporate tax regime is kind of totally different than the old one. In the old one, a US corporation owed tax on worldwide income, but the tax was deferred until the income made it to the US -- so stuffing it in some island tax haven forever is pretty useful. The new regime is that generally you only owe tax on US income (at ~ 21%), however, there's a minimum tax on global income (10%), regardless of if it's recognized in the us; you can still stuff your profits in the island, but the effective tax rate will be 10% instead of 0%, if you pay reasonable taxes on overseas income where its earned, there's not likely a US tax due. Additionally, under the new regime, any existing unrecognized money is taxed (8%). Only taxing US income is more in line with the global norm.
 
BSmith said:
I am not aware of any companies getting a zero tax rate. Google appears to have been paying the 25% rate to the Netherlands. Moving the money to a Bermuda bank just insured no further taxes on that money and to protect it from unscrupulous entities who would try and tie it up in court(s).
Click to expand...

It can be pretty close to zero just a quick look shows one year google paid 2.4%

BSmith said:
Google (all large coporations really) is very good at making sure their paper trail is clean. There is no benefit to try and cheat it when there are legal methods to protect their cash.
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I think the legality of this is pretty debatable. These companies are paying themselves royalties that are completely fictitious. That's how they move money around. Saying that is legal isn't much different than saying a person who receives a perk or trade for work should not have to pay taxes on it. Sure there may not be a legal way to track it easily but in fact it is a capital gain. Another example is all the people who think they don't own taxes on cryptocurrency profits and exchanges. Now while some may not see a problem with this ultimately its going to be a problem because the government will be forced to somehow rectify it. And the consequences of what they do could be very damaging to the economy. What if tomorrow Trump decides to push for a bill to levy a 20% tax on all royalties paid to any company to close this loophole on the USA side? Suddenly you have a mess, certain products are no longer profitable. That is exactly why this loophole has taken so long for the government to patch it up. Because governments all over the world can see clearly that the most direct way to patch it up will have a massive negative consequence and they don't want to cause chaos for all the other companies. So instead they have had to put pressure on Ireland to close the loophole and of course they will but they will do it in their own jolly good time. IMO this is a clear case of corruption at so many levels. A clear profit is being covered up, a corrupt irish government made a purposely designed loophole to attract international business with the sole intent to screw over their EU neighbors and the USA. And they put the entire world economy at risk of some sort of a tariff war. To say the least it was a very very irresponsible move.

BSmith said:
All these hoops corporations go through came about due to the stupid high tax rate the U.S. had imposed. The highest in the world. A few decades ago, the U.S. started wittling away at tax write-offs for corporations and states jumped on the band wago finding new ways to tax those companies. Even local governments are getting creative in tax assessment (for example; Tarrant County, in Texas, charges businesses a tax based on the furniture/fixtures used in the business).
Click to expand...

Its hard to know what really took place, but its pretty easy to see that if companies were figuring out how to shelter taxes by creative offshore tactics that the government would start trying to get some of that money back. So they keep trying to do so and the tax rate keeps going up. But guess what no matter how far up or down the tax rate goes its not going to be 2.4% so these companies will just keep doing it. Its not about the tax rate in the USA being stupid high. Its about the fact that companies will always seek to maximize profits. And the bigger the company is the more money that flows the more every single fraction of a percent matters. If the corporate tax rate in the USA dropped to 10% tomorrow it wouldn't matter they would still run the double irish dutch sandwich. The taxes you cite on furniture and fixtures have been around in various forms for decades and they are there because governments need a way to tax companies and they need some sort of measure of the size and impact of the company. But thanks to the very creative accounting traditional methods of taxing profit don't exist when ford props up an autoplant in your town, forces you to take care of the roads, electricity and infrastructure then says we don't sell anything or make any profit here. What do you do?

There is actually one way to solve this problem, but it wont be popular, especially not for a politician. It is to drop corporate taxes to nothing or nearly nothing say 1%. Let all the companies bring their taxes back to the USA and leave them that way. Think I am crazy? Maybe not. In 2016 corporations only accounted for 9% of the federal budget. The lions share came from income while it wouldn't be popular raising everyones income taxes by 10% in exchange for hundreds of billions of profits being brought back into the USA might not be such a bad deal. And going into the future letting companies know that they can operate in the USA fairly freely with reduced overhead would be a tempting offer. And indirectly you could slide in a little more money by simply raising minimum wage, and throwing some extra protections in for workers. Might as well get a little extra before AI and automation put them all out of a job.
 
In the end of the day loophole companies are just making YOU pay more taxes or degrade the public things you use like services and infrastructure. So i can´t help laughing when someone defends it.

Google, never do any evil...lol!
 
Rudy, what Google (and other corporations) is doing is perfectly legal and the reasons are sound. I am not going to quote your post, but I'll address some points of it.

What you are missing is Google did pay taxes on that money, just not to the U.S.

Yes, corporations seek to maximize profits. It the the legal obligation of the directors to do so.

U.S. tax law has created the incentive for coporations to look for ways to reduce their tax burden. What people would call "loopholes" are not loopholes at all, if the definition of "loophole" is applied (ambiguity or inadequacy in the law). Everything corporations legally do, to reduce their tax burden, is by design not by lack of design.

If Ford comes to your town and strikes a deal with the local/state government where the complete infrastructure will be carried by the tax payers, that is not on Ford. That is your elected officials. Nothing about the tax law changes are going to fix that.

The corporate tax rate just went down to 21% and corporations are being offered only a 10% tax burden if they bring back their cash from outside the U.S. which was not tazed by the U.S. 21% is lower than the world wide average of 24%. Many companies will be bringing back their cash, or striking deals where they have to it match or reduce the tax rate below that. Of course, that is speculation, but here is hoping.
 
BSmith said:
I am not aware of any companies getting a zero tax rate. Google appears to have been paying the 25% rate to the Netherlands. Moving the money to a Bermuda bank just insured no further taxes on that money and to protect it from unscrupulous entities who would try and tie it up in court(s).

Google (all large coporations really) is very good at making sure their paper trail is clean. There is no benefit to try and cheat it when there are legal methods to protect their cash.
Click to expand...

The legality of it is grey at best. The these tax schemes rely on IP transfer pricing that is completely nonsensical. In simplified terms, Google is licensing its IP to a foreign subsidiary for basically a penny then that Sub is then licensing it to another sub at near market rate. The legal issue is that transfer pricing is supposed to be fair/reasonable to market expectations which all these tax schemes violate. They get away with it primarily because determining realistic rates for IP licensing is complicated. It is only a matter of time before new rules come out that prevent it like they did wrt transfer pricing of physical/tangible assets.
 
BSmith said:
The corporate tax rate just went down to 21% and corporations are being offered only a 10% tax burden if they bring back their cash from outside the U.S. which was not tazed by the U.S. 21% is lower than the world wide average of 24%. Many companies will be bringing back their cash, or striking deals where they have to it match or reduce the tax rate below that. Of course, that is speculation, but here is hoping.
Click to expand...

No they won't. As long as the loopholes exist and have an effective tax rate less than the cost to bring it back, they will continue to cheat.
 
I am aware this is [H] but it's still somewhat surreal to read people defending what amounts to companies avoiding their due by paying their left hand with their right for jerking off their dicks in the morning.
 
aaronspink said:
The legality of it is grey at best. The these tax schemes rely on IP transfer pricing that is completely nonsensical. In simplified terms, Google is licensing its IP to a foreign subsidiary for basically a penny then that Sub is then licensing it to another sub at near market rate. The legal issue is that transfer pricing is supposed to be fair/reasonable to market expectations which all these tax schemes violate. They get away with it primarily because determining realistic rates for IP licensing is complicated. It is only a matter of time before new rules come out that prevent it like they did wrt transfer pricing of physical/tangible assets.
Click to expand...

They are essentially doing transferpricing to avoid taxes that is illegal. The issue is to value the exchange. Coca Cola does the same for example. Multiple companies have already been fined hard due to it.
 
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