The multinational Alphabet, the parent company of Google, will abandon this 2020 a fiscal engineering strategy that it has used for years to pay less taxes than it would in the US. through tax havens, local media published Thursday.
The company that owns the most used online search engine in the world has committed to the tax authorities of Ireland and the Netherlands to stop using the so-called “Double Irish, Dutch sandwich” plan, used by many multinationals to postpone payment of taxes in the US .UU. on international benefits and pay them instead in other countries with much lower tax rates.
This fiscal mechanism consists of transferring the money from the turnover by international business (obtained outside the US) from the subsidiary of Alphabet in Ireland to a postal address of Bermuda (considered a tax haven and without corporate tax).
The postal address of Bermuda is owned by another associated company but not owned by Alphabet and also with the registered office in Ireland, and the funds are sent through an instrumental company based in the Netherlands.
In this way, Alphabet and the rest of multinationals that use this perfectly legal system have for years paid a tax rate on their international benefits much lower than the one applied by the United States.
According to data provided by Alphabet to Irish and Dutch regulators, the company thus transferred $ 22.7 billion to Bermuda in 2017 and 19.2 billion in 2016, for which it did not have to pay the burdensome 35% rate on US corporate profits. .UU. (reduced by the Government of Donald Trump to 21% as of 2018).
“We are simplifying our corporate structure and we will set the licenses for our intellectual property in the United States, not in Bermuda,” Alphabet confirmed in a statement, which implies de facto ending the “Irish double, Dutch sandwich” strategy.
Two essential factors have contributed to Alphabet’s decision: on the one hand, Ireland’s decision – under pressure from the European Union and the US – to modify the legal provisions that allowed this fiscal engineering strategy; and on the other, the new tax scenario in the US, more favorable to large corporations after Trump’s tax reform.