Will a change in Ireland´s tax regime change Google´s effecitve tax rate ?

Discussion in 'Stocks' started by ASusilovic, Nov 15, 2010.

  1. Presenting a possible, and overlooked, ripple from the Irish bailout (which was looking ever more likely, bar the shouting, at pixel time).

    Basically, sovereign bailouts involve a certain quid pro quo.

    For a start, there’s been talk that Germany is pushing for the country’s low, low 12.5 per cent corporate tax rate to be hiked. But Ireland’s government remains on course to confirm on Monday that this former jewel in the Celtic Tiger’s crown will be kept. We foresee a scrap.

    Awkward. And perhaps not least for a certain tax-avoiding search engine. Interesting to note that Google lagged the Nasdaq somewhat on Monday:


    Interesting, because as Bloomberg BusinessWeek explained recently:

    To reduce its overseas tax bill, Google uses a complicated legal structure that has saved it $3.1 billion since 2007 and boosted last year’s overall earnings by 26 percent…

    When a company in Europe, the Middle East, or Africa purchases a search ad through Google, it sends the money to Google Ireland. The Irish government taxes corporate profits at 12.5 percent, but Google mostly escapes that tax because its earnings don’t stay in the Dublin office, which reported a pretax profit of less than 1 percent of revenues in 2008…

    Google Ireland sends the earnings on a tax-lite journey to the Netherlands, whence a shell subsidiary passes it on practically untouched to a Bermudan holding, basically. They call it a ‘Double Irish’.

    Jammy stuff. Until your tax haven files for a bailout from some very angry Germans, that is. And 26 per cent of your earnings is a lot to put at risk…



    And yes, short Google.