FOR more than 10 years, the European Union as well as the USA have been working to cut at least one legal loophole which allowed mega companies such as Alphabet, the Google parent company to reduce tax liabilities.
Known by the clumsy phrase ‘Double Irish, Dutch sandwich’ it allowed companies to transfer money to an Irish subsidiary, then to a Dutch holding company which in turn sent the money to an Irish holding company which was based in Bermuda.
It then licenced certain rights back to Google intellectual property and because Bermuda has no corporate tax, this switching of funds ending in a licence allowed Google to delay tax payments on international earnings in the USA and to reduce tax payments within Europe.
In 2014, after considerable pressure was exerted on it by both the European Union and the US government, Ireland changed their tax law but companies were still allowed to use this method until 2020.
This is not small change as the amounts involved in the past two years alone which passed through the Dutch company exceeded €40 billion for Alphabet alone and as the Dutch government is about to change its licencing laws so that royalties will be taxed in future, this is one legal outlet that seems likely to be closed.
Many EU members plus the United Kingdom have been endeavouring to tax not just Google but all of the major social media companies who use subsidiaries and holding companies to reduce their tax obligations, so in theory they will be happy.