This popular tax trick helped Google to save $3.7 billion

The tech companies shelter a lot of money from taxes, according to the Dutch. Tech giants like Google, Apple, Facebook, and Amazon have earlier faced allegations of doing so in Germany and France. Meanwhile, the new report by Netherlands regulatory claims that Google shielded around $19.2 billion in 2016 by using the popular “Dutch Sandwich” tax trick. The tech giant saved $3.7 billion in taxes.

A ‘Dutch Sandwich’ is a trick to save tax which is used by some multinational corporates to lower their corporate tax liability. The strategy uses payments between related entities in a corporate structure to shift income from a higher-tax state to a lower-tax country. Alphabet Inc. the parent company of Google uses two structures, known as a “Double Irish” and a “Dutch Sandwich,” to shield the most of its international profits from taxation. The strategy by tech giant is quite simple which involves shifting revenue from an Irish subsidiary to a Dutch company with no staff and immediately moving the funds to a Bermuda mailbox owned by another company registered in Ireland.

Google moved 15.9 billion euros which are about $19.2 billion to a Bermuda shell company in 2016, according to regulatory filings in the Netherlands. Furthermore, Google moved 7% more cash through this strategy in 2016 than it did a year earlier.

In a defensive statement given to Bloomberg, Google says,

“We pay all of the taxes due and comply with the tax laws in every country we operate in around the world. We remain committed to helping grow the online ecosystem.”

The statement might seem technically accurate, as it pretends to be honoring local laws. However, it doesn’t mean that companies like Google, Apple, Facebook, and Microsoft are obeying the spirit of local laws. These tech giants are still using tax loopholes of different countries and only following them in letters.