Google’s Ireland tax arrangement draws more EU scrutiny

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The European Union has taken a closer look at how Google uses operations in Ireland to help reduce its corporate tax obligations within the trade bloc, two people familiar with the matter said.

Officials from the European Commission, the EU’s executive arm, held in-depth talks with Irish authorities late last year about whether the internet-search unit of Alphabet Inc. complies with rules limiting tax perks provided by individual European governments, according to one person, who asked not to be named as the matter is private.

The review was preliminary and might not lead to any formal investigation, the person said. According to another person, an EU investigation isn’t imminent and some Irish authorities are optimistic that initial conversations proved sufficient to avoid a more extensive probe of the company’s tax arrangements. Irish Finance Minister Paschal Donohoe discussed a potential tax case with EU Competition Commissioner Margrethe Vestager, one person said.

Google declined to comment, as did the European Commission.

The Irish Times reported on Sunday that Donohoe declined to comment on any possible examination of Google’s tax planning.

“We’ve a very good working relationship with the European Commission, and it’s up to them to determine what kind of investigations they feel are needed across the European Union,” he said, according to the newspaper.

Cracking Down

EU officials have been cracking down in recent years on efforts by big global companies to limit their European tax burdens. Vestager, who is now seeking a top EU job, ordered Apple Inc. to pay back billions of euros to Ireland, and she backed a push by France to tax Internet firms more heavily.

Apple, Google and Facebook Inc. all base their European operations in Ireland, which has a low basic corporate tax rate. Ireland has successfully resisted efforts by other European states to align tax calculations across the region. The government has been part of a push back against the French-led campaign to introduce an EU-wide digital tax, holding out instead for a global approach.

Vestager’s probes have provided another way for the EU to put pressure on low-tax states — including Ireland, Luxembourg and the Netherlands — that may lure firms away from other European nations.

Vestager has been a key figure in Google’s regulatory woes in Europe, stepping up an antitrust probe when she took office in 2014 that her predecessor had been willing to end. She finished the third and last probe into the company’s behavior with a 1.5 billion euro ($1.7 billion) fine in March, a day before she started campaigning to become president of the European Commission or win another senior EU post.

Until recently, Google has seen little scrutiny of whether its Irish operations violate the EU’s so-called state-aid arrangements. Apple has been the biggest target so far. The company was ordered to pay as much as 13 billion euros for deals with Ireland that reduced its effective corporate tax rate. Apple and Ireland are appealing the decision. The EU has also taken aim at Inc.’s tax deals with Luxembourg.

Google arrived in Ireland in 2003, with 100 employees. Now, it employs about 7,000 in Ireland. The company’s European headquarters is in Dublin, the Irish capital, and its sprawling campus close to the city’s south docks has been dubbed Googletown.

In 2017, Google Ireland Ltd. recorded a profit of 1.2 billion euros on revenue of 32.2 billion euros, according to company filings. The firm paid 167 million euros in corporation tax.

Tax Haven

Ireland is battling a perception that it is a tax haven. President Donald Trump said Ireland is pushing to attract U.S. firms in search of lower taxes. In 2018, the corporate tax rate in Ireland was 12.5 percent, compared with an EU average of about 21.9 percent, European Commission figures show.

“The Commission as part of its mandate in relation to state aid has in recent years gathered information from all EU member states on tax rulings since 2014,” the Irish finance ministry said in response to questions. “So far, it has examined over 1,000 rulings across all member states.”

It isn’t appropriate to comment on the nature of such requests, the ministry said.

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