Paschal Donohue, Ireland’s minister for finance, has declined to comment on emerging reports that the European Commission is taking a closer look at Google’s Irish tax regime.
Sources familiar with the matter indicated that the EU is now scrutinizing how the technology giant uses its operations in Ireland to help cut down its corporate tax obligations within the trade bloc.
Sources close to the matter say the review was only preliminary and may not necessarily lead to a full-scale investigation into the firm’s Irish operations. An EU investigation, it seems, is not quite imminent and Irish authorities are bullish that the preliminary conversations are sufficient to avoid a more in-depth probe of Google’s tax arrangements.
Google declined to issue a statement on the matter as did the European Commission. But a source revealed that Margrethe Vestager, the EU Competition Commissioner, discussed a potential issue with Pascal Donohue, Ireland’s minister for finance. “I can’t comment on any matters in relation to any particular company. That is the role of the European Commission to comment on any investigations they may or may not be considering,” said Mr. Donohoe.
Mr. Donohoe was speaking in Washington where he was attending the World Bank Spring meetings. He indicated that the Irish government has had a good relationship with the European Commission and that and that it was up to them to determine what kind of probes they feel are required across the EU.
Last year, Bloomberg reported that officials from the European Commission had held in-depth talks with Irish authorities on whether Alphabet Inc, Google’s internet-search unit complies with rules limiting tax perks provided by individual governments of member states in the trade bloc.
While no formal investigations have been launched as yet, the report comes amid a clamp-down at the EU and OECD level on some of the tax practices of digital companies. Mr. Donohoe indicated that the issue of tax was something that was always contested and that Ireland was also engaging in the debate. “It is a debate we are participating in,” said the minister for finance, adding that he expected to see “further change take place in relation to the taxation of the digital sector.”
Mr. Donohue particularly pointed out OECD’s forthcoming work on digital taxation. The intergovernmental economic organization headquartered in Paris will, by the end of the year, publish its roadmap on taxing the digital economy. It is also expected to come forward with more details of its plans before the summer.
The EU had previously made unsuccessful attempts at introducing EU-wide digital tax policies. According to the finance minister, the move could have resulted in reciprocal measures from other parts of the world if the European Union had acted unilaterally.
Several big technology giants, including Apple, Google, and Facebook, have their European operations’ base in Ireland which provides a lower basic corporate tax rate as compared to other EU member states. Ireland has continually resisted efforts by other EU member states to align tax rates and tax calculations across the trade bloc.
Therefore, Vestager’s probes have opened up other avenues for the EU to intensify pressure on low-tax member states, including Ireland, Netherlands, and Luxembourg. The risk is that these states may lure firms away from other member states.
Until recently, Google has seen little scrutiny of its Irish operations, and whether they violate the EU’s state-aid arrangements. The EU has also targeted Amazon.com for its tax deals with Luxembourg. However, Apple has received more scrutiny in recent times, with the technology giant ordered to pay around €13 billion for its deals with Ireland that helped reduce its effective corporate tax rate. Ireland and Apple have appealed the decision.
Google’s European is in Dublin and its sprawling campus, which is dubbed Googletown, is located close to the south docks. Google landed in Ireland back in 2003, and with only 100 employees. The firm now employs about 7000 people in Ireland.
According to company records, the firm recorded a profit of €1.2 billion from revenues of €32.2 billion. Therefore, it paid about €167 million in corporate tax.
Ms. Margrethe Vestager, EU’s competition commissioner, has been at the forefront of Google’s regulatory woes in Europe. She even stepped up an anti-trust probe as soon as she took office back in 2014 which her predecessor had been willing to bring to an end.
Mr. Donohue is due to present an update to his cabinet counterparts on the latest economic forecasts for the country when he returns to Dublin on Tuesday. He will also outline the Department of Finance’s projections for both this year and the coming year.