According to Reuters, Google’s parent Alphabet will stop using a tax strategy known as the “Double Irish, Dutch Sandwich” to minimize U.S. taxes.
The tax practice involved using a subsidiary in the Netherlands “to shift revenue from royalties earned outside the United States to Google Ireland Holdings, an affiliate based in Bermuda, where companies pay no income tax.” As a result of the practice, Google was able to pay taxes in the single digits on non-U.S. profits. This is roughly a quarter of the average rate for overseas markets.
While legal, the practice was highly controversial, causing Ireland to eliminate the loophole in 2014, with it taking effect in 2020. According to a Dutch filing, Google has not confirmed a termination date for the practice, but says it will take place by the end of 2019 or in 2020.
Another motivation for ending the practice is the Tax Cuts and Jobs Act, passed by the Trump administration in January 2018. Under the law, “profits that have been made and taxed abroad are not subject to taxation when returned to the U.S.”
With the Irish loophole closing and motivation to look for other loopholes no longer a factor, it’s likely Google will be joined by a number of other U.S. companies.