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News : Innovation Last Updated: Sep 23, 2015 - 5:38 AM


Google booked 41% of global revenues in Ireland in 2012; A leprechaun's gold?
By Michael Hennigan, Finfacts founder and editor
Sep 30, 2013 - 11:31 AM

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John Herlihy, Google Ireland chief (left), apparently instructing Richard Bruton, enterprise minister, on pressing green lights, Dublin, September 2012.

Google booked 41% of its global revenues excluding Motorola, in Ireland in 2012. This manna from the heavens is officially a result of increased competitivness and a related plunge in unit labour costs. It is neither and from an Irish viewpoint it is wealth that is as durable as a leprechaun's gold.

Google added 100 additional staff in Dublin and while 2,200 "miracle" workers in Ireland could produce 41% of the world sales but on a worldwide basis, the search engine giant employed 53,861 full-time employees (37,544 in Google and 11,113 in Motorola Mobile and 5,204 in Motorola Home) as of December 31, 2012.

The mega-Irish revenues resulted from accounting transactions to transfer sales from higher-tax countries and only required some digital keystrokes.

There was a 25% rise in the revenues booked in Ireland to €15.5bn and after charging “administrative expenses” of almost €11bn to move profits elsewhere, it reported a net income as a ratio of sales of 0.8% compared with Google Inc's net income ratio of 30%.

Taxes paid or provided for amounted to €17m.

The Daily Telegraph reports today that Google paid £11.6m (€14m) in corporation tax in the UK in 2012, on revenues of £506m (€625m). Google Inc. said in its Q1 2013 report: "Google revenues from the United Kingdom totaled $1.39bn, representing 11% of Google revenues in the first quarter of 2013, compared to 11% in the first quarter of 2012."

Google's sales in the UK in 2012 were at about $5bn (£3.3bn).

So with Microsoft's 37% jump in the value of revenue diversions to Ireland in the year ended June 30, 2012 (24% of global revenues), the two American companies accounted for  almost a third of Irish headline services exports in 2012.

Even the tax paid by Google and Microsoft, on net income after multi-billion royalty charges results in effective rates of 11%  (€17m on €154m and 13.2% (€132m on €1bn) respectively, appearing to confirm the official line that Ireland's effective rate of corporate tax (actual tax paid as a ratio of net income) is close to the headline rate of 12.5%.

However, this would be another fantasy.

Microsoft Inc. reported an effective 2011 tax rate of 5.69% in Ireland to a US Senate panel last year and its net income ratio in 2011/2012 was 30% and 7.5% in Ireland.

Google reported foreign income of $8.1bn  in 2012 compared with US income of $5.31bn and it provided for $358m for foreign taxes giving it an effective foreign tax rate of 4.4%.

It said: "Substantially all of the income from foreign operations was earned by an Irish subsidiary"  - - Google Ireland Holdings, the Irish-registered non-tax resident company located in Bermuda, which owns the intellectual property that Google Ireland Ltd is licensed to sell.

It is a letter box company located at the Church Street, Hamilton offices of Conyers Dill & Pearlman, a company that provides services to offshore clients.

No withholding tax is paid when the money technically goes from Google Ireland to Bermuda. This of course just involves accounting transactions involving accounts in a US-owned bank; Google has no employees in Bermuda  and the Irish company is likely managed from Google's headquarters in California.

Finfacts: US company profits per Irish employee at $970,000; Tax paid in Ireland at $25,000

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