"Double Irish" and the "Dutch Sandwich" (how to p*ss off the taxman)

An insightful report by Bloomberg this week lends valuable insights on Google's tax structure, reporting the company pays just 2.4% corporate tax on its entire turnover outside the US! Obviously some lessons to be learned for all of us.

Bloomberg's report details that Google's Dublin-based operation, with a small team of 2,000, is responsible for 88 percent of the company's $12.5 billion in sales outside the U.S. That's obviously not bad on a measure of income per employee.

The really interesting part is that the company has saved $3.1 billion since 2007 and boosted last year's overall earnings by 26 percent through its tax structures.

And in a hint for those interested, the article draws reference to the final destination of Google's overseas profits. Bermuda - where there is no corporate tax.

Google pays tax on just 1% of its profits in Ireland. That's 12.5% of 1% profits on 88% of its €12.5 billion in overseas sales! (apologies to those of you who did not pay attention in maths class)

For all interested to learn how a corporate rate of 12.5% tax in Ireland equates to an overall corporate tax bill of just 2.4% - here's the route to follow.

The process is known as "Double Irish" and the "Dutch Sandwich." Which probably says all you need to know. (No, its not a description of certain intimate positions).

For clarity, in the case of Google - income from non-US clients (i.e. paying for search ads) is sent to Ireland. That starts a baton race of 'touch and go' - the money 'touches' Ireland, but does not stay (important/critical step). Next stop the Netherlands, because Ireland makes it difficult to send money direct to Bermuda.

There, the money passes through Google Netherlands Holdings - a shell company with no employees. From there, 99.8% passes on to Bermuda - and wait for it!!!!!! The Bermuda company is an Irish company! That's the 'double Irish' bit. The 'sandwich' refers to the Dutch bit in the middle.

So, the 12.5% Irish corporate tax rate may be a myth after all! Except for all those suckers who just pay up.