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July 1, 2013 11:34 am

Report: Israel is Losing Out on Google’s Advertising Riches

avatar by Zach Pontz

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Google offices. Photo: rakerace.com.

Google’s extensive presence in Israel may benefit the country in many ways, but as a taxpayer is not one of them.

Israel’s Channel 2 reports that, despite Google earning millions of dollars in profits a month from Israeli advertisers, the government doesn’t see a cent. This is because Google transfers the profits to its headquarters in Ireland.

Ireland’s corporation tax rate of 12.5 percent is the second-lowest in Europe, with only Bulgaria and Cyprus’s 10 percent rate being  lower.

The scheme has caused controversy in the U.S.  as well, where a senate committee earlier this year grilled the CEOs of other corporations that take advantage of a scheme, called a “double Irish,” which the Christian Science Monitor describes as follows:

“A ‘double Irish’ involves setting-up two Ireland-based companies – for example, Google Ireland and Google Ireland Holdings – one of which is, under Irish law, held to be headquartered elsewhere (usually a very low tax jurisdiction). This company will hold the intellectual property rights, which are then licensed to the second company. The second company can then offset royalty payments to the first as tax-deductible expenses.”

For its part, Google has remained defiant, saying that that it complies with all tax laws and that politicians have the power to change the laws if they deem them illegal.

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