Google Ireland pays just €46.5m in corporation tax even as revenues increase 23% to €22.6bn

Google Ireland has reported a 23% increase in revenues last year to €22.6bn (£20.11bn). The Dublin-based subsidiary – through which the search engine giant diverts sales from across Europe, the Middle East and Africa – revealed the same on Friday.

However, the highlight of the company's financial statements was that despite such large revenues, it had paid just €46.5m in Irish corporation tax. Google Ireland said this was because its taxable profits were just €341m. It further explained that its profits were low amid an increase in its "administrative expenses".

The subsidiary said that these expenses had increased by €3.5bn to €16.9bn in 2015. It attributed the increase to "increased head count", an "increase in sales and marketing effort", and "an increase in the royalties paid to a group undertaking".

While the company did not provide too many details about these expenses, it said the Irish operations saw a 6% increase in total employees to 2,763 people in 2015. It said apart from these staff, it also had about 3,000 contract employees in Ireland.

"As Google grows, Ireland continues to benefit...In 2015 we opened our second data centre, bringing total investment in capital assets in Ireland to over €750m," Ronan Harris, the outgoing head of its Irish operations was quoted as saying by the Irish Times.

The Dublin-based firm added that total salaries paid had increased by about €365m in 2015. This indicated that Google Ireland's primary administrative expenses were made up of cash royalties paid to another Google subsidiary.

While these statements did not disclose the location of the subsidiary to which the royalties were paid, according to the Guardian, all the royalties paid will eventually be directed to a business group called Google Holdings Ireland, which along with Google Ireland Limited are said to be part of the "Double Irish" arrangement. This arrangement is said to be a tax strategy used by some multinationals to lower their corporate tax liability.

Being registered as an unlimited company, Google Holdings Ireland is not required to file accounts, under Irish company law. Moreover, it is not charged any corporation tax by Bermuda, the country where it is registered as a tax resident. Hence every year the company is said to save billions of dollars in taxes.

Of this Irish income, more than $7bn (£5.59bn) is said to have flowed in from transactions with advertisers in the UK. This declaration by Google Ireland follows former chancellor George Osborne commenting in March that he would bring in a measure aimed at closing tax loopholes. He had then said that this measure, which was called the 'google tax' or more formally the diverted profits tax, would help raise £3.1bn ($3.88bn).