Thread by @Brad_Setser

There isn't any real news in Google's announcement that it will phase out its "double" Irish structure next year. All double Irish structure have to be phased out. The key question is what will replace Google's current double Irish.

1/x

cnbc.com/2019/12/31/goo…

One leg of a double Irish was an Irish company (legally speaking) that wasn't a tax resident of Ireland (as it was controlled by "Bermuda"). That is going to be phased out: the BEPS initiative requires that subs be tax residents of somewhere

2/x

en.wikipedia.org/wiki/Double_Ir…

One option would be for Google to consolidate its offshore operations around its U.S. headquarters, and take advantage of the lower rate on the export of intangibles (FDII)

3/x

The other option that I am aware of would be for Google to follow Apple and now Microsoft in using Ireland's "capital allowance for intangible assets" (CAIA) tax tool, which allows IP heavy firms to pay an effective tax rate will below Ireland's (low) headline tax rate.

4/x

Google would then consolidate its tax operations in Ireland (as Microsoft did this summer) and basically pay the U.S. GILTI (10.5%) rate, adjusted for any tax payments in Ireland.

So curious if any the reporting on Alphabet has indicated what will replace the double Irish!

5/5

for more background on Ireland's CAIA tax tool (the "Green Jersey"), see the very good Wikipedia page

en.wikipedia.org/wiki/Ireland_a…

and the Reuters story hints that Google may be planning to use the FDII (low rate on the export of intangibles) at least in part "We're now simplifying our corporate structure and will license our IP (intellectual property) from the US, not Bermuda"

would like to see this confirmed

(if Google does use the CAIA tool, there will be a big surge in Irish investment in intangibles at some point this year, so can test it that way with a lag)

finance.yahoo.com/news/google-en…