Google pays only 2.4% in taxes through loopholes

Bloomberg took a close look at Google's regulatory filings and found that over the last three years they have been able to cut $3.1 billion in taxes, thanks to loopholes in the system. They are using a technique that moves the money from Ireland and the Netherlands to the tropical island of Bermuda.

The income shifting strategy, known in the legal world as the Double Irish and the Dutch Sandwich, is a legal way to shift income overseas to avoid paying any taxes on it. Google was able to shift enough money around to lower its overseas income to just 2.4%. Martin A. Sullivan, a tax economist, said,

"It’s remarkable that Google’s effective rate is that low.  We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent."

Using Bermuda as a tax shelter to avoid paying taxes on income is a technique that is beginning to pick up steam among tech companies. It is said that Facebook and Microsoft are beginning to take advantage of these tax loopholes. 

The loophole itself takes advantage of an Irish law that allows companies to legally move money between subsidiaries, helping to escape Ireland's 12.5% tax. So, these companies take income and move it to the islands where there is no corporate tax. This then lowers the amount of taxable income within countries like Ireland that allow money to be shifted tax free. Jane Penner, a Google spokesperson, defended the practice. "Google’s practices are very similar to those at countless other global companies operating across a wide range of industries.”  

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Major corporations as a whole are run by nihilists, they have no religious, moral or ethical compass. For them decisions are made that enrich the shareholder, who cares about ethics or morals? If the law says that something is illegal, they will simply lobby the lawmakers and have that law changed, rearranged or overlooked.

Might be legal but completely unethical. I won't hold my breath for Congress to do anything about it since they are pretty much a corporation themselves.

Boeing 787 said,
Might be legal but completely unethical. I won't hold my breath for Congress to do anything about it since they are pretty much a corporation themselves.

got that right... I think google is in with the big man in charge also...

to all those wanting to put the blame somewhere else, the blame is all on google. They paid for the laywers to find these loopholes.

People fail to realize that corporations don't pay tax. They simply embed it in their goods and services. So yes our tax system does fail. So the general public pays corporate taxes and personal taxes. Now that is what is unethical!

Lol at the Americans complaining about high taxes as usual.
Try living in Britain, 17.5% VAT on goods (going up to over 20%), up to 50% tax on earnings, tax on savings, inheritance tax, road tax, tv license etc etc.
Thats just what an ordinary person gets taxed on lol.
And you started a revolution because we tried to tax you a little more when the British people were already paying a ridiculous amount more than you.

the better twin said,

And you started a revolution because we tried to tax you a little more when the British people were already paying a ridiculous amount more than you.

The Americans started the revolution because of "No taxation without representation", which because they had no say about it effectively caused their taxes to be spent in a way that had little benefit to the US . It had nothing to do with the amount of tax.

If i ran a company and i could take loopholes, i would. You cant blame em, everyone wants to get ahead and increase their bottom line. And lets face it, google probably cares more about the US economy than the right wing who just wants to keep their corporate buddys in business.

Neoauld said,
If i ran a company and i could take loopholes, i would. You cant blame em, everyone wants to get ahead and increase their bottom line. And lets face it, google probably cares more about the US economy than the right wing who just wants to keep their corporate buddys in business.

As a person in the position you describe, no... I could have saved a lot of money, 'being crooked', and never did.

Instead it is people like me that is paying part of Google's taxes. If there were better regulations and less 'crooks' like Google, there would be no need for the 35% corporate tax rate honest companies pay.

Go look at Microsoft, US Revenue is taxed and paid accordingly, and they are far more Global than Google.

Another Google PR moment. Not only is your privacy overated, we hack your wifi network for fun and pay hardly any taxes by using loop holes.

Dont you just love us!!!

I always laugh when Republicans claim the US has the highest rate for corporations. It just silly. The congress bought and paid with Corporate Money.

The problem with taxing corporations is that it's really a tax on us, the consumers. The corporation sure isn't going to eat the tax increase - they'll figure out a way to increase the cost to us, the consumer, to offset the increase, while their profits remain the same. If corporate taxes go up, the product prices go up, as we pay for their tax increase. It's a very sneaky way of increasing taxes on the population by stirring up class envy and having us be mad at "The Man" while the government takes more and more of our money from us, albeit indirectly.

Nashy said,
Wouldn't that almost classify as money laundering?

maybe tax evasion. but the law is wrote to protect the big investors and large corps.. If you or I tried to do it we'd be in a cuban holding cell.

sounds evil to me. but seems every company does this. Cooperate tax laws are two-blades sword, you can't allow them get away from extensive tax evasions, but you have to give them room to grow by not taxing too heavily. And whenever you move oversee money back to US, they are still taxable.

...the rich get richer and the poor get poorer.
F**ked up eh?

google should be paying 24% while the middle income family be paying 2.4% - that ain't how it goes though. Why are these loopholes still open? anyone?

First, we all already know that Google was doing it
Second, Hey is anyone here would want to pay more for taxes if they find a way to pay less?
Think logical!

Nelsoon said,
First, we all already know that Google was doing it
Second, Hey is anyone here would want to pay more for taxes if they find a way to pay less?
Think logical!

Exactly. Who on earth doesn't lodge a tax return when the time comes hoping that you get a somewhat significant portion back?

it cost these multi-national companies less to lobby the goverment than to actually pay the taxes. I wouldn't count on the US fixing our broken tax system any time soon.

If everyone just paid their taxed we would actually be able to lower them.

Shea J said,
it cost these multi-national companies less to lobby the goverment than to actually pay the taxes. I wouldn't count on the US fixing our broken tax system any time soon.

If everyone just paid their taxed we would actually be able to lower them.

Um no the government will never lower the tax rates, because they spend more and more every year. Im not talking about inflation either.

Tekkerson said,
Maybe because it is news to other people other than you?

I didn't know about this until I read it here.


+1

Obviously a slow news day! re writing news that was published years ago, im sure this was on one of the tech news websites a couple of years back.

seriously they made it possible with the law, sorry ;p i think it's logical everyone tries to avoid paying taxes, the system just makes it possible

satukoro said,
Granted, they do have over 9000! lawyers.
9000 Google lawyers == 900 Reliance lawyers (Indian corp) they can prove a expense an asset (Not prepaid).

Compared to all the companies that do the same I don't think they are that bad. They give us quite a bit, might not be out the goodness of their hearts but it works for me right now - thats not to say i would blindly follow everything they do in the future.

oh, so that's why I get adsense from Ireland and it's got a headquarters on the letter listed in holland. I'm in Scotland, but it still seems to take around 2 weeks to get here, from Ireland are they using a toy boat to deliver it ?

Ruran said,
Double Irish sounds like a awesome drink, Dutch Sandwich sounds oddly sexual. Yes, my mind is weird.

Hey, financial analysts need to have fun too!

"The income shifting strategy, known in the legal world as the Double Irish and the Dutch Sandwich, is a legal way to shift income overseas to avoid paying any taxes on it."

um ok, so it's legal right? Then who cares? We call it "working the system" and there are millions of companies that do this, and they will continue until the laws are changed.

DavidM said,
"The income shifting strategy, known in the legal world as the Double Irish and the Dutch Sandwich, is a legal way to shift income overseas to avoid paying any taxes on it."

um ok, so it's legal right? Then who cares? We call it "working the system" and there are millions of companies that do this, and they will continue until the laws are changed.


Yes its completely legal, but is it ethical is the question?

But like you said, companies will continue to do this until the tax laws are changed.

It has nothing to do with being ethical. Does a company exist to pay taxes to the Government? Of course not. If you want to talk about ethics, is it ethical for a Government to TAKE earned money from businesses and people? 10 to 30 F'n percent! I see no problem with a company or person figuring out a way to reduce it's tax burden and keep money it has earned as long as it's legal. If you don't want loopholes, create a more simple tax code.

The Patriot said,
It has nothing to do with being ethical. Does a company exist to pay taxes to the Government? Of course not. If you want to talk about ethics, is it ethical for a Government to TAKE earned money from businesses and people? 10 to 30 F'n percent! I see no problem with a company or person figuring out a way to reduce it's tax burden and keep money it has earned as long as it's legal. If you don't want loopholes, create a more simple tax code.

How do you expect the government to pay for anything then? Magic? Sure the government does overspend, but thats a completely different matter / topic.

And of course its not ethical. Why do corporations get to do that, but if I try holding money in offshore bank accounts or some shenanigans like that..the IRS will be knocking at my door.

/- Razorfold said,

How do you expect the government to pay for anything then? Magic? Sure the government does overspend, but thats a completely different matter / topic.

And of course its not ethical. Why do corporations get to do that, but if I try holding money in offshore bank accounts or some shenanigans like that..the IRS will be knocking at my door.

Its part of the same problem. They wouldnt need 30% if the didnt purposely increase their spending every year.

It's only an ethical issue to Democrats and Socialists. Some of us think you have have the right to earn MOST of what you keep. If the tax rates weren't so ridiculously high, businesses and people wouldn't be so focused on reducing their tax burden.

As a small business owner I spend every waking day trying to figure out how to reduce my expenses and make my product better. Why do you think so many businesses incorporate in Delaware? It's because the tax code is more favorable for us there. Is that unethical?

There are certainly legal ways to reduce your tax burden as an individual. People choose to live in states that don't have state income taxes. Is that unethical? People keep dependents on their taxes to squeeze out a little more savings. Are they unethical?

Finally, the American tax system is FUBAR'd and you know it. Half the country doesn't pay taxes!!!. If the system didn't gouge small business owners (heck any business) and individuals who have worked hard to get into the middle class or better I might approach this issue from an ethical/duty point of view. Until that glorious day happens I will continue to reduce my tax burden and support Google in doing the same.

/- Razorfold said,

Yes its completely legal, but is it ethical is the question?
A business (also known as company, enterprise, or firm) is a legally recognized organization designed to provide goods, services, or both to consumers or tertiary business in exchange for money. The primary motive of business is profit but can also be formed not-for-profit or be state-owned.

This is a vast topic on which we can debate, considering scope, bringing in ethics and so on.

/- Razorfold said,

How do you expect the government to pay for anything then? Magic? Sure the government does overspend, but thats a completely different matter / topic.

And of course its not ethical. Why do corporations get to do that, but if I try holding money in offshore bank accounts or some shenanigans like that..the IRS will be knocking at my door.


Do you really need everything done by the Gov.
Here in Quebec Baby sitters is now done by the gov and guess what it cost the Governement 47$/day what cost 20 in the public. They charge 7$ a day... without dicenrnement if they receive all their income in welfare program...

NesTle said,

Do you really need everything done by the Gov.
Here in Quebec Baby sitters is now done by the gov and guess what it cost the Governement 47$/day what cost 20 in the public. They charge 7$ a day... without dicenrnement if they receive all their income in welfare program...

I didn't say everything had to be done by the Gov, did I? But the things that need to be done (road, police, fire etc) do need money. They don't work on air.

/- Razorfold said,

Yes its completely legal, but is it ethical is the question?

But like you said, companies will continue to do this until the tax laws are changed.

Seriously? Tax payment is now an "ethical" question? If *you* became aware of a loophole that allowed you to save a significant portion of your income, and it was completely legal, would you take advantage of it? Or would you keep sending extra money to Uncle Sam because it's "ethical?"

I love how people on here think everything <insert evil corporation flavor of the month> does is automatically evil, immoral, or unethical, but it's completely okay when it's individuals doing it in their day to day lives.

Taxes, to me, are never an "ethical" issue. I'm sorry, but no one, individual or corporation, has an "ethical" duty to send more money to a government than is legally required.

Um just because you would do it doesn't make it ethical.

And I never said Google was evil did I? No I didn't. All I said was why are corporations allowed to do this, but if an individual tries it, the IRS will be arresting him soon after.

/- Razorfold said,
Um just because you would do it doesn't make it ethical.

And I never said Google was evil did I? No I didn't. All I said was why are corporations allowed to do this, but if an individual tries it, the IRS will be arresting him soon after.

So the IRS has the power to arrest people for LEGAL things? Hardly. Again, Google IS NOT BREAKING A LAW. Individuals use legal loopholes all the time to save on taxes. Again, so long as it's legal, the IRS has nothing to say about it.

MiniVegeta04 said,

So the IRS has the power to arrest people for LEGAL things? Hardly. Again, Google IS NOT BREAKING A LAW. Individuals use legal loopholes all the time to save on taxes. Again, so long as it's legal, the IRS has nothing to say about it.


I didn't say it was against the law for google did I? Did you miss my first post saying THIS IS LEGAL?
Yes its completely legal,

But try earning money and depositing it in an offshore bank account. You'll still be taxed on it. And no, most individuals do not have the capabilities to shuffle money around 3 banks in 3 different countries so they can only get a tax rate of 2.4%

Just because something is legal doesn't make it ethical. Why should Google be allowed to get away with this (ie why isn't this loophole fixed) when small businesses, normal people etc going to be taxed higher?

/- Razorfold said,

I didn't say everything had to be done by the Gov, did I? But the things that need to be done (road, police, fire etc) do need money. They don't work on air.

Applying your logic states like Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington, Nevada, Texas and Wyoming run on air because guess what ? they don't have state tax !

Omen1393 said,
Don't be Evil, Google.

Really? Avoiding taxes through legal means is now "evil?" So you are evil when you plan your retirement contributions and make other choices such as to minimize your tax liability? Minimizing tax liability isn't evil, it's good sense. Now, if there were something illegal going on, I'd be against it, but there isn't. Any of the governments involved are free to close this loophole if they so desired.

I know if I were a Google shareholder, and I heard the company was paying *more taxes than legally required* because someone thought using legal means to avoid paying tax is "evil" I'd be pretty ****ed.

MiniVegeta04 said,

Really? Avoiding taxes through legal means is now "evil?" So you are evil when you plan your retirement contributions and make other choices such as to minimize your tax liability? Minimizing tax liability isn't evil, it's good sense. Now, if there were something illegal going on, I'd be against it, but there isn't. Any of the governments involved are free to close this loophole if they so desired.

I know if I were a Google shareholder, and I heard the company was paying *more taxes than legally required* because someone thought using legal means to avoid paying tax is "evil" I'd be pretty ****ed.


IT's funny all the excuses one can make when google is in question...

MiniVegeta04 said,

Really? Avoiding taxes through legal means is now "evil?" So you are evil when you plan your retirement contributions and make other choices such as to minimize your tax liability? Minimizing tax liability isn't evil, it's good sense. Now, if there were something illegal going on, I'd be against it, but there isn't. Any of the governments involved are free to close this loophole if they so desired.

I know if I were a Google shareholder, and I heard the company was paying *more taxes than legally required* because someone thought using legal means to avoid paying tax is "evil" I'd be pretty ****ed.

Doing something without violating any laws doesn't mean it's not evil, and violating a law by doing something doesn't make it necessarily evil.

A simple example: If I cheat on my girlfriend and feel good about it, I haven't violated a single law and yet it's more evil than good.

What Google and many other companies are doing is screwing the countries they generate revenue in. The rule of the game is meant to be that whatever revenue you generate in a certain country, you pay taxes for it in that country. Exploiting loopholes to avoid that is not something that is done with good intentions (i.e it's closer to evil than good).

Hell-In-A-Handbasket said,
I blame the U.S. Tax system, not google, for being a convoluted pile of crap with more holes then a screen door.

+1

Hell-In-A-Handbasket said,
I blame the U.S. Tax system, not google, for being a convoluted pile of crap with more holes then a screen door.
Well you hate it when you have to make payment. Indian Law says, Income generated in or outside India, Received in or outside India by an Indian firm/citizen is liable for tax, this same law can also use this loophole.

I believe you dont understand how the loophole works, Google saved tax not from American government but from Ireland and the Netherlands where there is law for tax free funds transfer to their own subsidiaries. The hole is that the law doesnt specify the jurisdiction area of subsidiary company and to better rip crops they can even levy a maximum transfer allowed which will surely make business in that countries un-favourable.

Hell-In-A-Handbasket said,
I blame the U.S. Tax system, not google, for being a convoluted pile of crap with more holes then a screen door.
You should read the article again.. America tax laws do not affect Google when those "branches" are located in other country's "Ireland, Netherlands , Bermuda".

The article also stated:

"The income shifting strategy, known in the legal world as the Double Irish and the Dutch Sandwich, is a legal way to shift income overseas to avoid paying any taxes on it. Google was able to shift enough money around to lower its overseas income to just 2.4%."

So once again, this has nothing to do with the U.S. Tax System.. Google is a GLOBAL Corporation and each individual branch is bound by the laws of the country that it resides in.. The branch in the U.S. still had to pay normal taxes.

Hell-In-A-Handbasket said,
I blame the U.S. Tax system, not google, for being a convoluted pile of crap with more holes then a screen door.

ahh i thought they moved the money from US -> to Ireland/Dutch -> to Bermuda.

Morphine-X said,
You should read the article again.. America tax laws do not affect Google when those "branches" are located in other country's "Ireland, Netherlands , Bermuda".

The article also stated:

"The income shifting strategy, known in the legal world as the Double Irish and the Dutch Sandwich, is a legal way to shift income overseas to avoid paying any taxes on it. Google was able to shift enough money around to lower its overseas income to just 2.4%."

So once again, this has nothing to do with the U.S. Tax System.. Google is a GLOBAL Corporation and each individual branch is bound by the laws of the country that it resides in.. The branch in the U.S. still had to pay normal taxes.

Really? Yes they are a Global company, but they are shifting US BASED REVENUE to foreign branches. This is where the US TAX system fails miserably.

This is why the Corporate rate is so freaking high, and the little corporations that play by the rules and don't off-shore crap get stuck paying the taxes for companies like Google.

People are insane.

Morphine-X said,
You should read the article again.. America tax laws do not affect Google when those "branches" are located in other country's "Ireland, Netherlands , Bermuda".

The article also stated:

"The income shifting strategy, known in the legal world as the Double Irish and the Dutch Sandwich, is a legal way to shift income overseas to avoid paying any taxes on it. Google was able to shift enough money around to lower its overseas income to just 2.4%."

So once again, this has nothing to do with the U.S. Tax System.. Google is a GLOBAL Corporation and each individual branch is bound by the laws of the country that it resides in.. The branch in the U.S. still had to pay normal taxes.

I didn't know Google had offices in Bermuda. I've lived here my whole life and didn't know that. I'm going to investigate that tomorrow. Maybe I'll apply for a job. I know that Apple keeps money here. Saw Peter Oppenheimer just before the launch of the iPad. He had one with him though he would pack it away when anyone got close to him. Either way, what these companies are doing clearly isn't illegal. Maybe unethical but if these loopholes continue to remain open, then they will continue to be exploited.