Google profits skyrocket by moving revenue to shell company

Many large companies have come under fire in recent years for transferring revenues to shell corporations in no-tax countries, and it appears Google is quickly becoming one of the leading culprits.

According to a new report by Bloomberg, Google saved about $2 billion in worldwide income taxes during 2011 by "shifting $9.8 billion in revenues into a Bermuda shell company." That figure represents nearly double the amount Google shifted into its Bermuda shell company three years ago, the report claims.

Because Bermuda doesn't have a corporate income tax, Google saves billions by moving its money to the country. Tactics like this have enraged some activists, who claim that companies engaging in such tactics are depriving national governments of money that was earned in their countries, which would go to governmental programs and repaying debts to decrease deficits.

Bloomberg claims the amount Google shifted to its Bermuda shell company represents the equivalent of about 80 percent of the company's total pretax profits for the year in question.

A statement released by Google's UK branch says the company is complying with tax laws and that its employment of residents in the countries it operates in helps boost the local economies.

"We make a substantial contribution to the UK economy through local, payroll and corporate taxes," the statement says. "We also employ over 2,000 people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in east London. We comply with all the tax rules in the UK."

According to Bloomberg's report, Google's Bermuda shell company makes money through a series of transfers between other Google subsidiaries. First, ads are sold in countries such as the U.K. and France, then those revenues go to an Irish subsidiary. The Irish subsidiary then pays royalties to another Irish subsidiary, with the latter subsidiary having a legal residence in Bermuda.

Source: Bloomberg

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