Google's $2 billion tax dodge
The company reportedly uses a Bermuda loophole to cut its tax payments significantly. It's another sign that the tax code, which is way too complex, needs reform.
Google (GOOG) slashed its corporate tax bill by $2 billion in 2011 thanks to some creative and legal accounting, according to Bloomberg News. This should anger taxpayers as Congress debates how to avoid the fiscal cliff.The search engine giant shifted $9.8 billion in revenue to a Bermuda shell company, almost double the total from three years earlier, the news service says.
This is hardly a shock. Tax authorities in the U.S. and Europe have complained for years about the tricks wealthy individuals and corporations are using to avoid paying their fair share to governments. Officials in Europe and the U.S. are cracking down on practice of companies shifting profits from one country to another, also known as transfer pricing.
According to the Tax Justice Network, $32 trillion in U.S. wealth is parked in offshore accounts. The New York Post recently noted that Apple (AAPL), Microsoft (MSFT) and eBay (EBAY) have tens of billions of dollars squirreled overseas. Google has employed tax avoidance strategies with names that sound like pulp detective novels, such as "Dutch Sandwich" and "Double Irish." They seem to have worked like a charm.
"Last year, Google reported a tax rate of just 3.2% on the profit it said was earned overseas, even as most of its foreign sales were in European countries with corporate income tax rates ranging from 26% to 34%," according to Bloomberg. "Google’s overall effective tax rate dropped to 21% last year from about 28% in 2008. That compares with the average combined U.S. and state statutory rate of about 39%."
One thing that Democrats and Republicans agree upon is that the U.S. tax code is needlessly complicated. It needs to be reformed but Congress needs to tackle the jobless situation first because fixing the tax code is a tall order.
During the presidential campaign, both Barack Obama and Mitt Romney spoke of the need to close tax loopholes. Unfortunately, as the Google case highlights, that's easier said than done. No one has any incentive to address this problem because so much money is at stake.
Jonathan Berr does not own shares of the listed shares. Follow him on Twitter @jdberr.
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Problem, like I stated before. The business sector is way smarter than anyone in the government. They make laws they don't understand. Let's just pass Obamacare and then we will read it to find out what is in the bill.
Give me a break you have idiots running the government, and they are just not that bright. Problem they usually screw things up worse.
Now Dumbo wants to raise the debt ceiling on his own. Good luck with that.
Google did nothing illegal. It is congress that has caused this type of behavior. For fairness to all, there should be a flat tax of 12% for every single person in the U.S. No write offs, no deductions,
no loop holes. If Obama wants people to pay thier fair share (which he really doesn't) this would be the most fair for all. And neither does congress. We the people arte at fault for keeping them there.
And lets not for get Obama's big promise of government transparency. HA HA HA HA HA HA
He totally suckered the American public on that one, and he is still lying and ducking questions on the Benghazi issue. He still is avoiding the parents of those who died.
Gutless!
I like simple solutions.
Charge Officers of the corporation for currency manipulations. Let chip fall where they may be.
Only law if it is not there to be passed is about profit is tranferred from US to foreign terriroty it is considered Currency manipulation and liable for triple damages and officers in charge can get 10-25 years imprisonment and fine upto the amount determined by courts.
Yes you are absolutely right"gaswhoo"
Those dumbheads made tax law so complex ,that they themselves cannot see a whole bunch of loopholes,while others like Tech Behemots mentioned in that articles ,hiring best retired IRS employees ( I know one of those and he confessed) and those together with Hi Paid Corporate lawyers find ways to stash money and pay miserable Tax rate.
What Honest Government needs to do now is to double the fine on $2.4 B and start Auditing all those cheaters ,who keeps money offshore
When poor J Dow owns IRS $1000.00 they will knock him down with threatening calls and letters,but when MSoft/Goog/ Ebay -they scare to touch them
Specifically, the giant retailer announced Wednesday that the company will pay a special dividend of $7 a share this month. That's a $3 billion Christmas gift for shareholders that will let them be taxed at the current dividend rate of 15%, rather than next year's rate of up to 43.4%.
Hmmmm......wonder why we haven't seen this story on MSN (AKA part of the Obama cheer leading team).
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