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.

By Jonathan Berr Dec 10, 2012 12:04PM
The Google logo is seen on a podium and projected on a screen at Google headquarters in Mountain View, Califorina Paul Sakuma/AP 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.

More from Money Now


Dec 13, 2012 4:39PM
For all you who "think" companies owe you something.. Get off your butts, get a job, and earn it like they did. If you "think" its every ones job to support the poor.. Good, you take "your" paycheck and give it to the poor...  Invite these people into "your" home and give them room and board. Its NOT any ones responsibility to provide for anyone other than OUR families.. And if we choose" to do so, we will donate to a charity that "we" feel is appropriate  not because "you" tell us to.

So you can tell the Government and Liberals to stick it up their butts, Ill move my money out of this country too if I had it!

Smart move Google!

Dec 13, 2012 4:33PM
Thats the problem with Government they "think" they are entitled to everyones money. Good for you google.
Dec 12, 2012 1:54PM
So Congress is discussing HGH testing in the NFL instead of closing tax loophole, that makes sense.
Dec 12, 2012 11:01AM

Life is great!


Chris Van Hollen & Elizabeth Warren in 2016 & 2020!


God bless Mom & Pop stores!


God bless unions and living wages!


DIE big and unregulated corporations and DIE Ayn Rand Capitalism, DIE!


God bless America!

Dec 12, 2012 9:55AM
The term "Fair Share" is ludicrous. When you get rid of the earmarks and the welfare queens and kings, then we'll talk about fair share.
Dec 11, 2012 2:14PM
Republicans want to fix this but Obo is more concerned with ****ing over people who actually work for a living.

And a point:  Apple actually sells products in other countries which is why the money is there. Google does not.

Dec 11, 2012 2:11PM
$2 billion isn't very much when you consider the fed gov spends $10 billion per day.  Dang that Google, thanks to their crafty accounting team, the fed gov will operate in the red for an extra 5 hours next year.

It's a spending problem stupid!

Dec 10, 2012 9:59PM
HMMMM.....32 trillion dollars....what was that Mitt Romney said about closing loopholes?  didn't Obama say that was useless and the math didn't add up?  Google paid how much?  3.2%?  The tax rate they should have paid was 39%.  That is a 35.8% difference right?  Is that correct math?  What is 35.8% of 32 TRILLION DOLLARS?  Over 10 TRILLION DOLLARS!!!  And the Obama camp said that the math didn't add up.  Mitt wanted to lower rates and eliminate loopholes.  Obama claimed the rate reduction amounted to a 5 trillion dollar tax break.  what is 10 trillion minus 5 trillion?  Oh yeah...5 trillion dollars in new revenue just from the corporate sector.  And that is just from the money being held in foreign banks.  Imagine if we made all corporations pay taxes on 100% of their profits instead of allowing them to transfer the money around the world to make it seem on paper that they didn't make the money?  I think that if we do something like that it would be called money laundering which you get time in a federal f*** u up the a$$ prison for.  
Dec 10, 2012 6:37PM

This shows how messed up our gov't is.  The dems and republicans will not fix it.  I hope there is no agreement and the cliff happens.  America needs it.

Dec 10, 2012 6:32PM
I don't get why this is legal? Why not just impose a "tax" on ANY money that leaves the country. An analogy would be me having to pay taxes for pulling money out of my 401k.
Dec 10, 2012 6:29PM
No surprise here...US has the highest corporate taxes in the world.....Our government is an overbloated out of control spending machine.
Dec 10, 2012 6:22PM
Romney gets crucified for doing the same thing, but no one is up in arms when Google does it! Oh, I guess the 2 million Google gave Obama helps grease the skids.
Dec 10, 2012 6:15PM

Giggle Joke:

A Coast Guard cutter stops four Mexicans in a row boat, rowing towards California.
The captain gets on the loud-hailer and shouts, "Ahoy, small craft, Where are you heading?"
One of the Mexicans stands up and shouts, "We are invading the United States!"
The crew of the Coast Guard Cutter all start laughing and when the captain finally stops laughing,

he gets back on the loud-hailer and asks, "Just the four of you?"

The Mexican stands up again and shouts, "No, we're the last four, the rest are already there!"

Dec 10, 2012 6:13PM

Tax Reform.......???  Naaaaah!

We need to REFORM the White House, that's what.


Egypt is coming to the US, Obama made the Call.

Dec 10, 2012 5:57PM
Do no harm.......... pay no taxes.......... it's all the same really.
Dec 10, 2012 5:49PM
12 Million people have not snuck in here illegally. There are 11 million illegals most of which came here legally and is a drop from precious 12 million that were here illegally.  Don't make things up
Dec 10, 2012 5:42PM

Isn't Google on of those lefty companies? I would think they would want to pay as much tax as possible.. Look at the company Obama has in the white house for advise, GE. Oh wait, my wife is just telling me they are moving jobs overseas and avoided paying taxes and even got credits last year. I told her this must be some right wing fallacy as Obama wouldn't be in bed with a company that did that now... 

Dec 10, 2012 5:40PM
Yet, most CEOs and politicians in this country berate and insult most American taxpayers as do nothings and lazies. Then become indignant when you you don't vote for "THEIR" man or men. It will all come out eventually, and the tea baggers are really going to feel like fools (if they are that intelligent).
Dec 10, 2012 5:40PM
I'm an independent, so I'll speak up. Pay up you cheap bastards, or lose the right to call yourself an American Corporation. We don't need liars and cheats, we're all booked up with those already. Although in America, we call them Politicians.
Dec 10, 2012 5:36PM
I'm beginning a course in Mandarin. If anyone can recommend a quick study course for me please post to this forum. How much is a plane ticket to Hong Kong or Singapore? Thanks
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?


[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 shed less than a point, ending the week higher by 1.3%, while the Dow Jones Industrial Average (+0.1%) cemented a 1.7% advance for the week. High-beta names underperformed, which weighed on the Nasdaq Composite (-0.3%) and the Russell 2000 (-1.3%).

Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, ... More