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.
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
- A $1.5 billion ticket to the moon
- FedEx's busiest day ever: 200 packages a second
- Watch what you say online, Netflix
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!
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!
And a point: Apple actually sells products in other countries which is why the money is there. Google does not.
It's a spending problem stupid!
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.
A Coast Guard cutter stops four Mexicans in a row boat, rowing towards California.
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!"
Tax Reform.......??? Naaaaah!
We need to REFORM the White House, that's what.
Egypt is coming to the US, Obama made the Call.
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...
Copyright © 2014 Microsoft. All rights reserved.
[BRIEFING.COM] Equity indices continue trading in mixed fashion with the Nasdaq (+0.3%) trading ahead of the remaining indices.
The tech-heavy index has benefitted from the relative strength in the biotech space (IBB +0.9%), the outperformance of its top component-Apple (AAPL 101.23, +0.65)-and modest gains among chipmakers. The PHLX Semiconductor Index is higher by 0.1% with 16 of its 30 components trading in the green. NXP Semi (NXPI 65.35, +1.32) is the top-performer, ... More
More Market News
So far, the chain is only testing the offering in a few locations. It's ramping up its breakfast menu nationwide, however.
MUST-SEE ON MSN
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'