Google Tax Scandal

alg_google-flamesWe all know that there are some genius-level minds at Google, and now it seems they’ve applied their high-powered IQs to working out how not to pay taxes. Guys, can you create an app for that — I’d like to pay 2.4% tax too! From Bloomberg News:

Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.

“It’s remarkable that Google’s effective rate is that low,” said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. “We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent.”

The U.S. corporate income-tax rate is 35 percent. In the U.K., Google’s second-biggest market by revenue, it’s 28 percent.

Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax. (See an interactive graphic on Google’s tax strategy here.)

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros…

[continues at Bloomberg News]

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  • Liam_McGonagle

    Yeah, this has been a BIG problem for a long, long time.

    My only hope is that, given the world-wide nature of the economic failure and the precedent of states being pulled down into violent anarchy by a destroyed tax base, like Mexico, the heavy-hitting capitalist countries of the world will get together and harmonize some type of “leak-resistant” tax policies.

    While that is at least a good 3 years away even under my most optimistic scenario, it’s not impossible. Though it’d never happen if the ideologically-blinded Republican’ts get back into power.

    • Ironaddict06

      Yea, it’s been going on for a long time. Most educated people know the UBER-wealthy avoid a large % of taxes through loop-holes like this one, and that the poor don’t pay taxes. It is the working middle class that ends up paying the bills. It’s not the Republicans fault or the Demorcrates fault. It’s both their fault. Both are part of the oligarchy looking to increase their wealth at the expense of middle class.
      Instead of tax brackets-there should be a flat tax on purchased goods. 10%-15%-20%? This can be worked out. Food, medicine, and baby goods would be exempt. This way everybody pays taxes-even the illegals, and other cash business.
      This idea has been proposed many times-and never will see the light of day, because you would eliminate the IRS-which is a major force of law enforcement.

      • Liam_McGonagle

        Interesting ideas.

        But a little unfair to the Dems, I’d say, who are at least making tentative moves towards a more progressive, people-friendly tax structure. If it were as simple as you say, they would not have dug in their heels and refused to rubberstamp the renewal of Dubya’s tax cuts.

        So, in my mind, I classify the Dems as “well-intentioned, but slow-learning”–though there are some signs of hope. Even if you’re disappointed with the lack of more vigorous stances vis-a-vis the bullshit Bush-era tax cuts, you’d have to admit that Robert Reich’s new book points to something new. Even he can see the writing on the wall, and he’s an old school Dem linked to an administration that enabled many policies that got us here.

        http://www.amazon.com/Aftershock-Next-Economy-Americas-Future/dp/0307592812/ref=sr_1_1?s=books&ie=UTF8&qid=1287698363&sr=1-1

  • Liam_McGonagle

    Yeah, this has been a BIG problem for a long, long time.

    My only hope is that, given the world-wide nature of the economic failure and the precedent of states being pulled down into violent anarchy by a destroyed tax base, like Mexico, the heavy-hitting capitalist countries of the world will get together and harmonize some type of “leak-resistant” tax policies.

    While that is at least a good 3 years away even under my most optimistic scenario, it’s not impossible. Though it’d never happen if the ideologically-blinded Republican’ts get back into power.

  • Ironaddict06

    Yea, it’s been going on for a long time. Most educated people know the UBER-wealthy avoid a large % of taxes through loop-holes like this one, and that the poor don’t pay taxes. It is the working middle class that ends up paying the bills. It’s not the Republicans fault or the Demorcrates fault. It’s both their fault. Both are part of the oligarchy looking to increase their wealth at the expense of middle class.
    Instead of tax brackets-there should be a flat tax on purchased goods. 10%-15%-20%? This can be worked out. Food, medicine, and baby goods would be exempt. This way everybody pays taxes-even the illegals, and other cash business.
    This idea has been proposed many times-and never will see the light of day, because you would eliminate the IRS-which is a major force of law enforcement.

  • Technobob

    What we need is a global tax rate of say 30% then money collected would be divided based on money reported in each country. This is the only way to eliminate scams like this.

  • Technobob

    What we need is a global tax rate of say 30% then money collected would be divided based on money reported in each country. This is the only way to eliminate scams like this.

  • Liam_McGonagle

    Interesting ideas.

    But a little unfair to the Dems, I’d say, who are at least making tentative moves towards a more progressive, people-friendly tax structure. If it were as simple as you say, they would not have dug in their heels and refused to rubberstamp the renewal of Dubya’s tax cuts.

    So, in my mind, I classify the Dems as “well-intentioned, but slow-learning”–though there are some signs of hope. Even if you’re disappointed with the lack of more vigorous stances vis-a-vis the bullshit Bush-era tax cuts, you’d have to admit that Robert Reich’s new book points to something new. Even he can see the writing on the wall, and he’s an old school Dem linked to an administration that enabled many policies that got us here.

    http://www.amazon.com/Aftershock-Next-Economy-Americas-Future/dp/0307592812/ref=sr_1_1?s=books&ie=UTF8&qid=1287698363&sr=1-1

  • Davway69

    The USA needs to tell all international business’,”You want to do business here, you open administrative offices here and pay taxes here, or you are banned from selling your product.”

  • Davway69

    The USA needs to tell all international business’,”You want to do business here, you open administrative offices here and pay taxes here, or you are banned from selling your product.”

  • Barfnchunk

    the fair tax would solve this issue in a heart beat…
    http://www.fairtax.org/site/PageServer

  • Barfnchunk

    the fair tax would solve this issue in a heart beat…
    http://www.fairtax.org/site/PageServer

    • Liam_McGonagle

      I’ve seen a few interesting ideas in these comments, but haven’t addressed any of them specifically because they deserve a larger format to discuss their individual merits/tradeoffs. However, I have to say that policy known by the Orwellian mis-nomer of “Fair Tax” is the absolute worst tax reform idea I’d ever heard of. So it’s pretty easy to demonstrate its horrible inadequacy and dishonesty in a short space.

      The idea of the un-“Fair Tax” is essentially to replace the current income-tax heavy regime of Federal revenues with a sales and use tax. Anyone who isn’t an outright liar or idiot would immediately be suspicious that such a tax would have a large negative impact on lower income individuals and a corresponding benefit to the uber-wealthy. Everyone knows that lower income individuals by necessity spend a much larger proportionate share of their income on subsistence activities; not even Bill Gates requires a 20,000 calorie per day diet.

      Of course, Andy Clark III and his media allies, including Sean O’Shammity of Faux News, are likely to present counter-claims of special income-level adjustments to make the un-“Fair Tax” more equitable. This is really nothing more than a smoke screen for the patent Un-fairness of this plan. Thankfully FactCheck.org has published the results of some independent reviews from the Advisory Panel on Tax Reform.

      http://www.factcheck.org/taxes/unspinning_the_fairtax.html

      I won’t rehash the whole shebang here, cause FactCheck’s work is pretty good. But I will highlight what are in my opinion the 2 most salient points here:

      1. Of course this bullshit un-“Fair Tax” scam works against the middle class. See chart 9.4 for a graphic illustration of just how badly this plan gives them the shaft and hands the goods over to the uber-wealthy: Roughly 5% bonus for the plutocrats and 5% PENALTY for the middle class.

      2. Quite opposite of being a simpler, more efficient regime to administer, the un-“Fair Tax” , independent estimates of administrative costs land between $600 billion and $700 billion per year. That would create not just another new category of federal spending, but by far and away the LARGEST NEW CATEGORY of federal spending. Oopth!

      Yeah, pretty clear that the un-“Fair Tax” is just a big steamin’ pile that could only have been vomited up from the phantising mind of a Tea Bagger.

  • Anonymous

    I’ve seen a few interesting ideas in these comments, but haven’t addressed any of them specifically because they deserve a larger format to discuss their individual merits/tradeoffs. However, I have to say that policy known by the Orwellian mis-nomer of “Fair Tax” is the absolute worst tax reform idea I’d ever heard of. So it’s pretty easy to demonstrate its horrible inadequacy and dishonesty in a short space.

    The idea of the un-“Fair Tax” is essentially to replace the current income-tax heavy regime of Federal revenues with a sales and use tax. Anyone who isn’t an outright liar or idiot would immediately be suspicious that such a tax would have a large negative impact on lower income individuals and a corresponding benefit to the uber-wealthy. Everyone knows that lower income individuals by necessity spend a much larger proportionate share of their income on subsistence activities; not even Bill Gates requires a 20,000 calorie per day diet.

    Of course, Andy Clark III and his media allies, including Sean O’Shammity of Faux News, are likely to present counter-claims of special income-level adjustments to make the un-“Fair Tax” more equitable. This is really nothing more than a smoke screen for the patent Un-fairness of this plan. Thankfully FactCheck.org has published the results of some independent reviews from the Advisory Panel on Tax Reform.

    http://www.factcheck.org/taxes/unspinning_the_fairtax.html

    I won’t rehash the whole shebang here, cause FactCheck’s work is pretty good. But I will highlight what are in my opinion the 2 most salient points here:

    1. Of course this bullshit un-“Fair Tax” scam works against the middle class. See chart 9.4 for a graphic illustration of just how badly this plan gives them the shaft and hands the goods over to the uber-wealthy: Roughly 5% bonus for the plutocrats and 5% PENALTY for the middle class.

    2. Quite opposite of being a simpler, more efficient regime to administer, the un-“Fair Tax” , independent estimates of administrative costs land between $600 billion and $700 billion per year. That would create not just another new category of federal spending, but by far and away the LARGEST NEW CATEGORY of federal spending. Oopth!

    Yeah, pretty clear that the un-“Fair Tax” is just a big steamin’ pile that could only have been vomited up from the phantising mind of a Tea Bagger.

  • st68

    If you REALLY want to tax the “rich”, don’t tax income (which prevents people from getting rich), nor sales (which may well tax the “poor” proportionally harder), but rather, a property tax (including stock).

  • st68

    If you REALLY want to tax the “rich”, don’t tax income (which prevents people from getting rich), nor sales (which may well tax the “poor” proportionally harder), but rather, a property tax (including stock).

    • Liam_McGonagle

      I like this idea particularly well.

  • Liam_McGonagle

    I like this idea particularly well.

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