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Google saved $2B in taxes in 2011 by sending revenue to Bermuda
Apple has caught a ton of flack for keeping profits overseas to avoid paying hefty taxes on their earnings but many may be surprised to learn that they aren’t the only big tech brand engaging in such activity. Just last year, Google avoided paying roughly $2 billion in income tax by moving close to $10 billion in revenue to a shell company in Bermuda.
If you weren’t already aware, Bermuda does not have a corporate income tax. By moving money into the shell company, the search giant effectively reduced their tax rate by almost 50 percent. It’s all perfectly legal although it likely won’t sit well with those in the US and Europe that are opposed to corporate tax dodging.
Information on the redirection of funds was first made available in a filing on November 21 in the Netherlands. Google is already under investigation in a number of countries including Australia, France, Italy and the UK for similar tax avoidance practices.
Just last week, the European Commission told member states to come up with a list of tax havens for blacklisting purposes. According to the executive body, tax evasion or rerouting money to tax-free regions cost the European Union roughly $1.3 trillion each year. The EC feels the tactics are an attack on the fundamental principle of fairness and scandalous.
For their part, the search giant says they comply with all tax regulations and that their presence in various European countries helps the local economy. They also employ more than 2,000 Europeans and help thousands of online businesses prosper. That’s all in addition to investing millions in new tech businesses in East London, the company said in a statement.
Given all that Google and other large companies do for local communities, do you think they should be given any special tax breaks?
User Comments: 27
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This only goes to show that the individuals assigned to write tax laws are either incredibly stupid or incredibly brilliant. Most likely the latter with some major palm greasing.
Here in India a corporation is liable to tax on ALL income, global as well as local. An individual is liable to global income if he has been in the the country for 180 days or more during a financial year. This is predefined for ALL, 1st April to 31st March. No exceptions are allowed. Even multinationals have to follow this, regard less of the parent companies financial year regime.
I have first hand knowledge of one German major, in electrical engineering field, using such tax shelter / haven to avoid paying tax. They bid for and win big projects. Then they subcontract it to their subsidiary registered in tax haven at a price just slightly below the winning bid. This subsidiary then further subcontracts the project to their Indian arm of the parent company at a price that would leave the Indian arm with very marginal profit. Ultimately the big fat profit accrues in the subsidiary located in the tax haven.
Another example is in IT department of software and hardware designing. Most major companies have development setup in India. (TI for example does almost all its DSP designing here in India.) Patents of these designs are however owned by the parent company. Income derived from licensing of these patents are collected by the parent country in tax haven countries, depriving India, as also the US, of legitimate tax.
As Gandhi once said "there is enough for everyone's need but not enough for even one man's greed"
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Google saved $2B in taxes in 2011 by sending revenue to Bermuda
Well played, I could do with a loan of their accountants.
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