By Jesse Drucker (Bloomberg/Business Day)
Executive summary (SAIT Technical)
Google avoided $2bn in worldwide income taxes last year by shifting $9bn in revenue into a Bermuda shell company.The amount moved to Bermuda is equivalent to about 80% of Google’s pretax profit in 2011.
Google avoided about $2bn in worldwide income taxes last year by shifting $9.8bn in revenue into a Bermuda shell company, almost double the total from three years before, filings show.
By legally funnelling profits from overseas subsidiaries into Bermuda, which does not have corporate income tax, Google cut its overall tax rate almost in half.
The amount moved to Bermuda is equivalent to about 80% of Google’s pretax profit in 2011.
The increase in the internet search giant’s revenues routed to Bermuda, disclosed in a November 21 filing by a subsidiary in the Netherlands, could fuel outrage spreading across Europe and the US over corporate tax dodging.
Governments in France, the UK, Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums.
Last week, the European Commission urged member states to compile blacklists of tax havens and to adopt anti-abuse rules.
Tax avoidance and evasion cost the European Union about €1-trillion a year.
"The tax strategy of Google and other multinationals is a deep embarrassment to governments around Europe," Tax Research director Richard Murphy said in Norfolk, England, on Monday.
"The political awareness now being created in the UK, and to a lesser degree elsewhere in Europe, is: it’s us or them. People understand that if Google doesn’t pay, somebody else has to pay, or services get cut."
Google said it complies with all tax rules, and its investment in European countries helps their economies. It said that in the UK, "we also employ more than 2,000 people, help hundreds of thousands of businesses to grow online, and invest millions supporting new tech businesses in East London".
Google has avoided billions of dollars in income taxes around the world using a pair of tax shelter strategies known as the Double Irish and Dutch Sandwich, which move royalties from subsidiaries in Ireland and the Netherlands to a Bermuda unit headquartered in a local law firm.
At a hearing last month in the UK, MPs pressed executives from Google, Amazon.com and Starbucks to explain why they did not pay more taxes there.