This is so corrupt it's almost beautiful.
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.
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.
Income shifting commonly begins when companies like Google sell or license the foreign rights to intellectual property developed in the U.S. to a subsidiary in a low-tax country. That means foreign profits based on the technology get attributed to the offshore unit, not the parent. Under U.S. tax rules, subsidiaries must pay “arm’s length” prices for the rights -- or the amount an unrelated company would.
Because the payments contribute to taxable income, the parent company has an incentive to set them as low as possible. Cutting the foreign subsidiary’s expenses effectively shifts profits overseas.
After three years of negotiations, Google received approval from the IRS in 2006 for its transfer pricing arrangement, according to filings with the Securities and Exchange Commission.
The IRS gave its consent in a secret pact known as an advanced pricing agreement. Google wouldn’t discuss the price set under the arrangement, which licensed the rights to its search and advertising technology and other intangible property for Europe, the Middle East and Africa to a unit called Google Ireland Holdings, according to a person familiar with the matter.
More about the exact mechanics here: Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes - Bloomberg
Who would have thought the ability to pick and choose the laws your company follows could possibly go wrong? :lulz:
Nothing new, but the irony lies in the fact that Google's motto is "Don't be evil."
"Double Irish"? "Dutch Sandwich"? Are these legal strategies or sex moves?
Either way someone's getting fucked.
Google is hardly the first or only US Company to try to circumvent taxes. Many use similar schemes and in many cases the Companies underpay taxes because the IRS cant audit everyone. If the Companies get caught they plead ignorance and pay a fine and go on their way.
Tax avoidance is the legal utilization of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. By contrast, tax evasion is the general term for efforts to not pay taxes by illegal means.
Sounds like the former rather than the latter.
And gullible people still believe in the free market propaganda that politicians spout.
So is this "evil"?
There are many decisions we make in purchasing various goods and services that would look evil from the perspective of the people who lose out. The older I get the more I believe good and evil are rather childish concepts. This is self-interest at work. If it looks evil it seems to me it's because we're on the receiving end.