Google’s Irish Tax Dodge Signals A $60B Loophole

By Justin Gardner | Related entries in Money, Taxes, Technology

So much for Google’s mantra of “Don’t be evil.”

Bloomberg has more…

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.

Wait, that’s just $3.1B. What about the other $56.9B?

Well, the rest isn’t Google’s. The other money comes from corporations who have followed a similar path. And that includes Facebook and Microsoft.

And so…

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.

But wait. There is definitely much, much more…

The tactics of Google and Facebook depend on “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue, according to Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.

Is this fair?

Well, let me put it to you this way…

Is it fair that you pay your current tax rate, which includes local, state and federal income tax as well as FICA (Social Security) and Medicare withholdings, while Google pays an effective corporate income tax rate of 2.8%?

Discuss.


This entry was posted on Thursday, October 21st, 2010 and is filed under Money, Taxes, Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

7 Responses to “Google’s Irish Tax Dodge Signals A $60B Loophole”

  1. mw Says:

    Justin,
    You are so screwed. You do not mess with the Google Overmind.

    This speaks for itself. The Donklephant blog will soon be taken over — “conquered”, if you will — by the master race of Google web crawlers. It’s difficult to tell from this vantage point whether they will consume Justin or merely enslave him. One thing is for certain, there is no stopping them; the crawlers will soon be here.

    And I, for one, welcome our new Goggle overlords. I’d like to remind them that as a trusted blogging personality, I can be helpful in rounding up others to toil in their underground coding caves.

  2. Tweets that mention Donklephant » Blog Archive » Google’s Irish Tax Dodge Signals A $60B Loophole -- Topsy.com Says:

    [...] This post was mentioned on Twitter by Justin Gardner, Donklephant and Victor Cooper, Ellen. Ellen said: Google’s Irish Tax Dodge Signals A $60B Loophole: So much for Google’s mantra of “Don’t be evil.” Bloombe… http://bit.ly/aFLLnB [...]

  3. Mike A. Says:

    2.8%?!!! That’s far to high! We should be paying Google for the right to allow us to educate their low-level workforce, provide a path for legal immigration to fill their high-end jobs, build roads to their worksite, provide electricity to their massively inefficient servers…generally to do business here. The truth is, it is an honor to have a job, and not a right. Oh wait a second, I forgot we don’t live in India….

  4. Justin Gardner Says:

    Haha, I know, right? Why isn’t Donklephant showing up in any Google searches any more? Oh well, it was fun while it lasted.

    But seriously…a 2.8% effective tax rate? Good lord. No wonder they’re posting record profits.

    Do these folks really think this type of stuff is ethical?

  5. Chris Says:

    well clearly they need some more tax breaks to create jobs and trickle down their wealth to all of us!

  6. Jim Satterfield Says:

    But don’t forget that we have the highest corporate tax rate in the world! We need lower effective rates and more loopholes. Ask any Republican candidate.

  7. Aaron Says:

    Looking at some of the stuff Google is working on, I think their new motto is “It’s okay to be evil as long as what we’re doing is cool.”

    As it is, we now have self-driving Google cars running around here in the Bay Area.

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