The US corporate tax rate is 35 per cent. Google, partially founded with taxpayer money and trading at $US607 a share, pays 2.4 per cent. How is this possible? Through an arsenal of offshore tax tricks with names like the “Dutch Sandwich”.
Google’s startlingly low rate – how much do you pay every year? – goes back to a deal brokered with the IRS itself. The feds let Google licence its search and ad tech to a subsidiary in Ireland – Google Ireland Holdings – which begins a long, international cash siphon that ends in Bermuda. Licensing tech from Google racks up expenses, which allow Google’s dummy company to duck Irish tax law. The money generated in Ireland is shuttled to the Netherlands, which, because of EU law, further keeps government hands out of Google’s earnings. From here, revenue is paid to another subsidiary in Bermuda, where it becomes virtually invisible – under Irish law, this tropical tail end of this money snake isn’t required to disclose any financial documents.
Using Ireland as go-between is a common practice – Microsoft does it, and Facebook is looking to do it. So why does it matter? Should we just applaud them for being as smart as we’d expect them to be, and saving a bundle of cash?
No.
Speaking to Bloomberg news, Abraham J. Briloff, a professor emeritus of accounting at Baruch College, sums it up: Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses. Who is it that paid for the underlying concept on which they built these billions of dollars of revenues? It was paid for by the United States citizenry.”
And he’s right.
The National Science Foundation – run with your tax money – funded the Stanford University research that turned Google into what it is. Google cheating on its taxes, even if technically legal, is a gross hypocrisy. Besides presenting a giant middle finger to its tax paying users, who don’t make over $US2 billion a quarter, it presents a second, larger middle finger to the very organisation that put it on its feet. Nobody likes paying taxes – and yes, you might have some legitimate beef with the way your tax money is spent. But the fact remains that some of it goes to things like, well, indirectly creating Google, and who knows what else in the future? We might not ever know, if mega tech firms keep eating Dutch Sandwiches. [Bloomberg]
Art Nau
Friday, October 22, 2010 at 12:21 PM“if mega tech firms keep eating Dutch Sandwiches” – really?
thats the best end statement you can come up with…
ask your self why accountants getting paid BIG BUCKS? I mean like REALLY BIG, if it was all simple and sound graduate could of done Google’s taxes… global markets firms create many ways how to reduce your TAXation not using it is just stupid…
matt
Friday, October 22, 2010 at 1:16 PMlol, it has been a while since the last obligatory “Google is really big and influential, so they must be evil” article.
yes google, please start paying all your taxes, I’m sure all these ‘outraged’ US customers will happily pay for search, and maps, and all your other services in order to cover the costs…
as should be obvious… every big company does stuff like this…
also… tax evasion? you might wanna clarify your definition of ‘evil’
i’m getting sick of the cynicism that goes “a big company says its gonna try and not be evil? they must be liars”.
boc
Friday, October 22, 2010 at 3:53 PMThe article should note that it’s not tax evasion if it’s all legal – it’s called tax minimisation.
den
Friday, October 22, 2010 at 11:34 PM+1
Fail article.
How is finding ways to minimise tax ‘doing evil’? So basically all people that try and minimise tax are evil too?
Michael
Friday, October 22, 2010 at 1:18 PMI’m sure google’s technology has put plenty of money into the US treasury through things like companies using Google Maps for GPS’s, the production of Android phones, etc.
In a recession, we need to encourage entrepreneurship. Governments are quick to hike taxes, but deregulation can work just as well, it’s just that it’s less unpopular to raise taxes, than to say, make marijuana legal and tax it.
bob norams
Friday, October 22, 2010 at 1:31 PMbuy google shares then and stop whinging. investors pay tax. so its all good
Mark
Friday, October 22, 2010 at 1:35 PMIs a Dutch Sandwich anything like the Dutch Rudder?
Jamie
Friday, October 22, 2010 at 2:40 PMAnother quality article from Gizmodo.
While Google doing what it does to get away from exorbitant tax rates may seem like a total dick move to start with, the amount of tax Google pays at 2.4% is likely much higher than the amount they were donated by Stanford in the first place. I’m sure Stanford have made enough money of their own in the meantime not to be concerned.
I agree with Matt above. The moment people start this ridiculous tack, Google could just start charging. Then what would we do for search, maps, mail, Google Scholar, Books, reader, Chrome and all of those products you take for granted.
Quiet down, find something real to be a journalist about.
Mahq
Friday, October 22, 2010 at 2:50 PMGo google go… Anything done to reduce the influence and financial power the American government has the better… Who said it was going to be terrorists that brought down the ol’ red white and blue? eh?
M
Friday, October 22, 2010 at 3:32 PMOr maybe these are gourmet Dutch Sandwiches delivered on the day on a golden platter. This might sound crazy, but the rich are never crazy just eccentric.
It would have been funny if they had to Google “how to do avoid taxes”.
Adam
Friday, October 22, 2010 at 4:07 PMI think everyone is missing the point. Increasing the amount of tax paid would not make google start charging. You dont pay tax on revenue. You pay tax on profit. So if google turns over 100 million and makes 1 million profit (for example) then increasing their tax from 2.4% to 10% simply means they would pay $100,000 tax, instead of $24000.
The article makes a good point. Google does claim to do no evil and shirking taxation, irrespective of whether legal or not is not “doing no evil”. The argument that everyone else does it so it’s ok is not a real argument.
Steve
Friday, October 22, 2010 at 8:29 PMNice show of Gizmodo’s ‘fair and balanced’ reporting right there. The same site which runs a daily post PURELY for “best iOS apps” and just today went lovey-dovey over the new MacBook Air… has just posted an inflammatory article with a unflattering photoshopped Google founders.
It’s not even tongue in cheek anymore. “Google’s Tax Evasion Practices Screw the US Government (And You)?” Please.
If we were being pedantic about it, it’s tax minimisation, and any company worth their salt engages in it. As (grudgingly) mentioned, it’s legal and was given approval by the government, so what’s the goddamn problem?
Indeed, if Google’s not the first one to do it, why was this post even written? I don’t ever recall the Microsoft version with a vampiric Steve Ballmer. If you’re using their “Dont be Evil” mantra against them, ask yourself “Is Google paying as little taxes as possible ‘evil’?” I don’t know. I think murder is evil, willful destruction of evil. But THIS sort of behaviour is par for the course when a company’s as large as Google. Why the hell is Sam Biddle choosing this particular time to pretend to be naive about it?
Gizmodo: truly the British Tabloid of the blogosphere.
Ippolito
Saturday, October 23, 2010 at 9:53 AMAdam – increasing the tax would just mean having less cash at the end of the day (to re-invest, to hire, to spend in candies). Period.
The fundamental point we are all missing is rather this one: Google is a public company. As long as you are running your own business in the private world, you can apply your personal philosophy whenever you want. When you are presumed to be responsible of the money of investors, in fields like these (taxes) there’s simply no room for interpretation, especially if you are facing competitors like Microsoft and Facebook who are doing exactly the same. You must try to pay the lowest possible tax rate. Period. It’s in some way a “techno-economic” obligation, something that does not pertains to moral distinctions like good/evil, right/wrong, etc.
The fact in itself that paying the 2.5% is legally possible, makes for Google an absolute obligation to do so in order not to suffer a competitive disadvantage on the global markets.
This is simply what investors and stock holders are expecting from the companies they are investing in.
So maybe the point could be: is “doing no evil” motto compatible with the reality of being a public company? But that’s another story, for another day.