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?
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]