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How Google Avoided Paying $60 Billion In Taxes 1193

Posted by CmdrTaco
from the just-not-good dept.
bonch writes "Google only pays a 2.4% tax rate using money-funneling techniques known as the 'Double Irish' and the 'Dutch Sandwich,' even though the US corporate income tax is 35%. By using Irish loopholes, money is transferred legally between subsidiaries and ends up in island sanctuaries that have no income tax, giving Google the lowest tax rate amongst its technology peers. Facebook is planning to use the same strategy."
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How Google Avoided Paying $60 Billion In Taxes

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  • by eldavojohn (898314) * <eldavojohn.gmail@com> on Thursday October 21, 2010 @12:57PM (#33975442) Journal

    How Google Avoided Paying $60 Billion In Taxes

    Yeah, unless you read the article that says:

    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.

    That's $60 billion total per year. Not just from Google but from every American business using these tax loopholes (Microsoft and Facebook included). The article clarifies:

    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.

    Emphasis mine. So you can see that it's on average a billion a year that Google saves doing this. Not $60 billion. Do I still feel like they're shafting me? Yes. But not 15% of their stock market worth. That's just unimaginable. Here's a bigger survey of companies using these loopholes with more details [bloomberg.com].

    • by Pojut (1027544) on Thursday October 21, 2010 @12:59PM (#33975480) Homepage

      The widespread use of loopholes by companies/"rich" people always really pissed me off. They constantly complain so much of their wealth is being taken, yet they pull crap like this.

      I would bet you that if my wife and I tried to do something similar, we would almost certainly be "caught". I don't know if loopholes are due to the complexity of the system, or because the big guys can afford to pay folks who know how to exploit them...but regardless of the reason, it's fucked up.

      • by binarylarry (1338699) on Thursday October 21, 2010 @01:01PM (#33975518)

        Only poor people pay taxes.

        • by Flipao (903929) on Thursday October 21, 2010 @01:10PM (#33975670)
          Yes, and a good chunk of them are rallying on the streets every day to try and keep it that way.

          Bless'em
          • by clarkkent09 (1104833) on Thursday October 21, 2010 @01:49PM (#33976428)
            Who rallies in the street to keep poor people paying taxes? This has to be one of the most ridiculous comments ever modded 5 Insightful.
        • by ptbarnett (159784) on Thursday October 21, 2010 @01:37PM (#33976130)

          Only poor people pay taxes.

          Oh, BS. This meme is stupid, and can be disproved in moments with the US Government's own publications:

          http://cbo.gov/publications/collections/tax/2010/all_tables.pdf [cbo.gov]

          That's the Congressional Budget Office's compilation of effective tax rates and percentage of taxes paid by the various income quintiles in the US from 1979 to 2007. They also provide numbers for the top 10%, top 5%, and top 1%.

          The effective individual income tax rates for the lowest 40% has been negative since 2002, as the methodology includes low-income tax credits. However, once you add in the other types of federal taxes, it's no longer negative, but the lowest quintile's share of total federal taxes was less than 1% in 2007.

          In contrast, the top 10% of taxpayers paid 55% of total federal taxes in 2007. The lower 90% of taxpayers paid the other 45%.

          • by Hatta (162192) on Thursday October 21, 2010 @02:16PM (#33976990) Journal

            the top 10% of taxpayers paid 55% of total federal taxes in 2007. The lower 90% of taxpayers paid the other 45%.

            In 2007, the top 10% of the population owned [ucsc.edu] 73% of total assets and 83% of financial wealth in the US. If they're only paying 55% of the total taxes than the adage that "only the poor pay taxes" does in fact ring true.

      • by characterZer0 (138196) on Thursday October 21, 2010 @01:02PM (#33975528)

        Another option: loopholes are there because the rich bribed government officials to put them there.

      • by XanC (644172) on Thursday October 21, 2010 @01:04PM (#33975564)

        The US is one of the few countries, maybe the only one, which charges domestic taxes on income earned overseas. Everywhere else, that money is taxed only once, but here we expect it to be taxed twice.

        It's like the politicians are trying to get them to play accounting games, or simply pick up and leave, in order to have something to decry.

        What a ridiculous system. It's a wonder we have any multinationals based here at all.

        • by interval1066 (668936) on Thursday October 21, 2010 @01:22PM (#33975842) Homepage Journal
          I never felt very good about paying into a system that requires me to either be an expert in that system, which would mean spending the equivalent time to get at least a two year degree, just to pay my taxes, or hiring an expert to do them for me. If I am required under penalty of imprisonment to pay taxes, its galling to me that I must also hire an expert to do them for me. Its a ridiculous, and unsustainable, situation that needs to change.
      • by FlightTest (90079) on Thursday October 21, 2010 @01:16PM (#33975772) Homepage

        I am not a tax expert, however, I have heard that yes, you and your wife COULD do something similar, except the costs to get it going would greatly outweigh the benefits. Many of these tax "loopholes" have high fixed costs to get going, so they aren't useful for the kind of income most any household would have.

    • Re: (Score:3, Insightful)

      by MozeeToby (1163751)

      It should also be noted that the official position of the government and the IRS is that tax avoidance, which this is, if done legally, which this is, is perfectly fine. It is not Google's fault that the tax code is so screwed up that they can avoid paying 90% of what, on the surface, appears to be their tax liability. Now, if Google had an army of lobbyists in Washington pushing to extend those loopholes or create more of them, that would be evil.

      • by Raenex (947668) on Thursday October 21, 2010 @01:03PM (#33975552)

        Now, if Google had an army of lobbyists in Washington pushing to extend those loopholes or create more of them, that would be evil.

        How about secret agreements with the IRS? From the article:

        "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."

        • by operagost (62405) on Thursday October 21, 2010 @01:30PM (#33976008) Homepage Journal

          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.

          If the SEC knows about it, it's clearly not "secret" (any more than a CEO reporting his company stock sale to the SEC is "secret") and if the IRS approved it, it's not tax evasion.

    • by DragonWriter (970822) on Thursday October 21, 2010 @01:17PM (#33975780)

      TFS says "Google only pays a 2.4% tax rate"

      TFA says "Google’s income shifting [...] helped reduce its overseas tax rate to 2.4 percent"

    • I'm the submitter (Score:5, Informative)

      by bonch (38532) on Thursday October 21, 2010 @01:23PM (#33975868)

      For the record, I tried to submit a different headline, but the buggy, AJAX-ridden story editor wouldn't display the changes I made in the text boxes when I hit Preview. It kept displaying the old text unchanged. I even refreshed the page and tried a different browser. Eventually, I said, "Fuck it" and submitted, hoping it would post the changes.

  • Technically Legal (Score:5, Insightful)

    by Afforess (1310263) <afforess@gmail.com> on Thursday October 21, 2010 @01:01PM (#33975508) Journal
    Technically Google has committed no crime, and their tax avoidance is entirely legal. While it is normal to feel a moral outrage, I think your anger should be focused on those who created the loopholes in the first place. Washington.
    • by dachshund (300733) on Thursday October 21, 2010 @01:17PM (#33975786)

      Technically Google has committed no crime, and their tax avoidance is entirely legal. While it is normal to feel a moral outrage, I think your anger should be focused on those who created the loopholes in the first place. Washington.

      Technically Washington has committed no crime, and their acceptance of massive quantities of cash in exchange for favorable tax legislation is entirely legal. While it is normal to feel a moral outrage, I think your anger should be focused on those who paid for the loopholes in the first place. Google. And Microsoft. And a few hundred other large corporations.

      http://techcrunch.com/2010/04/20/google-spends-1-38-million-on-lobbying-in-q1-up-57-percent-from-last-year/ [techcrunch.com]

      • by Abcd1234 (188840) on Thursday October 21, 2010 @01:39PM (#33976176) Homepage

        Absolutely agreed. The anger toward tax evasion is entirely misdirected. If you want to point fingers, you can aim them straight at the supreme court, who made the decision that money == speech, and therefore bribary == simply exercising one's rights, and then proceeded to rape the corpse of the American system of democracy in their "Citizens United v Federal Election Commission" ruling.

  • Good for Google (Score:5, Insightful)

    by DesScorp (410532) <DesScorp.Gmail@com> on Thursday October 21, 2010 @01:12PM (#33975702) Homepage Journal

    ""Anyone may arrange his affairs so that his taxes shall be as low as
    possible; he is not bound to choose that pattern which best pays the
    treasury. There is not even a patriotic duty to increase one's taxes.
    Over and over again the Courts have said that there is nothing sinister
    in so arranging affairs as to keep taxes as low as possible. Everyone
    does it, rich and poor alike and all do right, for nobody owes any
    public duty to pay more than the law demands."
    " - Judge Learned Hand

    Of course, if we'd reign in corporate taxes, we'd bring a lot of capital back home [wsj.com]. The US has one of the highest rates of corporate taxes in the world [wikipedia.org], trailing only Japan and Cameroon. Even France... bastion of Euro-Socialism Lite... has a lower top corporate tax.

    • Re:Good for Google (Score:5, Insightful)

      by AdmiralXyz (1378985) on Thursday October 21, 2010 @02:10PM (#33976878)
      That philosophy is fine for tax loopholes that were created by popular vote with broad support from the general public. I have a harder time accepting it when these loopholes- which are designed specifically to exempt only corporations, you and I can go pound sand- were drafted and created by expensive corporate lobbyists. You're essentially saying that we should allow Google to bribe our politicians into giving them huge tax breaks, and then gag us with Hand's quote to keep us from complaining about it. To be blunt, fuck that.
  • 2.4% is incorrect (Score:5, Informative)

    by atticus9 (1801640) on Thursday October 21, 2010 @01:50PM (#33976466)
    Google on average pays 20% in taxes, as stated in their earnings. Which is still pretty low, but nowhere near the 2.4% in the article.

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