Liz Gannes

Recent Posts by Liz Gannes

Google Stashed $2B in Taxes in the Bermuda Triangle in 2011

Google is great at optimization and efficiency in many things. Among them: Taxes.

The company paid a total of $1.5 billion in worldwide income taxes in 2011, avoiding an estimated $2 billion more by moving the equivalent of 80 percent of its profit to Bermuda, Bloomberg reported today.

Google’s effective global tax rate was 21 percent last year, less than half of what it might have been expected to pay in the United States.

To keep more of its money in its pocket, Google employs a roundabout strategy of attributing most of its revenue to its Ireland sales office, and then having that subsidiary pay royalties, channeled through a Dutch subsidiary to avoid holding tax, to a separate shell company that pays taxes in Bermuda.

What Google is doing is complex and effective and not new — it’s apparently known to those in accounting as a “Double Irish” combined with a “Dutch Sandwich” — and Bloomberg has done a bunch of reporting on the topic over the years that is summarized here.

The Google strategy appears to be legal, but governments around the world aren’t happy about it. France, the U.K., Italy and Australia are all looking into the matter, Bloomberg notes.

Google has not yet responded to a request for comment.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik