Google Inc (NASDAQ:GOOG) reportedly avoided about $2 billion in income taxes last year, by sending almost $10 billion of its revenue to a shell company in Bermuda. Bloomberg reports that filings show that’s almost twice the amount Google sent to the shell company three years ago.
Google Inc (NASDAQ:GOOG) has subsidiaries in countries all over the world, and the search engine giant legally funnels its profits from those subsidiaries into Bermuda because the country does not tax corporate income. By doing this, Google Inc (NASSDAQ:GOOG) avoids more than half of the corporate income tax it would have to pay otherwise.
This latest information came out in a filing last month that was completed by one of Google Inc (NASDAQ:GOOG)’s subsidiaries in the Netherlands, and it adds fuel to the fire in both Europe and the U.S. about global corporations that are dodging taxes. Officials in at least four different nations around the globe are investigating Google’s tax practices.
All Things D reports that Google paid a 21 percent global tax rate in 2011, which was less than half of what it would have paid in the U.S. The company’s corporate tax strategy involves sending most of its European revenue to Ireland, where it pays royalties and is channeled through a subsidiary in the Netherlands so that the company doesn’t have to pay a holding tax. Then it makes its way to a Bermuda shell company, which pays taxes there.
This tax strategy has been going on for many years, and Google certainly isn’t the first to do it. Within the industry, some interesting names have even been assigned to it, including the “Double Irish” and “Dutch Sandwich.” Google officials say they follow tax laws in all countries where they do business. The company also released a statement saying that in the U.K., where it is especially under fire for its tax practices, it employs more than 2,000 people, invests millions of pounds in new tech companies in London, and helps “hundreds of thousands of businesses grow online.”