Tech giant Google has seen the revenues it stashes in the tax haven of Bermuda soar to nearly $10 billion according to a story yesterday by Bloomberg’s Jesse Drucker.
By shifting tax revenues to a shell company based in a Bermuda law office, the company has avoided paying roughly $2 billion in taxes, Drucker writes. This effectively cuts Google’s tax rate in half. The $9.8 billion moved to Bermuda is the equivalent of 80 percent of the company’s 2011 pretax profit.
According to the Bloomberg piece:
The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and in the U.S. over corporate tax dodging. Governments in France, the U.K., Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums.
Last week, the European Union’s executive body, the European Commission, advised member states to create blacklists of tax havens and adopt anti-abuse rules. Tax evasion and avoidance, which cost the EU 1 trillion euros ($1.3 trillion) a year, are “scandalous” and “an attack on the fundamental principle of fairness,” Algirdas Semeta, the EC’s commissioner for taxation, said at a press conference in Brussels.
Google invests heavily in the technology markets of these countries and does pay some taxes. In the United Kingdom, Google’s second biggest market, the company paid income taxes of $9.6 million on its $4.1 billion in sales. However, tax havens allow Google to pay a tax rate of 3.2 percent on its overseas profits while most European countries show a corporate tax rate in the range of 26-34 percent.
Richard Murphy, an accountant and director of the England-based Tax Research, LLP calls their actions a “deep embarrassment.”
The tax strategy of Google and other multinationals is a deep embarrassment to governments around Europe. The political awareness now being created in the U.K., and to a lesser degree elsewhere in Europe, is: It’s us or them. People understand that if Google doesn’t pay, somebody else has to pay or services get cut.”