Google Shifted $23 Billion to Bermuda in 2017 as Part of Tax Avoidance Scheme

Megalith

Megalith

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Documents filed at the Dutch Chamber of Commerce reveal that Google moved $23 billion to tax haven Bermuda in 2017 through a tax avoidance technique known as the “Double Irish, Dutch Sandwich,” whereby profits are initially sent to one Irish company, then to a Dutch company, and finally to a second Irish company headquartered in a tax haven. Google says they pay all of the taxes due and comply with the tax laws in every country they operate in.

Google employed an international tax evasion strategy known as “Double Irish, Dutch Sandwich” that legally allowed companies channel their profits through an Irish company than through a Dutch one, then to another Irish subsidiary based in a place with no income taxes like Bermuda. The Dutch subsidiary moved the company's royalties earned outside the U.S. to Google Ireland Holdings, an affiliate which is based in Bermuda, where companies pay no income tax. The move allows Google to avoid paying U.S. income taxes and European withholding taxes on funds.
 
are they going to bring it back now that the rate is lower?
 
It's simply the way it is. Any corporation is responsible to their shareholders to get the best return on their investment they possibly can. If they were to not optimize their taxes, they wouldn't be doing this, and they would be failing at their number one responsibility. You can't blame corporations for doing what they are required to do, the sole thing they exist to accomplish, which is to maximize shareholder value.

The real problem here is that transfer pricing is all messed up, which allows for the legal loopholes that make these kinds of tax avoidance schemes possible, but no one seems to want to tackle that from a regulatory perspective, as it is very complicated and politically sensitive.

That said, if I were king for a day I'd get rid of corporate/business taxes all together. They pull in very little money (relatively speaking) for the government and only make things more complicated.

I'd make up for the gap through a series of tweaks to personal income taxation including:
- Treating all income regardless of source (investment, inheritance, wages, etc.) the same for tax purposes. No different rates. If you get money in a year from any source, it is taxable income in that year, no exceptions.
- Tax all fringe benefits provided by employers as income. Do they provide meals that you otherwise would have to buy yourself? That's taxable income. Do they provide a car or a phone for work that you also use when not working? The non-work value would be taxable income.
- And finally, to make the system more fair, I'd set up a by-zipcode cost of living metric, computing the cost of a basic middle class existence in every zipcode. The standard deduction would be equal to the cost of that middle class existence in your zipcode. This way you are not taxed on the basics of living, only on the luxurious excesses above that. The tax brackets above this standard deduction would be highly progressive with no upper bracket.

I think these tweaks would result in a better more equitable tax situation for individuals and corporations alike. Now all businesses would be on the same footing whether they have a massive international team of tax lawyers or not, no one would have to worry about transfer pricing, and no one would be taxed on the income required to provide a basic existence. There would be some losers, of course, mainly higher income individual earners, but that is unavoidable whenever you make changes to a complex system, and these people have the least to lose.
 
Zarathustra[H] said:
It's simply the way it is. Any corporation is responsible to their shareholders to get the best return on their investment they possibly can. If they were to not optimize their taxes, they wouldn't be doing this, and they would be failing at their number one responsibility. You can't blame corporations for doing what they are required to do, the sole thing they exist to accomplish, which is to maximize shareholder value.

The real problem here is that transfer pricing is all messed up, which allows for the legal loopholes that make these kinds of tax avoidance schemes possible, but no one seems to want to tackle that from a regulatory perspective, as it is very complicated and politically sensitive.

That said, if I were king for a day I'd get rid of corporate/business taxes all together. They pull in very little money (relatively speaking) for the government and only make things more complicated.

I'd make up for the gap through a series of tweaks to personal income taxation including:
- Treating all income regardless of source (investment, inheritance, wages, etc.) the same for tax purposes. No different rates. If you get money in a year from any source, it is taxable income in that year, no exceptions.
- Tax all fringe benefits provided by employers as income. Do they provide meals that you otherwise would have to buy yourself? That's taxable income. Do they provide a car or a phone for work that you also use when not working? The non-work value would be taxable income.
- And finally, to make the system more fair, I'd set up a by-zipcode cost of living metric, computing the cost of a basic middle class existence in every zipcode. The standard deduction would be equal to the cost of that middle class existence in your zipcode. This way you are not taxed on the basics of living, only on the luxurious excesses above that. The tax brackets above this standard deduction would be highly progressive with no upper bracket.

I think these tweaks would result in a better more equitable tax situation for individuals and corporations alike. Now all businesses would be on the same footing whether they have a massive international team of tax lawyers or not, no one would have to worry about transfer pricing, and no one would be taxed on the income required to provide a basic existence. There would be some losers, of course, mainly higher income individual earners, but that is unavoidable whenever you make changes to a complex system, and these people have the least to lose.
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Nope, just remove itemization benefits for non essentials. No more itemizing dinners, Armani Suits, fucking $100 hair cuts, etc....
 
Brokennails said:
Nope, just remove itemization benefits for non essentials. No more itemizing dinners, Armani Suits, fucking $100 hair cuts, etc....
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I kind of considered this to be a part of the "fringe benefit" taxation. I wholly agree. While there are some justified itemizations for legitimate business expenses, that system is abused like all hell.
 
Double Irish Dutch Sandwich sounds more like something I’d read about on urban dictionary rather than a tax avoidance scheme.

It’s legal. It’s bullshit and sucks but it’s legal. Write the politicians and complain. I mean we’ll be ignored but thems the breaks.
 
Zarathustra[H] said:
It's simply the way it is.
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GuMbLt4
https://imgur.com/a/GuMbLt4 [/IMG]

Zarathustra[H] said:
That said, if I were king for a day I'd get rid of corporate/business taxes all together. They pull in very little money (relatively speaking) for the government and only make things more complicated.
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LOL you don't think all the tax evasion is a factor here for the relatively much lower corporate tax revenue these last 20yr or so? Its generally accepted around $400+ billion in tax revenue is lost due to tax evasion legal or otherwise each year BTW. That is A LOT of potential national debt that could be paid down.

Historical corporate tax revenue was much higher than its been for a reason too. In the 1950's corporate tax revenue was muuuuch higher (around 28% of federal tax revenue) than it is now due to less evasion. Corps were still plenty profitable back then as well despite effectively higher taxation too so don't go saying some nonsense about it being impossibly over burdensome taxation either.

Nookie420 said:
Nothing wrong with using the laws in place for their benefit. If people don't like it, they can vote to change the laws, it's that simple.
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Because changing tax laws is just so simple, easy, and totally fair and TOTALLY not effected from lobbying by powerful corporate interest groups (like ALEC, who BTW writes most of the tax and business laws that get passed) at all right?
 
GSDragoon said:
This is why we can't have nice things. Laws shouldn't be setting the minimum moral standards. Just because you can legally do something, doesn't mean it's right.
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Well, company leadership is in a tricky position here. As part of running a corporation you have moral fiduciary responsibility to your shareholders to do whatever it takes (within the confines of the law) to maximize their investment return.

If company leadership does not optimize their tax payments, they are violating the trust placed in them by investors under fiduciary standards (which are legally binding, btw.)

So, another way of looking at it is that corporate leaders are under a moral obligation to use whatever legal scheme they can to minimize the tax burden of their corporation. If they don't, they are not only violating trust, but they are breaking the law, and can be sued by their shareholders (or just plain fired)/

This is why it is important to legally fix the issue rather than plead that they pay more in taxes than they can legally get away with.
 
Zarathustra[H] said:
The real problem here is that transfer pricing is all messed up, which allows for the legal loopholes that make these kinds of tax avoidance schemes possible, but no one seems to want to tackle that from a regulatory perspective, as it is very complicated and politically sensitive.
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This, so much this. For those that don't understand, the issue is that companies can basically set what the pricing is for transfers of IP. This allows a whole bunch of really fubar'd economics.

The way it works is Company HQ sets up a subsidiary Company A and transfers the IP in question for basically $1. CHQ then sets up another sub Company B which licenses the IP from CA for near retail market price. All the revenues therefore go to CA while CB basically shows zero profit and CHQ shows no direct profit. In reality its generally even more complex with multiple transient license holders and chained sub companies to take advantage of tax loop holes in multiple locations like the Ireland delayed taxation, etc.

Nor does it require purely ephemeral products. It can be used for things like iPhones and even CPUs (Intel got dingle quite a while ago because their transfer pricing for undiced wafers sent to overseas packaging plants was way to low, low enough that the IRS basically had a slam dunk case, iirc).

For phones this works by Pear HQ, licensing the silicon designs so PSCA who gets them manufactured, then sells them to PSCB who puts them in phones, who sells them to PSCC_X who combines them with software from PSCS who bought that software from PHQ for $1. PSCC_X pays near wholesale pricing for the combination of the finished phones and the software that runs them thus making no profit. There is a different PSCC_X setup in each legal domain.

The only way to fix this whole mess is to somehow get to realistic fair market transfer pricing which as pointed out is a whole can of worms.

That said, if I were king for a day I'd get rid of corporate/business taxes all together. They pull in very little money (relatively speaking) for the government and only make things more complicated.
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All that would only work if you were God Emperor of Earth. The problem is that the taxation structure of an individual country doesn't matter if you can shift costs, liabilities, and equities pretty much without restriction. You can do all that within your country, but then we just run those perks via a 3rd party country and boom, still have all the benefit without the tax issue just like now.

Fundamentally, the transfer pricing needs to be fixed in order to solve the problem. But transfer pricing is super complex esp when you have multinational development of the items involved in the transfer pricing.
 
HAL_404 said:
and then there's the real world
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That's right - it's called LOOPHOLES.

The rich people and rich corporations find them and use them, the regular people get screwed and either go to jail or pay. And as far as closing them - why would a bunch of rich people pass laws to eliminate what is helping them? You have to be rich nowadays to get elected - that's what it takes to run a campaign.
 
Mega6 said:
That's right - it's called LOOPHOLES.

The rich people and rich corporations find write them and use them, the regular people get screwed and either go to jail or pay. And as far as closing them - why would a bunch of rich people pass laws to eliminate what is helping them? You have to be rich nowadays to get elected - that's what it takes to run a campaign.
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FTFY
 
Blaming corporations for avoiding taxes is like blaming a lion for brutally killing its prey or blaming the ocean for making waves.
 
But dont worry. The end of the world is coming soon. 2050 and humans will be no more. Then machines will take over and we can finally say goodbye to all the terrible things humans do.
 
maxz01 said:
But dont worry. The end of the world is coming soon. 2050 and humans will be no more. .
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yeah they said the same thing about 2000 but I was modifying COBOL two digit year date code and fixing it.
 
DF-1 said:
are they going to bring it back now that the rate is lower?
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Only if they need to use it in the USA. Which even then, they can take out a loan and pay the bank without even bringing that money back iirc. Either way no multinational will willingly bring foreign profits back to the US to get taxed again.
 
Tax avoidance is not tax evasion. Words matter.

Same as the discussion should have been in Bain Capital. The question should not be "Why are you exporting, or not importing American dollars back?" The question that should be asked is, "Why is this a beneficial choice for US-based companies and how can we fixed our screwed up tax system to make it advantageous to bring US dollars back home?"
 
///AMG said:
Only if they need to use it in the USA. Which even then, they can take out a loan and pay the bank without even bringing that money back iirc. Either way no multinational will willingly bring foreign profits back to the US to get taxed again.
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again? The whole point is to never actually be taxed.
 
aaronspink said:
again? The whole point is to never actually be taxed.
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Just to be clear, they always will get taxed something, even this scheme though apparently less than 1% is still something. The USA is one of the few countries with double taxation laws on foreign income. But yes that is the objectve, to never be taxed but no one accomplishes that.
 
The cognitive dissonance some of you are openly espousing is troubling. In your mind, the U.S. has a corporate tax rate of 21% and yet Google and other companies make profits in the Billions of dollars and pay an effective tax rate of 0%. Meanwhile the middle class has an effective tax rate of 8.7%. Just to be clear you are okay with that? Carrying the burden of rich people and corporations and paying their share of taxes for them. All while they steal resources and infrastructure usage from the middle class and poor? Just because you get away with something doesn't mean it is legal, it just means they haven't been prosecuted. Try not paying your taxes, I promise you will be jail. Corporations are not held to the same liability standards actual people are and yet some of you think they deserve the same rights to own and hold property etc.
 
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ferrisnox said:
The cognitive dissonance some of you are openly espousing is troubling. In your mind, the U.S. has a corporate tax rate of 21% and yet Google and other companies make profits in the Billions of dollars and pay an effective tax rate of 0%. Meanwhile the middle class has an effective tax rate of 8.7%. Just to be clear you are okay with that? Carrying the burden of rich people and corporations and paying their share of taxes for them. All while they steal resources and infrastructure usage from the middle class and poor? Just because you get away with something doesn't mean it is legal, it just means they haven't been prosecuted. Try not paying your taxes, I promise you will be jail. Corporations are not held to the same liability standards actual people are and yet some of you think they deserve the same rights to own and hold property etc.
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LOL, cognitive dissonance? How about the fact that left wing Google is fully allied with the Democrats, the party that rails against corporations. Google is so left wing, their employees are free to protest against supporting the US military, during working hours, and they have no problem personally profiting by avoiding paying taxes in the US.

Then again, George Soros, Warren Buffett, Jaime Dimon of Citibank, Apple, and a host of other leftists engage in exactly the same practice.

How's the 'middle class' doing in Cuba? Venezuela? Spain? Or any other socialist paradise, outside of a handful of microscopic lily white Nordic nations?
 
///AMG said:
Just to be clear, they always will get taxed something, even this scheme though apparently less than 1% is still something. The USA is one of the few countries with double taxation laws on foreign income. But yes that is the objectve, to never be taxed but no one accomplishes that.
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The effective tax rate with this scheme is ~0%. And the US doesn't have double taxation, they have an equivalent taxation scheme.
 
i dont care as long as when someone gets paid by said company they pay taxes on it. corporations/businesses arent people i dont get why a dollar get taxed more than once anyways.
 
GlowingGhoul said:
LOL, cognitive dissonance? How about the fact that left wing Google is fully allied with the Democrats, the party that rails against corporations. Google is so left wing, their employees are free to protest against supporting the US military, during working hours, and they have no problem personally profiting by avoiding paying taxes in the US.

Then again, George Soros, Warren Buffett, Jaime Dimon of Citibank, Apple, and a host of other leftists engage in exactly the same practice.

How's the 'middle class' doing in Cuba? Venezuela? Spain? Or any other socialist paradise, outside of a handful of microscopic lily white Nordic nations?
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you forgot poor-ass italy who gave their citizens so much free stuff they went bankrupt.
 
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