LJ down, Google evades taxes like whoa

[la_vie_noire]

To nobody's surprise, LJ is down for me again (and yes, it's only me).

Corporate Tricks Of The Trade. Or how big Corporations evade paying the taxes they should pay.

The story begins by noting that: “Google has made $11.1 billion overseas since 2007. It paid just 2.4 percent in taxes. And that’s legal.” This is pretty incredible because Google does business in many advanced capitalist countries with high tax rates. For example, “The corporate tax rate in the U.K., Google’s second-largest market after the U.S., is 28 percent.”

[...] So, how did Google get its profits to Bermuda? Businessweek explains:

Google’s profits travel to the island’s white sands via a convoluted route known to tax lawyers as the “Double Irish” and the “Dutch Sandwich.” In Google’s case, it generally works like this: When a company in Europe, the Middle East, or Africa purchases a search ad through Google, it sends the money to Google Ireland. The Irish government taxes corporate profits at 12.5 percent, but Google mostly escapes that tax because its earnings don’t stay in the Dublin office, which reported a pretax profit of less than 1 percent of revenues in 2008.

Irish law makes it difficult for Google to send the money directly to Bermuda without incurring a large tax hit, so the payment makes a brief detour through the Netherlands, since Ireland doesn’t tax certain payments to companies in other European Union states. Once the money is in the Netherlands, Google can take advantage of generous Dutch tax laws. Its subsidiary there, Google Netherlands Holdings, is just a shell (it has no employees) and passes on about 99.8 percent of what it collects to Bermuda. (The subsidiary managed in Bermuda is technically an Irish company, hence the “Double Irish” nickname.)

This set-up (as Businessweek describes it) also helps Google lower its tax bill in the U.S. Google Ireland licenses its search and advertizing technology from Google’s headquarters in Mountain View, California. Obviously this technology is worth a lot—but Google headquarters keeps the licensing fee to Google Ireland low. Doing so means that Google headquarters can minimize its U.S. earnings and thus its tax obligations to the U.S. government. And of course, Google Ireland knows how to move its profits around to minimize its tax liabilities.