My knowledge of international corporate tax law is practically nil, but if I understand this correctly, the money sitting in Bermuda is still subject to taxation when it gets brought back into the US; so Google isn't avoiding taxes, but is rather postponing taxes by doing this.
This article discusses how in 2004 there was a tax holiday for corporations to 'repatriate' profits stashed over seas. Presently corporations are lobbying Congress for another such one time tax holiday. Under these special one time deals the money being brought in is generally taxed at a ridiculously low rate. In 2004 it was 5% meaning Google's effective tax rate once the money arrives back in Mountain View is 7.5% still very very low.
I don't believe that Google is actually just postponing taxes. Instead, they are also being selective about what money they pay it on. Basically, the money has been obtained in Ireland, sent to the Netherlands, and then Bermuda. So it hasn't touched the US, and they don't owe US taxes. They can then do two things with that money. One, they can bring it into the US, pay taxes on it, and use it to do whatever it is they plan on doing with it, or, two, which I think is more likely, they use it to finance international business, and they never pay US taxes on it. However, there hasn't been any "loss" to the US per se. If anything, it's the Irish who should be up in arms
The Irish are probably not going to be too upset that companies are taking advantage of the system that they setup in order to attract large companies and the associated financial/legal industry. It's not a case of big companies exploiting the poor Irish.
Except, from the original article, I don't get why they don't just set up in Denmark & avoid setting up in Dublin altogether. They must be doing _something_ worthwhile with those 2,000 Irish employees.
This is just a guess, but if they were set up in the Netherlands, wouldn't they have to pay Dutch taxes? My impression is that they don't have to pay Dutch taxes because the money is just passing through the Netherlands, not being earned there.
My international corporate tax law knowledge is also practically nil, but I believe there is discussion in Congress about a corporate tax holiday that would allow them to bring money back to the US at a 3.5% tax rate.
It's subject to U.S. taxation only if Google ever decides to bring it back into the U.S. via a dividend. Alternatively, they can use that cash to fund foreign growth without ever facing US taxation.
Postponing taxes for about 7 years is roughly the same as avoiding those taxes altogether, based on a comparison of the time value of money calculations (because future amounts of the same value are worth relatively less).
It is not subject to taxation since the money has already been accounted for in Bermuda (where there is no corporate tax). It is effectively the same as money laundering, but then legal and on a much bigger scale.
That's not true at all. It is subject to taxation if the cash is ever repatriated back to the U.S.
That's not money laundering (which is the use of legal business activities to exchange illegaly earned income for legally earned income).
It's legal because the money was technically earned by Google's foreign subsidiaries, which are legally distinct entities. As long as the money isn't repatriated to Google (U.S.), the money isn't subject to U.S. income taxation.
