> Google pay taxes on all US income (not to mention payroll taxes, consumption taxes, etc.). There is a massive miscomprehension of these tax stories as they are portrayed as Google, Apple etc. avoiding all taxes when this is not the case. The income housed in Bermuda is from non-USA receipts, each of which have already passed through a local tax jurisdiction from wherever they were generated. They are not avoiding any taxes.
Saying they've paid anything in the "local tax jurisdiction[s]" isn't quite true. In most cases they've passed through Ireland and the Netherlands, even if the income is from other European countries. In most cases they haven't paid any corporation tax at all on the profits made in the local countries.
Take Starbucks in the UK as an example. They had sales of £400m but paid £0 corporation tax by ensuring the company didn't make a profit in the UK. It paid various license fees to foreign sister companies, and even purchased its coffee from Starbucks Switzerland to help offset profits. £0 profit in the UK, £0 corporation tax due.
> The reason they are kept offshore is because if the funds were naturalized back in the USA they would be double-taxed. It is really hard to argue that Google should pay local taxes once where a product is sold and then pay taxes again on that same money when it is transferred back to the USA.
They wouldn't be double taxed, the USA have double tax treaties with many countries. The reason they keep it off shore is because they're waiting for one of those amnesties that would allow them to bring the cash home to the US and pay far less than they would have outside the amnesty.
Example with no amnesty:-
Google pay 12.5% corporation tax in Ireland on European Revenues by using "license fee", loan or other perfectly legal schemes.
Google move money from Ireland to Bermuda tax free.
Google move money back into the US and pay (to the US) the difference between tax due originally and tax already paid (in Ireland).
Net result is Google pay the standard 35% (or whatever it is in the US) tax on the money. It's just a chunk of it goes to Ireland rather than the US.
Example with amnesty:-
Google pay 12.5% corporation tax in Ireland on European Revenues.
Google move money from Ireland to Bermuda.
US announce amnesty rate of 5.625% and Google moves money back to the US paying a total of 18.125%. That's a whole lot less than 35%.
It's exactly those amnesties that mean large US corporations can do this. Without them there would be little reason to hoard money offshore as it could never get back to the US without the full amount of tax having to have been paid on it.
I agree that tax amnesties are stupid, but you've got the logic wrong. When they've had them in the past, proponents were shocked at how few corporations took them up on it.
The trouble is that there is no advantage to bringing the money back. If you have your money in Bermuda, you can still invest it. You can buy securities, or you can loan it back to your sister companies in higher tax jurisdictions, and then the interest they pay you on it is generally tax deductible in the higher tax jurisdiction. The loan gives you all the benefits of having the money with none of the taxes. In that way they do bring the money back -- they just don't pay the taxes.
Even if they brought it back through the tax amnesty, what happens then? They've now got an extra billion dollars they didn't pay taxes on, so now they go out and invest it and the returns are taxable in the higher tax jurisdiction. Who thinks they're that stupid, when the alternative is to invest the money in the exact same investments but have the profits go to the sister company in the lower tax jurisdiction?
I remember reading that the US Congressional sub-committee report into a possible amnesty found that approx 50% of the money was back in the USA via securities and loans anyway.
With the 2004 amnesty - you are right - but there are a few things you can't do with offshore funds - which is why this time Cisco, Apple and the big pharma co's are lobbying for an amnesty
You can't do acquisitions, you can't do a share buyback and you can't pay a dividend.
If you are managing smaller reserves it makes sense to leave it offshore - but with larger reserves such as with Apple investors want you to do more with it (they want to _get paid_)
>If you are managing smaller reserves it makes sense to leave it offshore - but with larger reserves such as with Apple investors want you to do more with it (they want to _get paid_)
If they hold stock in a company whose share price has appreciated as a result of accumulating undistributed profits and they want money, they can always sell some of their shares.
And are you sure they can't do acquisitions? What stops them borrowing the acquisition money from their sister company, or doing the merger for stock?
Saying they've paid anything in the "local tax jurisdiction[s]" isn't quite true. In most cases they've passed through Ireland and the Netherlands, even if the income is from other European countries. In most cases they haven't paid any corporation tax at all on the profits made in the local countries.
Take Starbucks in the UK as an example. They had sales of £400m but paid £0 corporation tax by ensuring the company didn't make a profit in the UK. It paid various license fees to foreign sister companies, and even purchased its coffee from Starbucks Switzerland to help offset profits. £0 profit in the UK, £0 corporation tax due.
> The reason they are kept offshore is because if the funds were naturalized back in the USA they would be double-taxed. It is really hard to argue that Google should pay local taxes once where a product is sold and then pay taxes again on that same money when it is transferred back to the USA.
They wouldn't be double taxed, the USA have double tax treaties with many countries. The reason they keep it off shore is because they're waiting for one of those amnesties that would allow them to bring the cash home to the US and pay far less than they would have outside the amnesty.
Example with no amnesty:-
Google pay 12.5% corporation tax in Ireland on European Revenues by using "license fee", loan or other perfectly legal schemes.
Google move money from Ireland to Bermuda tax free.
Google move money back into the US and pay (to the US) the difference between tax due originally and tax already paid (in Ireland).
Net result is Google pay the standard 35% (or whatever it is in the US) tax on the money. It's just a chunk of it goes to Ireland rather than the US.
Example with amnesty:-
Google pay 12.5% corporation tax in Ireland on European Revenues.
Google move money from Ireland to Bermuda.
US announce amnesty rate of 5.625% and Google moves money back to the US paying a total of 18.125%. That's a whole lot less than 35%.
It's exactly those amnesties that mean large US corporations can do this. Without them there would be little reason to hoard money offshore as it could never get back to the US without the full amount of tax having to have been paid on it.