Google Pays Only 2.4 % Tax Rate, Hoards Profits in Cayman Islands
October 21, 2010
(ChattahBox Political News)– Bloomberg Reports has a must-read piece today, on the billions lost in U.S. revenue to legal tax loopholes that permit companies to transfer its profits around the globe in offshore accounts where it ends up in a Cayman Islands account. The “transfer pricing” tax scheme known by the colorful names of “Double Irish” and the “Dutch Sandwich” has reduced Google’s tax rate to 2.4 percent, saving the search engine giant $3.1 billion for the last three years alone. When you hear corporations complain they pay too much in taxes, it’s not true. And besides depriving the United States of an estimated $60 billion in lost revenue every year, companies hoarding profits overseas in a “transfer pricing” scheme don’t use that money to invest in research and development and hiring workers here at home. Our broken tax system not only encourages the outsourcing of jobs, but also of profits.
Google’s obscenely low tax rate of 2.4 percent is made possible by the lax tax system in Ireland that allows companies to shift profits out of the country in a complicated money transfer trip that usually involves stops in Bermuda, the Dutch Netherlands and finally the Cayman Islands.
“Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.” [...]
“The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.”
President Obama and Democratic lawmakers have tried to pass a package of tax measures to curb overseas profit shifting and discourage the outsourcing of jobs, but Republicans have blocked such measures. And with the expected more conservative makeup of Congress after the November elections, such reforms are unlikely in the near future.
Republicans propose cutting the corporate tax rate even more. And while the right-wing talks big about job creation, they are really seeking ways, together with the U.S. Chamber of Commerce and other business groups, to make it even easier to outsource both jobs and profits.