Using a complicated system that funnels profits through Ireland and the Netherlands, Google has ducked about $3.1 billion in taxes in the last three years, reports Bloomberg News's Jesse Drucker.
Thanks to the international tax strategy, which assigns income to countries with lenient tax rules and expenses to countries with higher taxes, Google's overseas tax rate is just 2.4 percent, compared to the U.S. corporate income tax rate of 35 percent and the U.K. rate of 28 percent. According to Bloomberg, other technology companies do this as well. An economics professor told Bloomberg that these companies' shenanigans, which have colorful names like "Double Irish" and "Dutch Sandwich," cost the U.S. government, currently mired in a roughly $1.3 trillion deficit, about $60 billion every year.
Microsoft, Bloomberg says, also makes use of the infamous Double Irish. And the company has blamed the U.S. government: Last year, Microsoft CEO Steven Ballmer threatened to ship employees to other countries if Obama raised taxes on corporations. The longtime corporate strategy is a large-scale version of what can happen in debt-strapped municipalities, when residents simply move elsewhere as their city raises taxes.
A bill, first introduced in 2007, that would reward "patriot employers" who suck it up and keep their operations domestic, has languished in Congress. Barack Obama supported it back when he was running for president, saying, "We can end tax breaks for companies that ship our jobs overseas and give those breaks to companies that create good jobs with decent wages here in America."
Bloomberg has an interactive demonstration of the company's tax strategy.