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IRS Auditing Google
theodp writes "Bloomberg reports that the IRS is auditing how Google shifted profits offshore to avoid taxes. According to Bloomberg, Google cuts its tax bill by about $1 billion a year using a technique that allocates profits to a unit managed out of a law firm in Bermuda, where there is no corporate income tax. In 2009, the most recent year for which records are available, this subsidiary collected 4.34 billion euros (about $6.1 billion) in royalties from a Google unit in the Netherlands. A spokesman for Google, whose stated mission is 'to organize the world's information and make it universally accessible and useful,' called the IRS probe 'a routine inquiry' and declined to comment further."
Hmm, this is well known for a long time, and only NOW the IRS is getting around to auditing them?
I think Google just pissed off the wrong politician somehow.
Methinks their goody two shoes nature finally rubbed some corporation the wrong way.
Google's probably got nothing to worry about. They've been doing this for a while. So has Microsoft. And Facebook. And probably most other large companies. Most of this falls under something called transfer pricing. Which is a global problem that you will find anywhere from China to Britain to Argentina.
... oh, right, I'm poor. We pay taxes. Corporations and people rich enough to afford shifty accountants don't. And, really, what motivation do my representatives have to change this situation? Their soft money doesn't come from me and my fellow citizens are too stupid, too easily misled and too illiterate to vote someone who would change this into office.
It's not quite right for this article to make it sound like a solely Google problem. It's far far larger than that. In the end, Google's got enough of the highest paid lawyers and accountants that this audit should turn up just about nothing.
Hmmm, maybe I'll just transfer all my profits to Bermuda
My work here is dung.
This, unfortunately, is a very common way for corporations to avoid taxes. The rules to decide which country "earned" a particular chunk of income are inherently complicated (with little way to simplify them), as there are plenty of legitimate reasons for part of a company to owe a foreign subsidiary money. It's a constant cat-and-mouse game between corporations and the IRS chasing this money around.
It's a complicated problem with no good answers. (Though you would never know it to listen to people on either end of the political spectrum... on one end you have people saying we should "eliminate loopholes", betraying their ignorance of why the problem exists to begin with. On the other end you have people that argue that corporations should pay no income tax since they spend so much effort complying (or fighting) with tax laws, but offer no way to make up that lost revenue, or volunteer cuts.)
I suspect that that isn't quite correct: members of congress tend to be of substantially above-average wealth; but not nearly so much that they would have personal need for the same accounting tricks used to hide the incomes of major multinationals.
Now, of course, the major multinationals who serve as important campaign donors and likely future employers, funders of think-tanks, etc. for them do have need of the accounting tricks used to hide the incomes of major multinationals, so the effect is largely the same.
Not so much the congress-denizens themselves, but the people who contribute to their campaigns and employ their constituents. If you're a senator, and you propose closing a tax loophole, you're likely to get a visit from a lobbyist saying 'my client has a factory in your state that employs 200 people. Without that loophole, we'd have to relocate the jobs to {this week's offshoring nation of choice}'. Senator votes for it, and the next election his opponent runs a campaign about how he cost the state 200 jobs in a single vote. More likely, the senator backs down and tries to find a loophole that none of the companies in his state are using. Unfortunately, when he does, he finds senators from other states experiencing the same pressure and the proposal never makes it out of committee.
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Again, his is just a mindless talking point.
The biggest corporations have enough people and tricks to pay 0%. Rate of percentage is irrelevant. Getting rid of the broken tax code is.
The last time the US Congress did that, companies just re-purchased their own stock with the money they brought in. In other words, the only people who benefited from that stimulus were the top executives. The rest of us saw a 3 Dollar uptick in the stock price, and thought ourselves lucky we could get a dinner at a nice place through selling the stock.
Those who can, do. Those who can't, sue.