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October 21, 2021

Google's (legal) $60B tax evasion

Google ought to give its accountants a raise. LargeNewGoogleLogoFinalFlat-a

According to a startling new report from Bloomberg, some creative accounting between the tech giant’s international divisions meant the company’s corporate tax rate shrunk to just 2.4 per cent overseas – as much as 23 per cent less than other major businesses are forced to pay.

By one U.S. professor of economics’ estimate, such elusive practices may have cost the American government some $60 billion in tax revenue.

Now, before we dive into the Bloomberg report – which is as complicated as it is lengthy – it stands to note Google has done nothing illegal in its tax methods. Income shifting, as its known in the corporate world, is a “very common” method among international businesses, notes one U.K.-based tax expert.

Still, that’s not to say Google’s schemes haven’t fallen under heavy criticism.

As per the Bloomberg report, the search engine has been able find loopholes that, by moving many of its foreign profits through Ireland and the Netherlands to Bermuda, prevent it from exposure to high tax corporate rates. (Check out this interactive graphic to see a more detailed explanation which, frankly, is too comprehensive for this space.)

What Google’s methods, however common they may be, have done is expose several glaring oversights in the global tax system.

And they’ve done that by Google’s being so much more effective at the legal tax evasion – which gets catchy nicknames in the accounting community, such as the “Double Irish” and the “Dutch Sandwich” - than other major tech businesses.

Of the top five U.S. tech companies by market cap (Google, Apple, Microsoft, IBM and Oracle), the former’s 2.4 per cent tax rate was far and away the lowest of the group – the others, from 2007 to 2009, ranged between 4.5 per cent and 25.8 per cent.

Perhaps worse, still, for Google’s PR is the nasty reaction that’s followed the California-based tech giant’s (understandable) reluctance to hand over tax dollars to the U.S. government.

One New York professor said Google is “flying a banner of doing no evil, and then they’re perpetuating evil under our noses. Who is it that paid for the underlying concept on which they built these billions of dollars of revenues? It was paid for by the United States citizenry.”

Adds one U.S. tax lawyer: “The (tax) system is broken and I think it needs to be scrapped. Companies are getting away with murder.”

So, who’s to blame? The international corporate tax system, which allows such expensive discrepancies to take place, or companies such as Google, who take full advantage of them?

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...