Google avoided paying $2 billion in taxes last year by moving money to Bermuda

by: ŠtefanDecember 11, 2012

In case you haven’t noticed by now, the global economy isn’t exactly doing too well. Countries are struggling to pay off their debts, which means they’re being really anal about making sure everyone is paying their taxes. Large companies, by the very nature of the fact that they’re massive, make a ton of money. Do they store that money where the bulk of their employees live? Nope. They often use what’s referred to as “tax shelters”. In other words, countries where taxes are so low they might as well not even exist.

Bermuda is just such a shelter, and according to Bloomberg, Google moved $9.8 billion there in 2011 to avoid paying $2 billion worth of taxes. They continue by saying $9.8 billion was roughly “80 percent of Google’s total pretax profit in 2011.”

Who’s most angry about all this? Europe. Algirdas Semeta, the European Commission’s Commissioner for Taxation told members of the press that the EU is losing about 1 trillion Euros a year because of the kind of stuff that companies like Google routinely do.

Which brings up a good question: Can the government stop companies from avoiding their taxes? Technically what Google did is perfectly legal. The European Commission wants to create some new rules to prevent these sorts of things from happening, but you know how lawyers work, they’ll just figure out some other way to hide their client’s money.

Now we’re not exactly economists, so we’re not going to pretend like we have an answer to all this, but why don’t countries levy a financial transaction tax? If Google wants to move close to $10 billion to Bermuda, then let them, but tax that wire transfer up to the hilt as to make it seem like an undesirable course of action to take.

And in case you’re wondering, we’re not singling Google out. Starbucks is downright criminal.

  • Edward Smith

    If its legal, you would do the same thing. Deal with it or change the laws….same thing needs to be done about the dumb patent system and Apple abusing it!

  • AndroidBrian

    Semeta sounds like a socialist. EU is not losing 1 Trillion euros, you just not able to take 1 trillion away from various company’s. Nobody’s taking anything away from Europe there just not giving it to you. Big difference. That quote made it sound like Google stole from EU.

    • Mo

      Think about it, it is kind of “stealing”…. If you make some profit in my house then I want a little something back, and that’s whats Europe wants.

      • AndroidBrian

        Not even close to stealing. They still tax every product sold and every worker that works in EU. Making “profit” in any region creates jobs and helps the economy. Who knows how much tax Google actually paid in 2011 to EU.

  • a reader

    To Stefan Constantinescu: please focus on things you have a clue about! Yes you are not an economist so please STFU instead of blasting around about a transaction tax. Furthermore, you might have missed it but good journalism differentiates between objective statements and personal opinions, there were no charges against Starbucks so there is no criminal offense! Hope that android authority raises their journalistic standards going forward or leaves reporting on business matters to people that have a clue

    • Infinite7154

      Wow…you must be a part of a huge mutlinational company that is participating in said practices. The article is about Google…who creates Android…which is the name of this site…Android Authority. Hence, anything having to do with Google will be reported here.

      • a reader

        The article suggests to introduce a financial transaction tax, which affects the entire economy, it also makes a judgement call on Starbucks (if I am not mistaken a coffee chain not a IT company) none of this has anything to do with Google directly

        Fact is the article goes way beyond what this blog is about and does so with poor knowledge of what the author talking about, and worst of all it is his personal opinion stated as objective fact

    • Bill

      Stefan seems to believe that money belongs to governments. Indeed, he is not a finance expert, otherwise, he’d know the damage caused by transaction taxes.

  • Jon E

    I’ve stopped using Amazon for exactly that reason. And you know what, I’m finding other suppliers to be cheaper. That’s approx £1200 – 1500 per year that Amazon isn’t getting. Oh yeah – add on business stuff they they’ll not be getting and that ramps up to more like £5000.

  • Two

    Great article and thanks for writing it even if it’s not your area of expertise. It highlights two major points which is good for American readers: 1. Taxes and 2. Ethics.

    As another reader pointed out, all of this tax-dodging behaviour is legal, but is it ethical? That is the problem facing Starbucks in Britain. Most Brits say it is unethical and that Starbucks should not be doing it. So they Boycott Starbucks. Secondly, what about taxes in the first place. I mean the US was bascially founded when the colonialists said NO to the UK taxes on tea. So we have a heritage of not wanting to pay taxes. But in the UK, they don’t mind paying taxes, at least not as much as Americans do.

    Its good for Amrerica to think more about it as we adopt policies that are more common to socialist nations around the world (higher and higher taxes with higher govt spending). How do we feel about paying higher taxes? And should people be trying to evade tax or should we sometimes be willing to pay a little extra just because we are feeling generous. Clearly the US is divided over these topics, but its still good to think about them individually.

    • iamtravis

      ” all of this tax-dodging behaviour is legal, but is it ethical?”

      Its their money, (and since its legal) Google gets to decide if their actions are ethical or not. In the long run, the less taxes that they pay, the better. This money will eventually be reinvested into the business.

  • iamtravis

    The United States currently borrows $2.45 Billion per day. Just something to think about; is it really a taxing issue that nations have? Or a spending problem?…Or both?

    • Day Hay

      Bingo this. Why do people think ANYTHING belongs to governments first?
      Note to libs, giving more money to a broken system does not fix it.

  • Ernest Decouto

    Instead of looking at the money that’s going to safe havens,look at the tremendous waste and currupion in governments.That’s why people hide money so they won’t be heavily taxed by wasteful governments.