Using legal and accounting maneuvering, Google has effectively kept some $3.1 billion dollars from the government since 2007. Is that a good thing?
Despite our applause at its It Gets Better videos, today there is some news about Google that is less applause worthy. Using legal and accounting maneuvering, Google has effectively kept some $3.1 billion dollars in potential tax revenue from the government. The corporate tax rate in America is 35 percent, but Google pays an effective tax rate of 2.4 percent. It manages this by routing its money through its Dublin, Netherlands, and Bermuda offices, in moves that are called "the Double Irish" and the "Dutch Sandwich" (check out an interactive graphic about how it works). It's the lowest tax rate paid by any of the five largest U.S. tech companies. According to Bloomberg, Facebook is preparing a similar tax strategy.
Now, Google hasn't done anything illegal. These are all legitimate tax-abatement strategies. And it's not particularly capitalist to say that a company shouldn't take advantage of a loophole just to be a good citizen. And you could pretty reasonably argue that Google might make better use of that money than the government would.
Still, this as a clear example of the need for a fair tax code that can't be manipulated so that the government could collect the correct amount of taxes from everyone and that everyone is on an equal playing field. But that would probably require a government that isn't beholden to money from large companies. And that's a bigger issue entirely.