Google chairman Eric Schmidt said Wednesday that he is proud of the way the Mountain View company is avoiding taxes, according to Bloomberg news service.
Google reportedly avoided paying $2 billion in taxes last year by funneling ad sales profits through a shell corporation in Bermuda, which has no corporate income tax.
“It’s called capitalism,” Schmidt said in a Bloomberg article. “We are proudly capitalistic. I’m not confused about this.”
“We pay lots of taxes; we pay them in the legally prescribed ways,” Schmidt said, according to the article. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.”
Several methods for funneling profits offshore, including what’s known as the “Dutch sandwich” and the “double Irish” because of the use of subsidiaries in those countries to funnel profits, have helped the company reduce its overall tax rate from 29 percent in 2008 to 22.2 percent in 2009, according to the article. The corporate tax rate in the U.S., combined with state taxes, is 39 percent. Google’s effective U.S. tax rate is unclear.
Google’s competitor, Apple, reportedly uses an even more aggressive strategy to pay an overall rate of 9.8 percent, according to the New York Times.
Google has more than 10,000 employees in Mountain View and pays millions in property taxes and lease payments to the city, which owns the land its headquarters sits on.
Google was not able to immediately respond to a request for comment.
Easy way to rescue the country from the “fiscal cliff”. Just close all these billionaires’ tax loopholes. If the Republicans don’t want to increase income taxes on millionaires, then go after the billionaires who are paying puny tax rates. That will raise more than enough money to save the country.
Google chairman Eric Schmidt is correct–this arrangement is quite legal. Thank Congress for that.
The employees of Google are big fans of big governmnet, based on their enthusiastic support of Barak Obama. So–when it’s time to pay all of those new ObamaTaxes–maybe Google will let them talk to the Corporate Tax Attorneys for ideas about how to hide their millions. No reason Google, or its employees, should pay for the taxes they’ve helped to create for others.
Typical Silicon Vally hypocrisy. They all talk about the need for additional federal revenue, but just not from the “big fish”. As all those large corporations figured out, it is much, much cheaper to buy congressmen that will take care of the loopholes than paying taxes. They hire armies of lobbyists that “buy” members of the congress, who make the entire tax code a joke. These loopholes allowing offshore tax havens are very easy to fix. As long as we allow free lobbying, and elect greedy politicians, this is just going to get worse. BTW, how much tax did Mitt Romney pay? I assume that the top Silicon Valley executives don’t pay much more than him.
> how much did Romney pay in taxes
From an (AP) article about Romney’s last tax returns, released during the recent Presidential campaign:
—
Romney and his wife, Ann, donated roughly $4 million to charities last year, but they only claimed a deduction of $2.25 million on their tax return, filed with the Internal Revenue Service on Friday.
Romney made $13.7 million last year and paid $1.94 million in federal income taxes, giving him an effective tax rate of 14.1 percent. That was a bit above the 13.9 percent rate paid on 2010 income.
—
However, if one adds his charitable contributions to his taxes (both of which are under the control of the Federal Tax Code), the Romney’s “effective tax” jumped from 14.1% to about 43%–a hellava lot more than Obama paid.
Fix the tax code. Google is a publicly held company – failure to take advantage of all viable and legal tax codes/regulations would immediately bring a stockholder lawsuit.
Save your moral high ground and focus it on getting Congress to fix the code.
Genentech found a huge tax loophole like this a few years ago….it had to do with something as innocuous as a misspelled word in a contract with the city of South SF. They were able to get out of paying one million dollars in taxes to the city of South SF, and that city could do nothing about it: the courts upheld it!!
Google and other big companies that are obvious wealthy and overpaying their employees 15% or more above industry average have a moral duty to pay their taxes fair and square and in full!
Eric Schmidt should GE ashamed, not proud. He and other CEOs like him are a national disgrace.
what is the big deal? A corporations goal is to maximize the return of it’s investors. They did nothing illegal. I imagine if the “loopholes” are closed that you are all worried about, Google can relocate to another country. Corporate income taxes should be abolished – dividends can be taxed (ONLY ONCE) as income when received by shareholders. GE pays no tax but pays huge amounts on DC lobbying and political campaigns. the only thing “immoral” (and also stupid) that Schmidt did was support obama.
@capitalist pig, a resident of East Palo Alto
Dear capitalist, investors, esp. hi-tech investors don’t benefit from companies avoiding taxes – as those companies pay no dividends
Where is Google gonna go? China hates them , blocks them regularly. They have violated most eastern and western European privacy laws ( such as, giving out TonyBlair’s address, etc), so they aren’t wanted there, either.
Paying taxes is the patriotic thing to do, especially when you can easily afford them, especially now with the country in a downward spiral. Do you really want this country to become a colony of China??????
Um, they are paying their legally required taxes as outlined by the USA tax code.
And yes, investors do benefit from aggressive/legal tax filings — greater profit and/or investment back into the company. Which increases the value of the company — which increases the value of the stock. You don’t have to receive a dividend to benefit from Google’s tax strategy.
@Tax-The-Man-Behind-The-Tree
Where are you getting the numbers for this ridiculous statement??? “However, if one adds his charitable contributions to his taxes (both of which are under the control of the Federal Tax Code), the Romney’s “effective tax” jumped from 14.1% to about 43%”
As my first accounting teacher used to say: “show your work”
Fact: “The Romneys’ tax bill could have been lower. They gave $2.6 million in cash to the Church of Jesus Christ of Latter-day Saints, the documents show.”
There is no way that the 2.6M would swing his tax rate to 40+ percent.
If you claim otherwise, “show your work”
glad to see Crescent Park Dad’s accurate comments.
We have too many economically ignorant people in the U.S. and they vote!
additionally, when companies grow, they hire more people, more people pay more income tax. not to mention when sales are involved, there are sales taxes.
finally, investors with growth stocks, pay capital gains tax when they sell their shares.
successful companies do way more than the gov’t by a long shot.
excessive taxes taken by the gov’t do more damage as those funds could go to better use – like creating jobs!
Google’s operations is creating all kinds of taxes and is doing way more than it’s “fair” share.
i think the 40% tax thing is derived by taking $2mm tax plus $4mm donation and dividing by $14mm
the point is that romney does not get use of 40% of his income –
you might disagree that donations are the same as tax, but i’ll bet it’s put to better use than than that taken by the IRS.
@mathman – you think the morman church spends 2.5 million better than the United States? Like what, the millions to fund Prop 8?
@cap pig: Google produucts generally do not create sales tax revenue.
> Where are you getting the numbers for this ridiculous statement???
> “However, if one adds his charitable contributions to his taxes
> (both of which are under the control of the Federal Tax Code),
> the Romney’s “effective tax” jumped from 14.1% to about 43%”
The “numbers” came from this (AP) article, that was published after the Romney’s released their tax returns:
http://news.yahoo.com/democrats-political-slant-marks-romney-tax-return-070444703–election.html
The key data, in the posting above, was extracted faithfully from this article.
The point being made is that one’s “effective tax obligation/rate” involves all of the money that one spends/pays that is specified as “legal” by the IRS to comply with one’s “tax obligations”.
> As my first accounting teacher used to say: “show your work”
Coming up with the 40% number from the data in the (AP) article is a simple word problem that a fifth grader should have no trouble doing. Adding the taxes paid plus the charitable contribution divided by the total income should be obvious to most people—it’s only three numbers. How hard can that be?
I would agree that Google products don’t necessarily produce sales tax revenue. However the advertising income is taxable. And…sales of products that are advertised via Google does produce sales tax.
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