Tax-free havens such as the Caribbean British Virgin Isles and Bermuda have long been the book-cooking salvation of the mega-rich and money-spinning multinationals. Though legal, outrage over corporate tax dodging has been spreading in light of a poor global economy and now the magnifying glass has been turned on Google.
It’s one thing for an individual to cheat the taxman out of a few bucks, that would be tax evasion, a serious financial crime, no? However, the average person’s income doesn’t even nearly compare to the $2 billion in worldwide income taxes that Google legally avoided in 2011 when they moved a startling $9.8 billion in revenues into a Bermuda shell company. Bloomberg Business Week reported that these financial strategies have almost cut the IT giant’s taxes in half by allowing them to pay a paltry ‘tax rate of just 3.2 percent on the profit it said was earned overseas.’ This is but a small fraction of the corporate tax rate they would have been paying in the European companies where they do a great deal of their business. And lord knows that the European economy could have done with the additional twenty or so percent tax that Google have escaped paying.
Investigations into the tax avoidance are underway in France and Italy and while it’s probable that they won’t find anything that’s strictly ‘illegal’, various European bodies are calling for tax reforms that won’t allow any further abuses of tax loop holes and havens. Google defended their strategies reminding us of the number of employees they have and the investment they are able to make in European economies and small businesses. This however does not seem enough for Algirdas Semeta, the EC’s commissioner for taxation, who commented on the $1.3 trillion a year that the EU loses from tax avoidance, calling it “scandalous” and “an attack on the fundamental principle of fairness.” I couldn’t agree more.