Skeptics who disbelieve Google's
Like many companies with global revenue, Google's moving money around in ways that cut down its tax bill. Bloomberg BusinessWeek recently traced the profitable path: The company routes much of its foreign revenue through Ireland first, where the corporate tax rate is 12.5%. But since the money doesn't stay there long, that rate doesn't fully apply. The money is headed for Bermuda, which sports a corporate tax rate of … 0%, making a necessary stop in the accommodating nation of the Netherlands, where it passes through a Google subsidiary there (with no employees).
An ethical dilemma
That all may sound rather outrageous, but it's all legal. You can argue that Google shouldn't sidestep paying U.S. taxes, but by the same token, it also owes an obligation to its shareholders to maximize profits in any legal way possible. From that perspective, Google isn't flawed; the system is.
According to a 2009 government study, 83 of the 100 biggest U.S. companies have a presence in countries considered to be international tax havens. One single address in the Cayman Islands is home to more than 18,000 corporations. Clearly, Google is not alone. Citigroup
Faced with piles of lost revenue, the government has proposed closing many of these loopholes. According to a 2009 White House release, "In 2004, the most recent year for which data is available, U.S. multinational corporations paid about $16 billion of U.S. tax on approximately $700 billion of foreign active earnings -- an effective U.S. tax rate of about 2.3%."
Various proposals may save $200 billion or more over the coming decade, but business is fighting back. The Business Software Alliance, a lobbying group that includes Cisco Systems
It hurts me to say this, but it's hard to fault companies for taking advantage of existing loopholes. However, doing so does cost the nation, and taxpayers, an estimated $60 billion annually. If the government wants that money back, it needs to close those loopholes.
Let us know your thoughts on the matter by leaving a comment below.
If companies are making money, why shouldn't you? Check out these great stocks you can buy today.
True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.
Longtime Fool contributor Selena Maranjian owns shares of Google. Google is a Motley Fool Rule Breakers pick. The Fool has a bull call spread position on Cisco Systems. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Google and Intel, which are both Motley Fool Inside Value recommendations. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.