Large tech firms are coming under scrutiny over their tax avoidance measures, following the testimony of Apple executives to a US Senate Permanent Subcommittee. Google, Yahoo, Cisco, and others have been found to be using an assortment of tax loopholes and off-shoring in order to avoid paying governments in the US and Europe at least $100 billion.
Retired international tax attorney Michael Durst suggested to Bloomberg that the various world governments allowed multinationals to perform these tax maneuvers by funneling cash through other countries, with the result being “eroding public confidence in the fairness of tax systems in the United States and around the world.”
Google uses the tax laws in Ireland and the Netherlands, termed a “Double Irish” and “Dutch Sandwich” by tax attorneys, to push cash into accounts located in Bermuda, a country without corporate income tax, in order to avoid around $2 billion in income tax each year. Yahoo uses a Netherlands-based accountant and stores funds in Mauritius and Switzerland, as well as operating an Irish subsidiary that is claimed to be a tax resident of the Cayman Islands. Cisco is alleged to have shifted half of its global profits to a unit in Switzerland, also avoiding billions in taxes.
In order to combat the “stateless income” that large companies have used to avoid taxes, a number of organizations are stepping in to work on the problem. Organization for Economic Cooperation and Development, at the request of a number of countries, is working on an “action plan” to prevent the loss of tax revenues via profit shifting, with a view to publishing it in July. The US Treasury Department listed a number of global tax loopholes that need to be closed, some of which have failed to close despite legal efforts.
Source: Bloomberg News
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Google Costs U.S. Billions With Stateless Income Strategy
