Bloomberg calculated that search giant Google avoided around $2 billion in worldwide income taxes in 2011 by moving $9.8 billion in revenues into a shell company in Bermuda, which doesn't have a corporate income tax. By moving profits from overseas subsidiaries into Bermuda, the search firm cut its overall tax rate nearly in half. The amount moved to the shell company represents about 80 percent of Google's total pretax profit in 2011.
The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and in the U.S. over corporate tax dodging. Governments in France, the U.K., Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums.
Last week, the European Union’s executive body, the European Commission, advised member states to create blacklists of tax havens and adopt anti-abuse rules. Tax evasion and avoidance, which cost the EU 1 trillion euros ($1.3 trillion) a year, are “scandalous” and “an attack on the fundamental principle of fairness,” Algirdas Semeta, the EC’s commissioner for taxation, said at a press conference in Brussels.