In most of the world, corporations are subject to tax rates of over 20 percent, with some, such as the U.K., sporting corporate tax rates as high as 28 percent. But many international corporations use tricks in international tax law to reduce what they owe — and the company that has accomplished that feat most successfully is Google, paying only 2.4% on its income last year.
The tactic employed is known as the “Dutch Sandwich” and is rapidly gaining a following among international companies. The money trail starts in Ireland, where much of the company’s profits are attributed and sent — Google itself claims nearly 90 percent of its international earnings at its office in Dublin, which has a moderately low tax rate of 12.5 percent. But most of that revenue is instead shipped off to the Netherlands.
Google’s office in the Netherlands is a shell, with no employees. The money moving allows most of the revenue to escape Ireland’s tax laws, since they allow tax-free transfers to some other EU nations. Once in the Netherlands, Google sends the money to Bermuda, which has no corporate income tax whatsoever. Dutch laws allow most of that money to go untaxed during the transfer, as well.
Google is not the only company that employs such tactics, though it is one of the most successful. The five largest tech companies paid effective tax rates of 2.4 percent to 25.8 percent. And all of the tactics the companies use to save billions are completely legal, if not entirely ethical.
