As Americans Ponder Their Fair Share of Income Tax, Consumer Watchdog Urges No Tax Holiday for Global Giants Like Google That Use Dodgy Tax Avoidance Schemes

Fri, Apr 15, 2011 at 10:00 am

    As Americans Ponder Their Fair Share of Income Tax, Consumer Watchdog Urges No Tax Holiday for Global Giants Like Google That Use Dodgy Tax Avoidance Schemes

    WASHINGTON, DC – As average Americans focus today on their income tax bill, Consumer Watchdog called on President Obama and the chairmen of the House and Senate tax committees to block calls for a tax holiday that would unfairly benefit corporate giants like Google.

    In a letter to the President, Chairman Dave Camp (R-MI) of the House Ways and Means Committee and Chairman Max Baucus (D-MT) of the Senate Finance Committee, the nonpartisan, nonprofit interest group said:

    “Sadly, many of our largest corporations avoid their obligations by stashing billions of dollars in overseas tax havens, and then repatriating the money to the United States only after wheedling a tax holiday out of Congress.

    “Google, the self-declared ‘Don’t Be Evil’ company, is the poster child for this irresponsible behavior. Using avoidance techniques dubbed the ‘Double Irish’ and the ‘Dutch Sandwich,’ the Internet giant cut its taxes by $3.1 billion in the last three years and reduced its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries, Bloomberg News Service reported.”

    Read the full letter from Jamie Court, Consumer Watchdog President, and John M. Simpson, consumer Advocate, here:

    Normally, Consumer Watchdog said, U.S. based firms would be subject to the U.S. corporate income tax rate or 35 percent on the overseas funds that have been stashed in dodgy tax havens when the money is brought back to the United States.  Instead of stepping up and acting responsibly and paying their fare share, tech giants like Google and Microsoft, are lobbying aggressively individually, and as members of the so-called Win America coalition, for a tax holiday.

    The Consumer Watchdog letter continued:

    “Google and supporters of granting a tax holiday argue that the $1 trillion now overseas would then be invested in the U.S. economy creating jobs.  Past history shows this simply will not happen.  In 2004 America’s greedy multinationals made the same argument. They talked the government into allowing companies to bring back $300 billion in 2005 and pay a tax rate of only 5.25 percent. They promised the money would go toward job creation and capital investment.

    “It did not.

    “For the most part, according to an analysis by three economists, Dhammika Dharmapala and C. Fritz Foley and Kristin J. Forbes, most of the money went to shareholders.

    “Their analysis, “Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act,” found that instead of creating 500,000 jobs each $1 increase of repatriated profits was associated with an increase of 62 cents to 92 cents in shareholder payouts – despite regulations stating such expenditures were not allowed.  The problem was the fungibility of money.”

    Read the economists’ study here:

    “The study found that the act and its guidelines were ineffective in getting repatriating firms to increase their domestic activities,” Court and Simpson wrote. “Congress and the administration must not be fooled again.”

    The letter concluded:

    “We urge you to oppose any attempt to declare a tax holiday. Do not endorse dodgy tax avoidance schemes practiced by Google and other multinationals like the ‘Double Irish’ and ‘Dutch Sandwich’ that have become key to the operations of tech giants, and undermine the revenues of governments around the world.

    “As Americans ponder their tax bills today, please ensure that corporations will be called upon to play by the same rules.”

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    Consumer Watchdog, is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, CA. Consumer Watchdog’s website is Visit our new Google Privacy and Accountability Project website:

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    This post was written by:

    John M. Simpson

    - who has written 414 posts on Inside Google.

    Contact the author

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