News Americas, WASHINGTON, D.C., Fri. Oct. 23, 2015: What does Google, Nike and Bermuda have in common?
According to “Offshore Shell Games,” a recent report from Citizens for Tax Justice, its all about tax evasion.
Internet giant Google shifts profits through Ireland and the Netherlands to Bermuda.
Google reportedly uses accounting techniques nicknamed the “double Irish” and the “Dutch sandwich,” according to a Bloomberg investigation and one of its Irish subsidiary is headquartered in Bermuda leading to a shrinking tax bill of approximately $2 billion a year.
In this arrangement, the U.S. firm transfers its intangible asset to an Irish holding company. This company has a subsidiary sales company that sells advertising (the source of Google’s revenues) to Europe.
However, sandwiched between the Irish holding company and the Irish sales subsidiary is a Dutch subsidiary, which collects royalties from the sales subsidiary and transfers them to the Irish holding company. The Irish holding company claims company management (and tax home) in Bermuda, with a 0% tax rate, for purposes of the corporate income tax.
This strategy allows the Irish operation to avoid even the low Irish tax of 12.5% and, by using the Dutch sandwich, to avoid Irish withholding taxes (which are not due on payments to European Union companies).
Meanwhile, sneaker giant Nike reported $8.3 billion in accumulated offshore profits in part by transferring the ownership of Nike trademarks for some of its products to 3 subsidiaries in Bermuda.
Humorously, Nike’s Bermuda subsidiaries bear the names of Nike shoes such as “Air Max Limited” and “Nike Flight.”
Approximately 60 percent of US companies with “subsidiaries” have set up at least one in Bermuda or the Cayman Islands.
The Congressional Research Service found that in 2008, American multinational companies collectively reported 43 percent of their foreign earnings in five nations but only one in the Caribbean – Bermuda!
Morgan Stanley also has four “subsidiaries” on Bermuda while PepsiCo has 15; Merck 10; Wells Fargo 5; Marriott International 6 and JetBlue, 1.
In 1999, the profits American multinationals reported earning in Bermuda represented 260 percent of that country’s entire economy. In 2008, it was up to 1,000 percent and by 2010 it was put at $94 billion or over 1,600 percent.
