Google is not an American company (GOOG)

Of course not. Google is Sovereign.

From The Week:

Unless President Trump has finally adopted the royal first-person plural and owns a significant amount of Google stock, it is hard to know what the president meant when he complained on Thursday that the European Union has slapped a $5 billion fine on "one of our great companies."

Because whatever else it may be, Google is not an American company.

"Google" is, more than anything else, a logo and a marketing label; it is also a subsidiary of a holding company called XXVI, which is in turn a subsidiary of Alphabet Inc., a corporation that is also an umbrella for a number of other venture capital and research entities. For another two years, until the deadline imposed by an Irish court expires in 2020, Google or Alphabet or the Money Machine or whatever you want to call it will continue to steal from the rest of us by means of two accounting schemes known as the "Irish Double" and the "Dutch Sandwich."

A rehearsal of the specifics of these arrangements would exhaust the space of a column, but what they mean in practice is that Google has an Irish subsidiary that swallows up billions in revenue, which is then moved to a Dutch company — one which employs exactly zero persons — before being passed on to another outfit based in the Bahamas but also registered in Ireland. This labyrinthine scheme allows it to avoid paying billions of dollars in taxes on the advertising revenue it generates when people in countries around the world use its ubiquitous search engine on their smartphones, tablet devices, and computers. Estimates suggest that this strategy has left the tech giant with an effective tax rate of less then 20 percent, 15 percent lower than the longstanding U.S. rate of 35 percent. (The GOP's tax reform bill slashed the corporate tax rate from 35 percent to 21 percent beginning this year.)

These tax schemes have been immensely profitable for Google. Just last year it was able to avoid paying more than a billion euros in France because a court ruled that it had no meaningful presence in that country. Which is true, I suppose. That's the whole point: Google isn't liable because it is nothing and nowhere and endless....MORE

HT: naked capitalism who have their own related post:

The Missing Profits of Nations
By Thomas Tørsløv, PhD student, University of Copenhagen and Ministry of Taxation, Denmark, Ludvig Wier, PhD candidate, University of Copenhagen, and Gabriel Zucman, Gabriel Zucman. Originally published at VoxEU

Between 1985 and 2018, the global average statutory corporate tax rate fell by more than half. This column uses new macroeconomic data to argue that profit shifting is a key driver of this decline. Close to 40% of multinational profits were artificially shifted to tax havens in 2015, and this massive tax avoidance – and the failure to curb it – are in effect leading more and more countries to give up on taxing multinational companies.

Perhaps the most striking development in tax policy throughout the world over the last few decades has been the decline in corporate income tax rates. Between 1985 and 2018, the global average statutory corporate tax rate fell by more than half, from 49% to 24%.

Why are corporate tax rates falling? The standard explanation is that globalisation makes countries compete harder for productive capital. By cutting their rates, countries can attract more machines, plants, and equipment, which makes workers more productive and boosts their wage. This theory is particularly popular among policymakers. It permeates much of the discussion about tax policy, for instance the decision by the US to cut its corporate tax rate from 35% to 21% in 2018 (e.g. Council of Economic Advisors 2017).

But is it well founded empirically? Today’s largest multinational companies don’t seem to move much tangible capital to low-tax places – they don’t even have much tangible capital to start with. Instead, they avoid taxes by shifting accounting profits. In 2016 for instance, Google Alphabet made $19.2 billion in revenue in Bermuda, a small island in the Atlantic where it barely employs any worker nor owns any tangible assets, and where the corporate tax rate is zero percent.

Mapping Where Profits Are Booked Globally
In a recent paper (Tørsløv et al. 2018) we argue that this profit shifting is a key driver of the decline in corporate income tax rates. By our estimates, close to 40% of multinational profits were artificially shifted to tax havens in 2015. This massive tax avoidance – and the failure to curb it – are in effect leading more and more countries to give up on taxing multinational companies. The decline in corporate tax rate is the result of faulty policies in high-tax countries, not a necessary by-product of globalisation.

Our estimate that 40% of multinational profits are shifted to tax havens is based on new macroeconomic data known as foreign affiliates statistics.These statistics record the amount of wages paid by affiliates of foreign multinational companies and the profits these affiliates make. In other words, they allow to decompose national accounts aggregates (wages paid by corporations, operating surplus of corporations, etc.) into ‘local firms’ and ‘foreign firms’. We draw on these statistics to create a new global database recording the profits reported in each country by local versus foreign corporations. This enables us to have the first comprehensive map of where profits are booked globally....MUCH MORE

1) Which of course leads to a philosophical discussion of who actually has a claim on those profits.
2) Which is followed by force of arms.
I'm not kidding. If a court directs the sheriff to seize property to satisfy a tax delinquency the deputies will be armed.

Back in the day they skipped the first step, and were more forthright with the second:

Old school rent extraction device