Lobbying group Citizens for Tax Justice has called out Google, Apple and Microsoft and others for what it described as “accounting tricks” in which companies “pretend” to be based overseas for tax purposes. The claims were made in a report entitled Offshore Shell Games 2015.

Many multinational corporations use accounting tricks to pretend for tax purposes that a substantial portion of their profits are generated in offshore tax havens, countries with minimal or no taxes where a company’s presence may be as little as a mailbox. Multinational corporations’ use of tax havens allows them to avoid an estimated $90 billion in federal income taxes each year.

Google’s overseas tax arrangements came under fire in the UK back in 2013 when it was revealed that the company paid just £6M ($9.4M) on a UK turnover of £395M ($620M), claiming that all its advertising sales were made by staff in Ireland (a claim later challenged) …

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Apple and Microsoft both employ similar tactics. The British government subsequently announced a new 25% tax on profits generated in the UK and then “artificially shifted” overseas.

Two academic experts told Ars Technica that these arrangements are perfectly legal, and are unlikely to change anytime soon.

There is, of course, an alternative,” said Omri Marian, a professor at the University of California, “to change the law so [companies pay tax] on this income. In [the] current Congressional environment, this will happen immediately after hell freezes over.”

Samuel Brunson, a professor at Loyola University Chicago, put it more succinctly. “Individual taxpayers don’t have a strong incentive to lobby for change,” he said. “Meanwhile, Apple has a $59.2 billion incentive to lobby for the law not to be changed.”

Apple’s position is that it pays all the taxes it is required to, while Google took a more aggressive position, Eric Schmidt stating that the company was “very proud of the structure that we set up.”

Photo: Stephen Lam/Reuters

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