Bloomberg reports that Google Inc. has avoided paying $3.1 billion worth of taxes in the last three years by exploiting regulatory loopholes. The company utilizes a strategy favored by other tech companies such as Microsoft and Facebook. More below.

The tactics of Google and Facebook depend on “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue, according to Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.

Google employs the “Double Irish” method, according to NPR:

Google licensed the European rights to its search and advertising business to a unit called “Google Ireland Holdings,” according to Bloomberg.

Despite what the name might suggest, Google Ireland Holdings has its “effective centre of management” in Bermuda — land of sun, sand, and superlow corporate taxes.

Google Ireland Holdings in turn owns Google Ireland Limited, which employs almost 2,000 people in Dublin.

That unit sells billions of dollars of ads every year — but winds up passing most of that money through to Google Ireland Holdings, the Bermuda unit.

Google’s tax strategies are not uncommon and if they are being singled it’s most likely because of their noble ambition to “do no evil.” It is interesting that even as Republicans clamor for increased fiscal responsibility, limited government and further austerity measures, they overlook gaping tax loopholes. Just a little disingenuous?

By: Will C