Google on Monday is reported to avoid about 2 billion U.S. dollars in worldwide income taxes in 2011 by shifting revenues into a shell company in Bermuda, highlighting major tech companies taking advantage of tax loopholes.

In 2011, Google moved around 9.8 billion dollars in revenue to Bermuda, which does not have a corporate income tax. The amount is equivalent to around 80 percent of Google's total pretax profit in 2011, and almost doubled the total routed to Bermuda three years before, Bloomberg reported, citing a filing by a Google subsidiary in the Netherlands.

According to Bloomberg, Google's tax rate in 2011 totaled just 3.2 percent on the profit it earned overseas, even as the corporate income tax rates in European countries, where Google have most of its foreign business, are ranging from 26 percent to 34 percent.

Overseas revenues account for around 54 percent of Google's total, and Britain accounts for more than 10 percent of its total revenue.

The Mountain View, California-based search giant told Bloomberg in a statement that it complies with all tax rules and its investment in various European countries helps their economies.

What is Google doing is not new and quite common among technology companies. They set up their EU headquarters in countries like Ireland and Luxembourg, which don't have Controlled Foreign Companies legislation, a form of legislation aimed at limiting companies from channeling their revenues to low-tax jurisdictions such as Bermuda.

Google attributes most of its revenue first to Ireland sales office, and then has the subsidiary pay royalties to a shell parent company in Bermuda. The royalties are also channeled through another subsidiary in the Netherlands to further avoid taxes, Bloomberg reported, citing Google's regular filing in Europe.

Microsoft used a similar arrangement in Europe, moving its EU revenues through Luxembourg, Irish and Bermuda. It is alleged of avoiding 159 million pounds (around 255.48 million dollars) in corporation tax every year in Britain, British newspaper The Sunday Times reported.

In the U.S., Microsoft avoided 4.5 billion dollars in federal income taxes over the last three years by shifting revenues to low- tax Puerto Rico, according to an analysis released by U.S. Public Interest Research Group on Dec. 6.

Apple, the world's most profitable technology company, is also alleged of sidestepping billions of dollars in taxes by using a small office in tax-free state of Nevada to manage its profits in the U.S. along with other overseas tax havens including Ireland, the Netherlands, Luxembourg and the British Virgin Islands, The New York Times reported in August.

Although the tech giants asserted that they fulfill all tax obligations, the avoidance, which is not illegal, have fueled outrage spreading across the United States and Europe over corporate tax dodging, as well as a conundrum for the current tax codes whose loopholes are taken advantage by the booming digital economy.

Tech companies are gaining more and more profits from royalties on intellectual property, such as a MP3 download and patents on software. It is easier for them to move profits to low-tax countries than manufacturers of physical goods.

According to The New York Times, over the last two years, the 71 technology companies in the Standard & Poor's 500-stock index, including Apple, Google, Yahoo and Dell, reported paying worldwide cash taxes at a rate that, on average, was a third less than other S&P companies.

Closing offshore tax loopholes is taken as a step to avoid the "fiscal cliff" by U.S. tax activists. The U.S. Public Interest Research Group's analysis said the tax avoidance costs the U.S. government an estimated 150 billion dollars in tax revenue each year.

Governments in France, Britain, Italy and Australia have started probing tax avoidance of tech companies.

Google, Facebook, Amazon and Apple have been under scrutiny under French authorities. On June 30, tax authorities raided Google's Paris offices and seized its files.

In Italy, tax authorities began an audit of Google last month and recently searched the Internet search giant's office in Milan, as well as the offices of Facebook, Bloomberg reported, citing a person familiar with the matter.

Last Thursday, the European Commission, the European Union's executive arm, presented a plan against aggressive tax avoidance, encouraging its members to crack down on cross-border tax avoidance in the bloc.

EU commissioner for taxation Algirdas Semeta said tax evasion and avoidance cost the EU around 1 trillion euros (around 1.3 trillion dollars) every year.

 Source: Xinhuanet