Google managed to avoid paying about $2 billion in global income taxes last year by moving the vast majority of its pre-tax profit to a shell company in Bermuda, Bloomberg reported Monday.
The search giant shifted some $9.8 billion in revenues about 80% of its total pre-tax profit to a tax haven in Bermuda, roughly twice the amount Google placed in Bermuda three years earlier, according to the report, which is based on company filings.
By sheltering money in Bermuda, Google managed to cut its overall effective tax rate to 21% in 2011, down from 28% in 2008. Google's tax rate on the profit it earned overseas was just 3.2%.
This strategy may be controversial, but it's certainly not illegal. Under U.S. law, businesses are allowed to move payments from subsidiaries in countries like Ireland and the Netherlands to Bermuda, where it won't be taxed. According to Bloomberg, these tactics are apparently known as the Double Irish and Dutch Sandwich.
Microsoft, HP and other big tech companies have all reportedly avoided paying some portion of their taxes by shifting money to various offshore accounts as well.