Bloomberg has a superb story out today exposing how tech giants, and particularly Google, are exploiting loopholes to avoid paying taxes overseas.

The massively profitable Google is so successful at this that its effective tax rate overseas is a mere 2.4 percent. Two point four percent!

The corporate tax rate in the U.S. is 35 percent and Bloomberg’s Jesse Drucker reports that these tax schemes helped drop Google’s effective tax rate to 22.2 percent last year (which, I’d note, is less than what the second-lowest-earning quintile of American workers pay). This for a company with a 63 percent gross profit margin.

This is a good follow to Bloomberg’s earlier excellent story on the “Double Irish” tax shuffle being used here. Here’s a reminder of what that one was about:

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…

In Google’s case, the IRS for some reason signed off on an arrangement that lets it declare that much of its foreign revenue comes from Ireland, where it has set up a holding company for tax purposes. Bloomberg reports that almost all of Google’s foreign revenue is funneled through low-tax (and more important: lenient-tax-law) Ireland. The profits, naturally, are funneled through Bermuda.

Tax planners call such an arrangement a Double Irish because it relies on two Irish companies. One pays royalties to use intellectual property, generating expenses that reduce Irish taxable income. The second collects the royalties in a tax haven like Bermuda, avoiding Irish taxes.

To steer clear of an Irish withholding tax, payments from Google’s Dublin unit don’t go directly to Bermuda. A brief detour to the Netherlands avoids that liability, because Irish tax law exempts certain royalties to companies in other EU- member nations. The fees first go to a Dutch unit, Google Netherlands Holdings B.V., which pays out about 99.8 percent of what it collects to the Bermuda entity, company filings show. The Amsterdam-based subsidiary lists no employees.

Oughtta be a crime, no?

Bloomberg does an excellent job of putting the Google numbers in context, too. We’ve got an actual dollar figure on how much Google saves: $3.1 billion over three years, and how much it inflates its profit: 26 percent We find out that a study found the median effective tax rate for U.S. companies is six percentage points higher than Google’s 22.2 percent. And both numbers are the overall effective rate, including taxes at the state and local level. We often hear from Chamber of Commerce types that the U.S. has the highest corporate income taxes in the world. As Ezra Klein pointed out recently, that’s true nominally but not in reality.

Bloomberg is also good to compare Google to its peers:

The company, which tells employees “don’t be evil” in its code of conduct, has cut its effective tax rate abroad more than its peers in the technology sector: Apple Inc., the maker of the iPhone; Microsoft, the largest software company; International Business Machines Corp., the biggest computer-services provider; and Oracle Corp., the second-biggest software company. Those companies reported rates that ranged between 4.5 percent and 25.8 percent for 2007 through 2009.

And I just love this smash-mouth stuff:

Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google’s tax disclosures.

“Who is it that paid for the underlying concept on which they built these billions of dollars of revenues?” Briloff said. “It was paid for by the United States citizenry.”

The U.S. National Science Foundation funded the mid-1990s research at Stanford University that helped lead to Google’s creation. Taxpayers also paid for a scholarship for the company’s cofounder, Sergey Brin, while he worked on that research. Google now has a stock market value of $194.2 billion.

Exposing the hypocrisy.

Excellent work.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.