5 big multinational companies that pay less tax than you (and how they get away with it)

By Joshua Saxon

As the saying goes, two things are certain in life: death and taxes. Although looking at how some of the world’s biggest companies work out their global taxes, exactly how much you pay can vary wildly.

While many consider it’s only fair that corporations that make billions should shell out a bigger slice of the pie than the rest of us, big businesses would argue that some tax rules are “parasitic” and will do whatever it takes to find loopholes.

Here’s how some of the world’s biggest companies use their knowledge of global tax laws to get away with paying less than the average Joe.

Apple

Considered the “big daddy” of keeping profits abroad, Apple has accrued over $200 billion in overseas income that it doesn’t want to send back to the US in order to avoid subjecting it to heavy domestic taxes (hence the $17 billion saving mentioned earlier).

Despite being the highest earning US company in 2015, Apple has no obligation to repatriate the money to the US. It’ll just keep those profits safe and sound in lower-taxed countries, thank you very much. So how do they get access to cash for US expenditures? They use the foreign money as collateral against US bonds, which works out infinitely cheaper than if the tax man got hold of it.

However, despite seeming to know more about global tax rules than most of the world’s top financial experts, Apple was recently ordered to pay 10 years in back taxes to Ireland’s government, amounting to €13 billion, after the European Commission ruled that tax incentives Ireland offered to Apple to set up shop in the country went against EU policy. Apple continues to object to the decision.

Facebook

Mark Zuckerberg’s multi-billion dollar corporation should have paid out 40% in taxes on its $3.7 billion global net profit last year. But the sneaky social media giant managed to get by with paying somewhere around 4%. How did they do it?

While the murky world of international tax leaves it unclear exactly how they pulled it off, according to their tax declaration, it’s some kind of combination of  "tax-benefits from share-based award activity" (a shareholder payout to the tune of $1.85 billion).

Astonishingly, this is a drop in the ocean compared to the unbelieveable £4,327 they paid in UK taxes in 2014. They managed this by paying out massive staff bonuses which led to an accounting loss.

Facebook has also been fingered in the Irish tax evasion scandal that Apple fell foul of last year.

Google

Search engine behemoth Google is so prolific in their creativity with tax declarations, there’s even an anti-avoidance provision named after it (Google Tax).

Google manages to pay less tax through its Irish subsidiary, which its US parent company sells intellectual property to. This crafty company uses tactics called Double Irish and Dutch Sandwich to move funds from Ireland, Holland then to another Irish subsidiary physically based in Bermuda that imposes 0% corporate tax.

These efforts resulted in Google paying just $3.3 billion in 2015, just 16.4% of its earnings.

Amazon

Amazon wins the award for the biggest difference in global tax it should have paid versus what it actually paid: 60.5% versus a meager 17.4% (which you could argue is more reasonable, but still probably less than you pay).

The online bookseller turned retail juggernaut weaves a tricky web of loopholes and tax breaks (mostly due to the jobs it creates with its growing global presence) and—surprise, surprise—runs much of its business through Ireland and a holding company in Luxembourg.

To be fair to Amazon, it recently announced that it intends to make its tax policies less complicated and has started paying based on the rules of the countries it’s operating in.

Starbucks

With a shop seemingly on every street in every city on the planet (not to mention prices that even the most caffeine-dependent among us balk at), Starbucks is certainly raking in the big… bucks. And it works very hard to keep hold of every single one they can.

In fact, one Austrian politician recently accused Starbucks and its fellow multinationals of “paying less tax than a sausage stand” and taking advantage of lenient corporate tax in Europe.

The Netherlands had been granting "selective tax advantages" to Starbucks, meaning the coffee company was able to get away with paying a lot less than it would in the US, although it was recently ordered to repay €32 million for abusing the system.

Globally, Starbucks has paid an average effective tax rate of roughly 33%, making it the highest international contributor on this list.

Whether you fancy yourself an international corporate accountant or you want to head up a taskforce responsible for making these thrifty businesses more accountable, educating yourself on the ins and outs of global tax is fundamental. With new laws being proposed to curb tax evasion coming into effect on a regular basis—and even the experts coming up stumped as to the legality of multinational tax declarations—the future of global tax will need to call on the best of the best to make sure everyone’s playing by the rules.

This fall IE Law School invites you to navigate the world (and master the ropes) of Global Tax with our new Master in Global Taxation (LLM), a program that perfectly combines tax knowledge with the corporate and global world.