Income shifting commonly begins when companies like Google sell or license the foreign rights to intellectual property developed in a high tax country to a subsidiary in a low-tax country, such as U.S. for this specific case of Google.That means foreign profits based on the technology get attributed to the offshore unit, not the parent.That licensee in turn owns Google Ireland Limited.
The Dublin subsidiary sells advertising globally and was credited by Google with 88 percent of its $12.5 billion in non-U.S. sales in 2009.Allocating the revenue to Ireland helps Google avoid income taxes in the U.S., where most of its technology was developed. The arrangement also reduces the company’s liabilities in relatively high-tax European countries where many of its customers are located.