Lisa O’Carroll

October 14, 2011

US tax authorities are investigating the strategies used by Google to cut its tax bill by about $1bn (£635m) a year by funnelling profits from the US and Europe to subsidiaries with low tax rates.

The Internal Revenue Service has requested information from Google about its offshore deals following three acquisitions including its purchase of YouTube in 2006according to Bloomberg.

Sources said it was “bringing more than typical scrutiny” to techniques known as the “Double Irish” and “Dutch Sandwich”, which move revenues through units in Ireland, the Netherlands, and Bermuda.

The complex revenue shuffle is legal and is used by countless US multi-nationals. However, the tactic cost the US treasury an estimated $90bn in tax revenues in 2008, according to Kimberly Clausing, an economics professor at Reed College.

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