Basically everyone in Corporate America is doing this. Its not just Google. If the EU (or us, or whoever) doesn't like this, then we need to change the laws.
We do, no other country makes companies pay taxes on income earned outside their domicile. It's supposed to be taxed by the country where it's earned. That said, this double dutch or whatever is taking things to an extreme.
Interestingly the U.S. does make natural persons pay tax on income earned outside their domicile. U.S. residents (of any citizenship) have to pay U.S. tax on their worldwide income, and U.S. citizens do even if nonresident. Foreign taxes paid can be taken as a tax credit, to avoid double-taxation, but you can't escape U.S. taxation by booking your income in a lower-tax jurisdiction.
It's unusual to tax non-resident citizens (the U.S. is almost unique there), but it's common to tax foreign income of residents. For example, the UK also taxes residents on their worldwide income: https://www.gov.uk/tax-foreign-income/overview
To be fair, in no other civilized country can you exploit people like you can in the US (no paid leave, right-to-work laws), or have the government enforce your profits (TPP). Why shouldn't corporations be required to pay more for the privilege of being in a corporate-friendly state?
I think the way the sandwich works is the US entity pays huge royalties to the foreign entity for the use of their intellectual property.
I might be wrong, but I think that's how it works, and if it is, that means a lot of the money is not "earned outside their domicile" quite as much as you'd think.
As a Bermuda company, I could invest in sub-contract software engineers who create IP as a work made for hire (and that the Bermuda company would own). In that case, was the IP created in Bermuda or where the software engineers were pressing keys?
In a case where the IP was created in country X and later sold to a company in country Y, is country X owed a continuing taxation revenue stream after the sale closes (and any taxes due related to the sale are paid/accounted for)?
