
Google Lowered Taxes by $2.4B Using European Subsidiaries - kungfudoi
http://www.bloomberg.com/news/articles/2016-02-19/google-lowered-taxes-by-2-4-billion-using-european-subsidiaries
======
peteforde
Just because something is legal doesn't mean that it's okay, from a values and
ethics perspective. This is precisely why so many people are frustrated with
the very notion of a corporation; it has most of the rights and none of the
moral compass of a human. I find it troubling that so many folks here are
quick to argue what distills to, "if it won't land you in prison and it's
better for your shareholders, you pretty much have a responsibility to behave
in an antisocial manner". Antisocial as in: short term profits over societally
accretive goals for the future.

I feel comfortable in my position because corporations benefit directly and
indirectly from infrastructure provided by all three levels of government;
everything from roads to schools for their employees kids. A smart player
would put money back into the public coffers so that people could be taken
care of, not hoard it for the already-wealthy. Why? Because there needs to be
a functioning middle class to buy your products (and click on your ads).

I'm reminded of Penn Jillette talking about how he rapes and murders exactly
as much as he wants (eg. not at all) without needing a divine entity to tell
him not to do those horrible things.

~~~
modeless
> none of the moral compass of a human

I find this notion laughable, that a "moral compass" prevents individuals from
attempting to lower their tax burden as much as corporations. Individuals are
no different than corporations in the desire to avoid paying taxes. The
difference is that the amounts are smaller, so they can't afford as many
lawyers, and the tax laws are less complex, so generally fewer loopholes are
available.

If it was advantageous for individuals to set up European subsidiaries for tax
purposes, I guarantee everyone would be doing it, "moral compass" be damned.

~~~
PavlovsCat
> I find this notion laughable, that a "moral compass" prevents individuals
> from attempting to lower their tax burden as much as corporations.

Correct, I'd argue a functioning moral compass would keep a person from seeing
it as a "burden" to begin with. Paying for what I take out and for the less
fortunate (until it's my turn to be struck by misfortune) is not a burden,
just like waiting in a queue until it's my turn is not an inconvenience. Being
aware of the randomness of my own birth and having empathy doesn't require a
moral compass, it requires intelligence; it _leads to_ having a moral compass.

That you can find that "laughable" you owe to the fact that you were born and
cared for as a baby, creating a lot of costs and work for a lot of people,
none of which with anything but their moral compass humming gently as a
compensation.

~~~
mike_hearn
If all you care about is paying in so you can take out, and to help cover
unlucky people until it's your rainy day, you don't need any taxes at all,
just insurance.

In practice taxes are used for all sorts of things which you may or may not
agree with (e.g. foreign wars), and other things that you may agree with but
maybe don't believe tax and government is the most efficient way to provide
it.

The blasé assumption that tax == moral is just another form of the left wing
assumption that people working for the state have a slight moral superiority
over people working in the private sector (and who are therefore tainted by
the desire for profit).

For some things, there aren't really any better options than paying taxes.
Military spending comes to mind. For others, it's sort of an open question
(roads and healthcare are cases where countries frequently strike different
balances). For yet others, tax is obviously the wrong solution. Nobody these
days thinks governments should be in the steel or coal businesses, except
China.

Unfortunately the nature of tax is that it's rather hard to express your views
about it outside of general elections.

~~~
PavlovsCat
> In practice taxes are used for all sorts of things which you may or may not
> agree with (e.g. foreign wars), and other things that you may agree with but
> maybe don't believe tax and government is the most efficient way to provide
> it.

So? You can't evade taxes for A but not B -- if you evade taxes, you are
actually more likely to hit, say, orphans, than, say, big business or war
profiteers.

I can't respond to "may". If you think there is a better way, humor me, though
even then I don't see how one should be allowed to "have the cake and eat it",
namely profit from the infrastructure upheld in no small part with taxes, but
then not pay taxes because there are better ways. Then make business and be a
citizen where it's done a better way, or try to change it where you are.

And yes, I'm aware that taxes get spent on all sorts of crappy things, that
doesn't invalidate the general idea or the social contract, and just because I
think "trying to minimize taxes whenever possible by all means" is always
immoral, doesn't mean I think all taxes are moral in all instances.

> The blasé assumption that tax == moral is just another form of the left wing
> assumption that people working for the state have a slight moral superiority
> over people working in the private sector

Except I don't have that assumption, so it can't possibly be a form of that.
That simply doesn't parse.

Though we could discuss the meaning of "profit". Someone who voluntarily reads
stories to children with cancer does profit from that, too, and furthermore
they are also considering the profit others have from that. So it's still a
"desire for profit". Hey, even Jesus asked "what does it profit a man..",
profit in itself apparently not the issue, but rather what profit, and at what
costs to whom or at what point down the road. Profit, in my books, isn't just
measured in the amount of money or land something nets, but in everything it
involved to get there.

~~~
mike_hearn
What makes you think that if you minimise your tax payments, it's poor little
orphans that get hit and not bloated military budgets or overweight
bureaucracies? Isn't that just an assumption on your part? How can you know
what governments would choose to spend less on, if they had less tax revenue?

Corporations normally do not profit directly from infrastructure provided by
governments. The people who make them up benefit from them a lot, but they pay
taxes already. The primary infrastructure corporations specifically use a lot
is the courts, and arguably, patent/copyright systems. But these are
relatively cheap to administer, especially as courts can charge fees and the
patent system is actually a profit centre for government (in the USA).

Everything else (roads, schools, health, etc) is all about people, not the
abstract groups they sometimes form. We'd still need them even if there were
no corporations.

When I said "may or may not agree with", I meant that many things governments
do are somewhat controversial. Not that I expected anyone to write an essay on
all of them :-)

~~~
PavlovsCat
> What makes you think that if you minimise your tax payments, it's poor
> little orphans that get hit and not bloated military budgets or overweight
> bureaucracies? Isn't that just an assumption on your part? How can you know
> what governments would choose to spend less on, if they had less tax
> revenue?

Because that's what happens time and time again, from what I can tell when
looking for information on that over the news I got to hear for all of my
adult life. It has nothing to do with looking into a glass ball.

> Corporations normally do not profit directly from infrastructure provided by
> governments. The people who make them up benefit from them a lot, but they
> pay taxes already.

"Not directly", so? Without the people who need the infrastructure to live,
there would be no corporations and no customers.

------
mc32
If people think this is wrong the same people should ignore taking any
deductions on their personal taxes. If we want companies to pay their "fair
share" then governments should institute international tax reform and have a
tax treaty where signatories abide by whatever they agree to.

Here companies are rationally choosing ways to pay as low a tax burden as the
laws allow. As they say, hate the game, not the player.

~~~
notahacker
Deductions on personal taxes are intentional provisions to encourage certain
types of saving/investment/giving. Weaknesses in tax treaties are not designed
to encourage people to repatriate their profits to artificial entities in tax
shelters.

Google pretending that sales are made in Ireland (and not by the revenue-
targeted local salesperson selling local ads to local eyeballs) in order to
enable them to deduct fictitious license fees owed to a subsidiary in Bermuda
is not even in the same ballpark.

It's the equivalent of me donating most of my salary to a "charity" created
for the purpose of paying my mortgage. I don't think many people here do that,
or would consider it if their accountant suggested it.

~~~
joelrunyon
The problem is with the laws. Poorly written, lazy or "bought-for" laws are
being used _exactly_ as they are worded. If you want better laws, you need to
write better laws - not just hope that people will follow what each law
intended.

For the people that claim that the tax loopholes are something that the
companies lobby for - again - it's interesting that people are upset with the
_companies_ who lobby for this, rather than the fact that _politicians_ are
receiving the actual money.

The problem is not with the companies - it's with the politicians that allow
money to influence themselves. It's laughable to me that politicians denounce
"money in politics" with one hand and are busy recruiting, fundraising and
accepting it on the other.

~~~
mattmanser
The problem is definitely the companies.

They're the ones exploiting the system.

I'm not sure what your agenda is, but the problem is _definitely_ the
companies.

If they just paid their fair share with a little bit of mild tax dodging no-
one would give a fuck. But they're taking the fucking piss at the moment,
generating billions in revenue and then not paying for any of the
infrastructure which is supporting their business.

~~~
nezumi
You have to account for competition.

Suppose there are two companies with the same business model, operating in the
same countries etc. One files taxes "fairly" and one minimizes its tax burden
as far as the law will allow. Which one do you think is going to be in
business for longer? Which one would you buy shares in?

You can get as angry as you like at the companies, or the legislators, but in
the end it's the system you need to be scrutinizing.

~~~
mattmanser
This is clearly nonsense, what serious competition does Google have in Europe?
Or Apple? Apple are making billions in profits, they have no competitive need
for lower prices!

Also this is an advantage only massive multinationals have, so again, complete
nonsense as they're already past that stage.

------
haberman
Something recently occurred to me. The fundamental problem here is that as
companies have grown multinational, something that used to be mostly a one-to-
many relationship (country contains many taxable entities) has become a many-
to-many relationship.

It wouldn't be fair or logical to tax any multi-national as if it existed 100%
in each country where it does business. So the question is how to write the
rules such that a business's overall operation is taxed by each sovereign
state in a way that is "fair" compared to the amount of operation / amount of
benefit it is getting in each.

This might be obvious to most people but it was a new way of thinking about it
for me.

~~~
tvanantwerp
What you're suggesting is a territorial tax system, versus the a worldwide tax
system such as the one the US currently has. Using a worldwide system is
actually very rare--only six OECD countries implement worldwide taxation
rather than territorial. Part of the reason America-based companies seem to be
trying so hard to avoid American taxes is because they are, compared to the
other nations they operate in, much worse.

~~~
joelrunyon
Making the US tax system more competitive worldwide is very rarely brought up.

Corporate taxes aside, I think the US is one of just 2 countries (the other
being Eritrea) where you're taxes personally on the money you make based on
your citizenship (not residency) no matter where you live. Stuff like that is
why you're starting to see people give theirs up in favor of more favorable
tax codes.

~~~
ryanhuff
Does being US company afford these companies benefits that justify a tax
premium?

~~~
mike_hearn
No. Why would it?

------
outside1234
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.

~~~
wheaties
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.

~~~
DanBC
Google doesn't pay income in England on stuff they sell, because they claim
the tax is due in the US where the IP (search, ad sense) is created.

They then don't pay the tax in the US because something something.

~~~
justincormack
No they say the tax for European sales is due in Bermuda, which owns the IP.
There is no tax in Bermuda, and no IP was created there.

~~~
sokoloff
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)?

------
wrong_variable
This tells me more about how dysfunctional the EU is then Google being 'evil'.

~~~
dazc
> This tells me more about how dysfunctional the EU is ...

Exactly, the European Union was originally conceived as a 'common market' but
individual countries can set their own corporate tax levels.

Google have had a lot of bad press here although most of it is badly
misinformed. The bar for accuracy of reporting is generally set quite low for
American companies operating in the UK.

------
rdlecler1
I'd like someone to explain to me how this is not tax evasion. This is a US
incorporated company that developed its IP in the US. It has its headquarters
in the US and it trades on a US stock exchange. Moreover, a good portion of
its revenue comes from the US. This business of paying some sort of technology
license to a subsidiary you own in Bermuda to avoid taxes seems like outright
tax evasion. Whether that is US tax evasion or European tax evasion where the
earning were made. If Google is reporting billions of dollars in earnings to
Wall Street and they get the benefit of that from the market, then Google
should be paying taxes on that and not funneling it to a jurisdiction where
they have no actual or tangible business.

~~~
Narkov
IANATL (tax lawyer) but why can't they sell those US developed rights to
Bermuda?

Don't hate the player, hate the game.

~~~
baudehlo
In this case why can't we hate the player? We apply similar hate to people who
abuse the welfare system too. This is very similar.

~~~
Narkov
The root cause is still the rules that allow the abuse. It's lazy on all our
part to blame Google et al when it is really the rules that force them to do
this.

See the '5 whys' for why we should look deeper:
[https://en.wikipedia.org/wiki/5_Whys](https://en.wikipedia.org/wiki/5_Whys)

~~~
baudehlo
Nothing I said disagrees with that. But if you are on the side of "don't hate
the player" you have to feel that way about all abuses of the system. You
don't get to pick and choose when you take that stance.

------
joering2
... and that boys and girls is called "tax planning".

But don't try it at home - for you, me and every other regular Joe Doe or
small-business owner, this would be labelled as "tax avoidance".

~~~
mtone
I like the CRA's ([http://www.cra-arc.gc.ca/gncy/lrt/vvw-
eng.html](http://www.cra-arc.gc.ca/gncy/lrt/vvw-eng.html)) categories:

\- Tax planning: within the spirit of the law

\- Tax avoidance: within the letter of the law

\- Tax evasion: unlawful

------
jokoon
I don't think those issues will be solved politically speaking, between
countries.

Voters are consumers, and I don't think politicians have a lot of leverage
against those corporations. If they hit corporations, consumers will complain.
Even in a global economy, I don't think nations are enough organized to fight
multinationals, since they might defend the corporation or their home country.
Maybe the goal of the TPP is to fix exactly just that, to lay some ground
rules about taxes, but if it fails, it will show how nations are unable to
collect taxes.

That's my greatest fear, that people become dependent on corporations, so much
that they would side with them. Today I'm sure people prefer their iPhone and
internet than firemen, police, an administration, etc.

------
ksk
Its interesting how many of these companies do business with the US
government, yet continue to dodge taxes. (Any) Government in theory could
choose a vendor using any arbitrary criteria, for e.g. manufacturing the
product in the US, not funneling profits outside the country and many others.
Unfortunately, its all about - Privatize the gains, subsidize the losses -
these days.

------
sjg007
At some point taxes are irrelevant. That's the justification. But they are
also an excuse and the reason we don't fund education and social services.

------
jacques_chester
There's an ancient saying worth meditating on, when statistics like these
surface:

Hate the game, not the player.

~~~
joelrunyon
Ah - the old ancient proverb :)

------
kilroy123
It's interesting how some of these companies are sitting on piles of cash but
are still so tax avoidant. Many companies aren't doing anything with the money
they're saving on taxes. I don't understand it.

~~~
bpodgursky
The cash is factored into the stock price. Stockholders figure that sooner or
later there will be a tax holiday or equivalent which will let companies bring
this money into the US for free, or at least cheaply, and pay it out as
dividends or share buybacks.

Also, lots of US companies use this overseas cash as collateral to take out
low-interest debt from inside the US to fund US expansion (again, because
those issuing the cheap debt know that Google etc * could * pay it off if
necessary, it's just dumb to pay the 35% if you don't have to).

~~~
charlesdm
\+ they can use it do fund big acquisitions outside the US. Luxembourg based
Skype, for example, for which Microsoft (probably, maybe) overpaid
significantly was acquired with foreign reserves. Overpaying on a deal isn't
nearly as bad if the alternative is to lose 35% of said money.

~~~
jsprogrammer
The money isn't really lost though. It would go towards services and
infrastructure for everyone. Are those alternatives considered in the
corporation's accountings?

Please, take this down to -4.

~~~
charlesdm
Absolutely, and they are completely irrelevant to a corporation. For example:
a canadian pension fund doesn’t care one bit about paying taxes in France;
they care about hitting their targets and achieving a certain annual yield on
their (tens of) billions of dollars under management for their beneficiaries.

If I’m said fund and a shareholder in a company, if I notice management paying
excessive taxes somewhere, I will intervene and force them to reduce taxes as
much as legally possible.

~~~
jsprogrammer
>Absolutely, and they are completely irrelevant to a corporation.

Why would a corporation account for irrelevancies?

A pension fund isn't really a typical corporation; it's more of a holding
facility. If a Canadian pension corporation thinks that common services and
infrastructure are irrelevant, they probably aren't going to be around vey
long, as their civilization crumbles.

~~~
charlesdm
Pension funds hold controlling stakes in various companies (private and
public) globally. It’s not uncommon for a US or Canadian pension fund to hold
a controlling stake in a private European business. Meaning they often have
indirect influence over the actions of corporations. The same applies to hedge
funds or investment vehicles controlled by activist investors.

Why would a US pension fund care about paying tax in France? I could
understand why it matters if they paid tax in the US (even though a CA based
fund probably wouldn’t care about contributing in NY), but what do they have
to gain by overpaying tax in France?

~~~
jsprogrammer
No one in this thread is arguing about overpaying.

>Why would a US pension fund care about paying tax in France?

As you said, they may have a controlling stake in businesses there.

------
jstalin
Outstanding. Tax competition is a good thing.

------
Aoyagi
Well, if Google keeps dodging taxes, I'll keep dodging any advertising and
snooping they might employ. Not that tax-dodging was the only reason for that,
but it could be a sole reason for it.

------
bitmapbrother
If Google saved 2.4B then Apple must have saved 5 - 7 Billion. Where's that
story, Bloomberg?

------
vonklaus
<satire>

This makes me fucking sick. Google is a beautocratic monolith and doesn't
deserve to be subsidized by the people. They should pay the government in full
so we can finally get back to making progress.

I don't want to suggest Google would spend all that money on hammers(as this
was largely a myth) but they certainly won't be spending it protecting the
american people. Google should do the right thing here and pay up.

Almost 3400[0] people die from terrorism, if you include people in the middle
east directly interacting with terrorists as well as domestic terrorism and
also actual instances of terrorism. Does google really think 463billion is
enough to protect America?

Leave the decision making to the people who are qualified cyber security is a
big deal and I need a group with a success record to protect me.

</satire>

Edit: Made it clear this was in jest. While I regularly state we incur risk
using google for everything pretty obvious it is a net good and even from a
non-financial return on value, i would invest my taxes in google.

[0][http://www.cnn.com/2015/10/02/us/oregon-shooting-
terrorism-g...](http://www.cnn.com/2015/10/02/us/oregon-shooting-terrorism-
gun-violence/)

~~~
swampthinker
The article was about taxes. How did you go from taxes, to terrorism, to cyber
security?

Never mind the fact that this is representative of EU disfunction, not Google
"being evil".

~~~
vonklaus
While I don't love google, I thought I made the claim rediculous enough that
everyone would be able to realize it os satire and google could probably do
10x of what any govt could with the money.

~~~
swampthinker
The /s went flying over my head.

