
Former Google Exec Turns Whistleblower On Company’s Tax Avoidance In The UK - sinnerswing
http://techcrunch.com/2013/05/19/former-google-exec-turns-whistleblower-on-companys-tax-avoidance-machinations-in-the-uk/
======
magicalist
This is techcrunch blog spam of the actual story in the sunday times.

actual story:
[http://www.thesundaytimes.co.uk/sto/news/uk_news/National/ar...](http://www.thesundaytimes.co.uk/sto/news/uk_news/National/article1261720.ece)

previous discussion: <https://news.ycombinator.com/item?id=5730861>

------
aarondf
"Anyone may arrange his affairs so that his taxes shall be as low as possible;
he is not bound to choose that pattern which best pays the treasury. There is
not even a patriotic duty to increase one’s taxes. Over and over again the
Courts have said that there is nothing sinister in so arranging affairs as to
keep taxes as low as possible. Everyone does it, rich and poor alike and all
do right, for nobody owes a public duty to pay more than the law demands."

Judge Learned Hand in Helvering vs Gregory, 1934.

~~~
adamt
I suspect though that that US Supreme Court ruling has little impact and no
jurisdiction on an HMRC (HMRC = Her Majesty's Revenue and Customers, the UK's
equivalent to the IRS) investigation into the tax practices of Google's UK
subsidiary.

~~~
AnthonyMouse
Would you prefer Lord Clyde in Ayrshire Pullman Motor Services v Inland
Revenue?

 _No man in the country is under the smallest obligation, moral or other, so
to arrange his legal relations to his business or property as to enable the
Inland Revenue to put the largest possible shovel in his stores. The Inland
Revenue is not slow, and quite rightly, to take every advantage which is open
to it under the Taxing Statutes for the purposes of depleting the taxpayer's
pocket. And the taxpayer is in like manner entitled to be astute to prevent,
so far as he honestly can, the depletion of his means by the Inland Revenue_

------
cpursley
It's not likely illegal.

Anyways, 'immoral' is all relative to one's political philosophy. Some find
taxes immoral - especially when they're used to bailout and/or protect
competitors, bomb and maim 'enemies' and spy on it's own citizens.

Depriving poorly run corrupt governments of tax benefits everyone, including
said government.

~~~
shubb
Tax in the UK makes me very sad. For businesses big and small, and for
individuals like me, it's a huge burden.

A lot of business owners in my town have been forced out of business by local
taxes. They lose business to charity shops, which sell donated, or sometimes
new items, and pay profits to charity. They do not pay local tax, and often do
not pay rent [1]. In some cases, after paying much of the money to the owner,
that charity profit can be slim[4]. It is hard to compete with those who do
not pay tax. It is not a level playing field.

I'm sure that those trying to compete with Google, Amazon, and similar large
companies that pay very little tax feel the same way.

The times article says "Although Google’s London sales staff would negotiate
and sign contracts with British customers, and cash was paid into a UK bank
account, deals were technically booked through its Dublin office to minimise
its liabilities here. Jones, a devout Christian and father of four, is ready
to hand over a cache of more than 100,000 emails and documents to HM Revenue &
Customs (HMRC), detailing the “concocted scheme”. "[2]

At the same time, Google's CEO made a thinly veiled threat to withdraw work
from the UK if the government here plays hard ball on tax. BP would claim that
fines made against it in the US were politically motivated[3], and with some
credibility. I think that whether Google is fined in this case will be very
much a political decision. Which perhaps supports your point.

[1][http://www.ft.com/cms/s/0/d8bee184-112c-11e1-a95c-00144feabd...](http://www.ft.com/cms/s/0/d8bee184-112c-11e1-a95c-00144feabdc0.html#axzz2TmyzKMVH)
[2][http://www.thesundaytimes.co.uk/sto/news/uk_news/National/ar...](http://www.thesundaytimes.co.uk/sto/news/uk_news/National/article1261720.ece)
[3]<http://www.bbc.co.uk/news/business-22549710>
[4][http://www.independent.co.uk/money/money-charity-shops-
and-t...](http://www.independent.co.uk/money/money-charity-shops-and-the-cash-
that-wont-reach-the-needy-1276435.html)

------
thrill
I love when someone wants to use the word "scam" and "immoral" when talking
about "technically" avoiding taxes. It's either legal or it ain't - and
there's nothing that shows it was illegal.

~~~
arrrg
Something can be legal and also immoral.

~~~
camus
Immoral according to what ? to whom ?

There is only the law , the rest is b.s.

~~~
arrrg
So you solved the question of what’s right and wrong. All we need is some
people, elected using a byzantine voting process, who, with weird rules and
centuries of inertia, come up with the Truth. That’s it, everyone else can
pack their things and go home.

Why do you elevate the law in such a way? It’s possible to have a perfectly
productive discussion about whether and why something is immoral without even
so much as mentioning the law. People define what’s moral and what’s not just
how people define what’s legal and what’s not.

The discussion about whether something is immoral or not is one that is
completely separate from whether something is illegal.

~~~
sokoloff
Yes, but morality cannot be adjudicated whereas legality can.

So, when it's important for a point to be settled definitively, talking about
the legality is generally more fruitful than talking about the morality. I
suspect that was camus's point.

~~~
arrrg
It’s not important for this to be settled definitively. I suspect it never
will be. Plus, I think many here probably agree that it’s likely that Google
didn’t do anything illegal. So why discuss something most people agree on?
That’s pointless.

------
xtc
Whistleblowers pointing fingers in the wrong direction. What they're doing is
most certainly legal. What should be looked as is the legislation enabling it.
Or rather if it's even a bad thing in the first place.

------
throwaway1980
When Google first came out with "don't be evil", this was exactly the kind of
thing I thought they wanted to avoid, especially since the corporate bogeyman
of the day was Microsoft and they were doing exactly this (Apple too). Turns
out I don't really have any idea what Google thinks don't be evil means. It
looks like they operate like any other corporation, where the only people they
truly care about in a bottom-line sense are shareholders. May as well be up
front about that. From what I've seen, a better motto is probably:

    
    
      Don't be evil unless it makes money than being good,
      but never admit to evil or talk about it in any way.

------
smartician
Isn't this just the Double Irish scheme[1] that Google and other multi-
nationals have been doing for a long time now? How is it "whistle blowing" if
something is public knowledge? If it goes beyond that, then the article hasn't
really done a good job at pointing that out.

[1] <https://en.wikipedia.org/wiki/Double_Irish_arrangement>

------
tsotha
This is just another reason we should ditch corporate income tax. It never
made any sense anyway.

~~~
rayiner
Corporate income tax makes perfect sense. If you have a system that: 1) taxes
income to persons; 2) treats corporations as distinct legal persons, as both
the U.S.'s and U.K.'s does, a corporate income tax falls out naturally. That
is to say, the fact that the corporation and the shareholders are taxed
distinctly is a natural consequence of the fact that the "corporation's money"
is distinct from the "shareholders' money." This fact is the basis for the
advantages of corporate form: that a lawsuit against the corporation only
endangers the "corporation's money" not the "shareholders' money."

The resulting state of affairs creates a common sense choice for businesses:
if you want to treat the corporation as a separate entity when it comes to
legal liability, you also have to treat the corporation as a separate entity
when it comes to taxation.

But though a corporate income tax is theoretically justified, the challenges
of enforcing one may make it desirable to get rid of it as a practical matter.

~~~
tsotha
>But though a corporate income tax is theoretically justified, the challenges
of enforcing one may make it desirable to get rid of it as a practical matter.

That was my point. Whether or not you can morally justify it, corporate income
tax is easy for multinationals to avoid, putting smaller corporations at a
disadvantage and forcing companies to operate more inefficiently.

------
DanBC
Every time people say "What's the problem if they're obeying the law?"

These companies are using very complicated schemes, bought from well funded
well staffed multinational accountancy companies (any single one of the big
four has more staff in an off shore tax haven than the HMRC has in total).
Don't forget that law consists both of statute and case law - a bunch of this
stuff has never been before a judge so we don't know if it's legal or not.

These schemes are not normal tax planning. While they're not tax evasion (use
of clearly illegal methods to not pay tax) they're borderline, and may not
actually be legal. For these schemes to be legal requires a suspension of
disbelief - for example, Starbucks doesn't make any profit in the UK[1].
(Baffling if you've ever bought a £4 coffee.)

Forensic accounts investigation is complex, time consuming, and expensive.
It's not surprising that overworked under funded understaffed tax offices
can't spare the resources to investigate companies who are trying to obfuscate
their tax arrangements. When companies are caught they negotiate deals to
repay some, but not all, of the tax. Not paying your tax and risking getting
caught is just a cost of doing business.[2]

A company using English staff, in English offices, to sell English products to
English staff working for other English companies, using English money through
English banks should probably be paying tax in England, even if the company
have arranged for someone in an Irish office to sign a bit of paper at the end
of the chain.

And we've got ourselves into this weird situation. The big four firms lend
staff to HMRC to help draft tax law. The big four firms then use their inside
knowledge of these laws, that they helped to draft, to create schemes on the
edge of legality[3ab].

What I'm gently worried about is an employee of Google (apparently from an
accounts department but maybe I got that wrong) siphoning off 100,000 emails,
and keeping them for _years_ before coming forward. That feels like a
significant fail, but I have no idea of the law around that kind of thing. I
trust that Google has much tighter controls around user data.

[1] ([http://www.independent.co.uk/news/uk/home-news/starbucks-
is-...](http://www.independent.co.uk/news/uk/home-news/starbucks-is-right-not-
to-pay-uk-tax-because-it-makes-no-profit-says-coffee-chains-tax-
advisor-8589459.html))

[2] ([http://www.guardian.co.uk/politics/2011/dec/20/inland-
revenu...](http://www.guardian.co.uk/politics/2011/dec/20/inland-revenue-
sweetheart-tax-deals))

[3a] (<http://www.ion.icaew.com/TaxFaculty/26745>)

[3b]
([http://www.guardian.co.uk/business/2013/apr/26/accountancy-f...](http://www.guardian.co.uk/business/2013/apr/26/accountancy-
firms-knowledge-treasury-avoid-tax))

~~~
Jabbles
I am angry that the law is so flawed, that the authorities are so slow to act,
that the accountancy firms employed to write the laws were not impartial, and
that companies negotiate special deals with HMRC.

I cannot blame Google (or any other company) though. In the same way I don't
blame them for filing software patents to be used defensively. The system is
broken - either through case law, reformation, or deterring windfall taxes -
we must do something about it.

~~~
rayiner
Without addressing the tax situation directly: the fact of the matter is that
civilized society is not possible without good faith on the part of people
charged with following the law. The threat of enforcement mostly exists to
keep honest people honest. It's not really practically possible to police a
citizenry determined not to follow the law in good faith.

Always blaming the system is not productive. If the system has to be air-tight
to get a usable result, you've already lost the battle.

~~~
andrewflnr
While you're general point is true, I don't think it's terribly relevant here.
This is definitely a case of the system being broken.

Taxes are a necessary evil to begin with; they're a direct impingement on the
freedom of citizens. Making the laws surrounding them so hideously complicated
makes it much worse. No one's really asking for air-tightness, just low enough
complexity that we don't have to have full-time professionals to make sense of
it. Taxes should be _easy_.

~~~
rayiner
What makes you think taxes should be easy? Defining income is hard. Defining
income in an international context is exponentially harder.

The corporations in this case are not using obscure loopholes to avoid taxes.
They're taking advantage of necessary complexities in the tax code: that it
taxes net income rather than revenue, and that it taxes income reasonably
related to the jurisdiction and not all income everywhere. What's complex is
the situation: accounting for the income of huge multi national businesses
that have customers and employees in dozens of countries, whose income
involves transactions with pieces spread out all over the world.

Its like saying that the Windows kernel should be simple. Sure, as long as you
give up decades of backwards compatibility and a multitude of hardware support
you could make it simple. Analogously, the only way to simplify the tax code
might be to give up on taxing corporations. But you can't jump to the
conclusion that the complexity is unnecessary.

~~~
lsaferite
What makes you think we should be taxing income?

There are other means of taxing the citizenry and funding the government. Why
should we tax the compensation for work, physical and/or mental, of the
population? Better would be to narrow the compliance field to taxing
consumption. And in the US we are generally voracious consumers (can speak for
the UK).

------
brohoolio
I would like to point out that this is about Google actually breaking the law
and not just gaming the system. Seems most commenters assume that this is
about gaming the system. Google is walking a fine line here and if they step
over that line they can't expect folks to go easy on them.

------
ensignavenger
I am in favor of replacing all income tax with a consumption tax- one that is
really easy to calculate, like the Fair Tax. The Fair Tax may have some kinks
that need to be ironed out, but the concept is really solid.

~~~
andrewflnr
My understanding is that consumption taxes (we're talking about things like
sales tax right?) disproportionately affect poorer people, who spend more of
their income, as opposed to rich people who tend to invest more. I'm not 100%
sure of the science, but it makes sense. I'd rather just see a simple income
tax.

~~~
ensignavenger
Yes, typically a sales (consumption tax) does effect to poor more than the
rich, because the poor tend to consume 100% of their earnings to survive,
whereas the rich only consume a very small portion of their overall earnings.

The Fair Tax attempts to address this via 2 mechanisms- first, it does not tax
used goods. Poorer people are more likely to buy used goods than new ones.

Second, the Prebate. Under the Fair Tax, the a prebate is given, based on the
Federal Poverty Line, and the amount of tax that would be paid if a family
spent up to the federal poverty line. Families that are spending less than the
Federal Poverty line actually would pay negative taxes, and those spending
more, would progressively be taxed more.

As written, some analysts of the Fair Tax have criticized it for putting the
squeeze on the middle class- because many spend everything/most of what they
earn, but earn well over the poverty line. Whereas the wealthy still consume
very little of their overall income, and the poorest of the poor pay negative
taxes.

I would tweak the prebate a little from this model, requiring the legislature
to specify the prebate level each year as a part of their budget. This means
they can't hide behind tweaking the way the poverty line is calculated- they
have to make the decision directly, and be held accountable for it. I would
also require the legislature to set the actual tax rate annually or at some
other regular interval.

------
dm2
Somebody is really trying hard to spread this negative press against Google.

The issue isn't even news, it's well known that Google and many other large
multi-international companies do the Double-Irish to avoid taxes. Until
Congress plugs the loophope, what should Google do, they hire companies to
manage their taxes and the hired company does it to the best of their ability,
who is to blame? Our representatives, IMO.

------
duncan_bayne
Go Google! Perhaps? An issue I always face when considering tax evasion is
that I'm pleased when someone manages to avoid at least some compulsory
taxation, but I'm disturbed that it's often very large and very wealthy
organizations, which suggests a level of corruption (conscious or emergent) in
our systems of Government.

