

Google Boss: We Follow The Law On Tax - ceekays
http://news.sky.com/story/1094264/google-boss-we-follow-the-law-on-tax

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noonespecial
I think politicians are just upset that those tax law loopholes that were
_supposed_ to be just for their friends are now being exploited by those
upstart interweb companies like "the google".

Our supporters paid good money for those exclusive exemptions, dammit. This is
just making us look bad...

~~~
mjw
Fair point, although it's rather disingenuous for multinationals (not singling
out Google) to say to taxpayers: "don't like our tax avoidance? well just
change the rules then!"

Arguably one of the main reason we're _not_ able to change (or at least,
enforce) the rules easily is because of regulatory capture of tax agencies
around the world, and multinationals are (directly or indirectly) funding this
regulatory capture via their investment in complex tax avoidance schemes and
the whole industry around them which is in constantly in and out of the
"revolving door" between regulators and accountancy firms.

So, likely there's _always_ going to be opportunities out there for aggressive
tax avoidance, because of exactly these kind of agency problems. And so a
multinational is always going to have a decision to make about exactly how
aggressive they choose to be. And they are going to be judged morally by the
taxpayer for the decisions they make, whether they like it or not.

If they are judged badly as a result of their choices, they should have the
good grace to just admit that they're being selfish because they can get away
with it and that's the way things are, and not come up with disingenuous self-
serving rationalisations.

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Nursie
Of course you do dear, but you also exploit every possible loophole of inter-
country commerce to make your bill as small as possible, regardless of the
intention of the law in the countries involved or any sort of social contract.

Expect the law to change.

~~~
pvnick
You would make a terrible accountant.

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Nursie
So? I'm not an accountant.

I'm an individual with an interest in multinationals paying tax on their
profits rather than spiriting them out of the country tax free. This is why I
hope to see the law change.

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rayiner
I see a lot of talk about "tax loopholes" but not any specifics about exactly
what those loopholes are. It's easy to blame the law (a process which is
mostly just a self-reinforcing talking point), but has it occurred to anyone
that maybe neither the law nor Google are "crooked?"

You can take the most straightforward law and it still won't withstand a
company putting all their IP in a tax haven and then attributing most of their
revenues to their tax haven subsidiary. That's not taking advantage of a
"loophole" that's taking advantage of the fact that: 1) accounting for revenue
is inherently complicated, regardless of the tax laws, especially for service
businesses and software services businesses at that; and 2) multi-national
corporations must have some way to attribute income to the various countries
in which they operate; it wouldn't be fair for every country to individually
tax all the company's income separately.

It's instructive to try and figure out a tax law that would allow say the U.K.
to reach some portion of Google's income. It's harder than it seems. For
example, is it relevant that Google has customers in the U.K.? It shouldn't be
--there is no sales tax on search services. If someone in the U.K. for example
calls up their accountant in the U.S. for advice, as a general rule the
accountant isn't liable for income taxes in the U.K. Is it relevant that
Google has servers in the U.K.? Sure. But how relevant? How much of the value
of Google's service derives from the servers in the U.K. versus the code and
algorithms that were developed in California? I think most people would agree
that the servers are just incidental--the real value of Google's services is
the algorithms and data. So why should the mere existence of servers in the
U.K. entitle the country to tax some substantial amount of Google's income?

~~~
ars
> I see a lot of talk about "tax loopholes" but not any specifics about
> exactly what those loopholes are.

See here: <https://en.wikipedia.org/wiki/Double_Irish_arrangement>

The "cheating" accusation comes because you have to be very large to be able
to make use of this. If everyone could use this tax arrangement people
wouldn't complain. (Well, they would complain that it exists, but not that
people use it.)

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rayiner
The double Irish arrangement isn't a loophole, or if it is its a loophole
that's the fault of the Irish by not taking account of US transfer pricing
rules. The basic problem is that transfer payments within multinational
corporations makes it hard to account for income, and rules to attempt to
achieve that accounting are easily undermined by tax haven jurisdictions.

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gamblor956
The double-Irish is _definitely_ a loophole. The basic premise of the loophole
is that Irish-incorporated companies don't owe Irish income taxes on their
business activities if they are not managed in Ireland.

This is a relatively recent change to the Irish tax code (based on the pace of
tax law development)--and was introduced _only after_ the development of
transfer pricing rules (assignment of income to/between subsidiaries of
multinational companies). In other words--the loophole was _deliberately_
designed to get around U.S. and European transfer pricing rules and make
Ireland "competitive" for multinational corporations.

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dasil003
Without specifics this is just so much hot air. Google's responsibility should
not be to find ways to pay more tax. If there are tax loopholes it's the
government's job to close them.

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takluyver
I see a disturbing amount of this attitude: it's fine for corporations to be
as unethical as they can get away with, and it's up to government to
constantly rein them in.

I don't buy it. No, it's not Google's responsibility to find ways to pay tax,
but they also shouldn't be constantly finding ways _not_ to pay tax. A company
is not a function relentlessly optimising for money, it's made up of real
people making decisions. I expect those people to use some sense of what's
morally right, not just what the law allows them to do.

The law is a heavy, slow implement, especially when multiple countries are
involved. Multinational corporations can rearrange their accounts much faster
than we can pass legislation to control them. It's like playing whack-a-mole
with a vote before each hammer swing.

If they're dodging taxes within the letter of the law, they can expect
judgement in the court of public opinion. Which is how this debate started.

~~~
dasil003
> _I see a disturbing amount of this attitude: it's fine for corporations to
> be as unethical as they can get away with, and it's up to government to
> constantly rein them in._

That's not my attitude at all. My attitude is just one tiny facet of that
attitude, which is that no one should have to pay more taxes than they are
legally required to. I don't, for instance, think that corporations should be
free to maximize profit by toeing the EPA line.

With regards to taxes, what's unethical about using the law to one's
advantage? This isn't a rich guy socking away millions in the Bahamas; as far
as we know there's nothing shady going on at all. Furthermore, we know Google
pays some amount of tax all around the world and that they employee a lot of
people in the UK all of whom pay gobs of taxes. Google decision of where and
how to open offices may well be shaped by these tax laws, so it's really not
fair to attract a company to your country with a certain tax regime, and then
berate them for not following the "social contract" or whatever. Google is not
a UK company. It didn't start in the UK, and it doesn't have to operate here.
If tax laws change Google has to deal with it, so do it, but you can't have
your cake and eat it too by attracting them in with a certain tax regime and
then painting them as some sort of greedy villains because their accounts
don't interpret the intention of the law and voluntarily decline tax breaks.

~~~
takluyver
I'm not suggesting they should make saintly donations of money without anyone
asking them. I'm saying they shouldn't find ways to weasel out of taxes that
it's pretty clear they're intended to pay. That's what they were accused of.

I don't know what schemes Google has come up with, but Starbucks faced similar
criticism recently, and I heard a bit about what they do. The Starbucks
'brand' is owned by a company somewhere with minimal taxes. Starbucks UK pays
'royalties' to that company which conveniently come to just about all of its
profits. Then Starbucks UK tells the taxman that it's making almost no profit,
and hence owes almost no tax. That's not just 'interpretation', that's an out-
and-out loophole. They have found a way to disguise their profits (and they do
call them profits to their investors). Given enough time, we can close that
loophole, but not nearly as quickly as they find a new one. So I'll get angry
with them, and hope that if enough people do, maybe they'll stop hunting for
loopholes and pay their taxes.

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mcintyre1994
Google is clearly in the right here, unless somebody can actually point out a
law they're breaking. Simplifying a lot, Google have 2 responsibilities here:
Pay at least the amount of tax they owe, maximise stuff shareholders care
about. It doesn't take much to work out the optimal solution to them two
problems is to pay exactly the minimum amount of tax possible.

~~~
mjw
Firstly, if google sees its only responsibilities as "maximize shareholder
value" and "obey the letter of the law" then perhaps they should officially
give up on the "don't be evil" thing.

Secondly, it's disingenuous of them to ask the taxpayer to "just change the
rules" if we don't like their avoidance, when they're funding the very
regulatory capture which makes it hard for us to do that, via their investment
in these schemes.

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roopeshv
let me introduce you to:
<https://plus.google.com/+MattCutts/posts/4U2mpZ6hazU>

don't be evil is not the same as do no evil

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Shivetya
Lets see, politicians have created a system so complex they themselves cannot
understand it. Then they act upset that someone else has to that others
advantage and attempt to vilify them instead of acknowledging that the system
is too complex.

Sounds about right. You would think that they would instead focus on making a
system even they could understand.

~~~
svenkatesh
Actually, if you look at the video from the Senate hearing, some of the
senators are clearly fawning over, and pandering to, Tim Cook.

It's disgusting.

~~~
pvnick
What's your point? I thought that senate hearing was disgusting because they
were hammering away at Apple for obeying the law. Apple is an incredible
success story and they should be lauded as an example of free markets, not
vilified for trying to avoid giving extra money to the incompetent fools in
congress.

Which would you prefer - successful companies that lawfully avoid paying too
much in taxes while supporting western economies, advancing technology, and
providing countless jobs? Or a top-heavy, zero-liabilty, exploitive government
that, even as it grows unsustainably larger, still demands more and more,
always chasing that unreachable pie-in-the-sky ideal of the "fair share."

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pvnick
If my accountant paid a penny more taxes than I owed I would fire them. That
politicians are attacking successful companies for trying to pay as little in
taxes as possible is offensive and embarrassing. If you're unhappy with the
law then change it. Otherwise shut the hell up and stop wasting the tax money
you're complaining about.

~~~
skore
Now now, be fair. There IS a difference between "paying only the taxes that I
am required to pay" and setting up a Double Irish with a Dutch Sandwich.

One is investing resources to minimize failure ("I want to make sure we don't
pay more than we need to pay"), which I completely agree with - if your
accountant fails to do that, it's not a good accountant. But the other is a
proactive investment of even more money to pay even less taxes ("I want to pay
even less than what would be normal by the intent of the tax law").

~~~
AnthonyMouse
I'm not sure what line you're attempting to draw. An accountant's job isn't
just to make sure you file the right paperwork, it's to identify courses of
action that could have a significant effect on the bottom line. You seem to be
suggesting that a business would be doing something unreasonable by moving any
of its operations into a jurisdiction with lower taxes, since that would be
making an investment in order to pay less taxes.

~~~
skore
> You seem to be suggesting that a business would be doing something
> unreasonable by moving any of its operations into a jurisdiction with lower
> taxes [...]

Moving to or setting up a subsidiary in a different jurisdiction: Completely
fine.

Doing the same thing for the sole purpose of avoiding taxes: Not fine.

I really don't get what's so hard to understand about that. How many employees
do Google or Apple have in Ireland, the Cayman Islands or the Netherlands? And
how many in the US? Quite simple, I think.

~~~
AnthonyMouse
>Moving to or setting up a subsidiary in a different jurisdiction: Completely
fine.

>Doing the same thing for the sole purpose of avoiding taxes: Not fine.

And how exactly do you propose to distinguish the two?

"Number of employees" is a completely worthless metric. Apple (and/or Foxconn)
employs many times more employees in China than in the U.S., does that mean
they should be reporting most of their profits in China?

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skore
I'm pretty sure that Foxconn and Apple are separate corporations, so I have no
idea what you're getting at.

Apple has 73k employees, 50k of which are in the US. Pretty sure most of them
have benefited from US society (education, roads, police stations etc.) or
benefit from it now that they have moved to the US.

~~~
AnthonyMouse
>I'm pretty sure that Foxconn and Apple are separate corporations, so I have
no idea what you're getting at.

Apple US is a separate corporation from Apple China too, that's how all of
this works. Apple Ireland ends up with all the profits and is a distinct
corporate entity from Apple US.

You keep talking about use of government services or where employees are.
Those things are not corporate profit. If you want to tax companies that
employ your workforce then you can tax payroll. If you want to tax companies
that use local government services then you can tax commercial real estate.
What you can't do is try to tax corporate profit at one of the highest nominal
rates in the world and then be surprised when international corporations
arrange to stop reporting any profits within your jurisdiction. Profit is a
highly mobile asset. It's like trying to levy a local property tax on gold
bullion -- the people who own large amounts of bullion are just going to move
it out of your tax jurisdiction. If you then say "but they still live here and
use government services" they're just going to shrug and look at you like
you're a crazy person for expecting anything different to have happened,
because you're trying to tax the wrong thing.

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skore
Sheesh.

Foxconn wasn't build as a subsidiary of Apple. Not sure what you're getting at
with that. Yes, I understand the technicalities, but if it didn't happen that
way and the intent of how it happens is the way it is, arguing the
permutations is a strawman.

> You keep talking about use of government services or where employees are.
> Those things are not corporate profit.

Yes and no. Those government services are not corporate profit, sure. But they
are what makes the Apple corporation possible in the first place. Apple wasn't
founded in Ireland, the Netherlands and certainly not on the Cayman Islands.
The "thank you" payment for that is called taxes.

> they're just going to shrug and look at you like you're a crazy person for
> expecting anything different to have happened

Yup, that's what I would call destructive attitude. A society works because a
sufficient number of people think it's a good idea to make it work. Large
corporations are simply lucky to get away with behaving differently, for
profit. If a majority of people were behaving like that - cutting around the
system at every chance they get while obscuring their tracks with money, for
their own benefit - you end up with no society at all very quickly.

Put differently: large corporations should count themselves lucky that there
are enough reasonable people (the lower and middle class suckers who are
constantly being degraded to a purer form of worker drone consumers) to offset
the damage that they do.

All laws have to assume to a varying extent that people are interested in the
society they live in. Because if they aren't, no law whatsoever is going to
make them a good member of society. Kind of like how the DSM-IV has no
definition of psychopathy because it describes the absence of a mind capable
of having a disorder in the first place. The way those large corporations
behave is truly antisocial behavior, lacking regard for the deeper and finer
points of how society works.

> because you're trying to tax the wrong thing

Funny, because to me it seems that no matter _what_ you tax, people who don't
want to pay taxes will either seek and find or invest and create a way around
that.

This isn't a law problem, it's a culture problem. But I suppose you're right,
no sense in arguing culture and civil responsibility with people who lack
both.

~~~
cardine
What is wrong with looking out for you own self interests?

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dotcoma
Then it must be the law which is crooked.

~~~
DannyBee
I think it was jon stewart who said "these complicated carve outs weren't made
by poor people"

~~~
mseebach
As everyone who's attended internet pundit law school know, the effect of a
law is dependant on the net worth of the author of it.

------
ancarda
Is "Don't be evil" just a joke or was it actually the motto of Google?

~~~
ndr
<http://www.google.com/about/company/philosophy/>

