
The Tax Haven That's Saving Google Billions - petethomas
http://www.businessweek.com/magazine/content/10_44/b4201043146825.htm
======
grellas
_Google is "flying a banner of doing no evil, and then they're perpetrating
evil under our noses," says Abraham J. Briloff, a professor emeritus of
accounting at Baruch College who has examined Google's tax disclosures._

Maybe it is the lawyer in me, but why wouldn't any international business do
whatever it could legally do to minimize its taxes? I understand that
governments might want to consider these as loopholes and seek to end the
right of U.S. taxpayers to avail themselves of these tax-minimization
strategies. But, as long as it _is_ legal, why should a company voluntarily
seek to expose itself to higher tax rates when it has the choice not to?

I guess when you as a company claim the high ground ("do no evil"), you will
have people making their own judgments about what ethical standard ought to
govern your conduct and this would explain this professor's remark. By that
measure, though, one could argue that companies such as Google should seek to
attribute all their revenues to California because that is where their main
intellectual property development efforts have occurred and hence pay
corporate tax rates at one of the highest rates around simply because they
"owe" it to California.

I get this question all the time from web-based startups: why run our revenues
through a high-tax state when we have the option of running them through all
sorts of lower-tax venues and saving on taxes? The universal answer for
smaller companies is "set your company up in a way that let's you pay the
least tax you can legally."

Why should Google be held to a different standard on penalty of having its
perfectly legal actions castigated as "evil"? Is it the view of some or many
in the HN community, for example, that a private enterprise has a form of
"social responsibility" to voluntarily subject itself to the tax rates of
whatever domicile it happens to have its major operations in (in this case,
California) when it legally has the option not to do so? That seems unwise by
free enterprise standards and I am genuinely curious to know why refusing to
do this would be called "evil."

~~~
lionhearted
> That seems absurd by free enterprise standards and I am genuinely curious to
> know why refusing to do this would be called "evil."

When taxes come up, it tends not to be a well-thought, cohesive, pros-and-cons
thing. It tends to be an emotional/identity thing. Some people think and
almost always argue it'd be a good thing if companies gave more money over to
governments.

Me, I think it's very good for the world on every level for Google to pay less
taxes. They're hiring the best people, acquiring companies and giving
liquidity to founders, run amazing free services (search, Gmail, Google Earth,
Google Maps, Google Finance, Google News, Google Voice, Google Reader,
Feedburner, many many others). Also, they're internally investing in energy
and robotics like the auto-driven cars thing, and their high level personnel
seem to invest really well too (like in genetics research). Anyone who thinks
that England would do a better job with the money than Google hasn't been to
England, or hasn't thought this through very much.

~~~
Anechoic
_run amazing free services (search, Gmail, Google Earth, Google Maps, Google
Finance, Google News, Google Voice, Google Reader, Feedburner, many many
others). Also, they're internally investing in energy and robotics like the
auto-driven cars thing_

None of those products/services would be possible but for the government
spending taxpayer money to develop the infrastructure behind those services
(the internet, roads, GPS, etc).

~~~
ataggart
>None of those products/services would be possible but for the government
spending taxpayer money...

This is sloppy reasoning. Just because A contributed in some measure to B does
not imply B could _only_ have come about because of the contributions of A,
nor does it imply that more of A will yield more Bs.

Further, absent a parallel world in which such different choices were made,
one could just as easily argue on economic grounds that the resources
confiscated would have been otherwise put to more effective, productive use in
satisfying the wants of the common man.

~~~
notahacker
Although Sebastian's original post stopped just short of doing so, it would be
equally sloppy to suggest that Google's ability to come up with amazing free
(but profitable) services was a consequence of their tax avoidance.

~~~
chc
Only because calling it "tax avoidance" is overspecifying. Google's ability to
come up with amazing free services without immediate profitability is a
consequence of their considerable post-tax revenue.

------
rmc
In Ireland, these kinds of tax breaks are one of the foundations of our
economy. They aren't viewed as a way to give a hand out to the big companies,
but as a way to create jobs. This article mentions that 2,000 people are
employed in Google Dublin. Given Microsoft, Amazon, Intel, IBM and Sun also
operate, there's easily 10,000+ people employed thanks to our low tax rate.
There are only 1,000,000 people employed in Ireland (small country), so the
loss of these 10,000+ jobs (~1%+ of all employees) would be massive.

Ireland has very little industry, very little traditional ways to grow the
economy. We all know if it wasn't for the tax breaks these companies wouldn't
be here, and that there'd be loads of people out of work.

~~~
borism
And that's the reason Ireland has something like 1000% external debt to GDP
[1] - politicians and local businessmen alike got so drunk with their success
of luring in corps that they assumed it will continue forever.

The reality is however, that taxes will have to be raised and the corporations
will leave for yet another island paradise, and that will result in social
catastrophe either way.

[1]
[http://en.wikipedia.org/wiki/List_of_countries_by_external_d...](http://en.wikipedia.org/wiki/List_of_countries_by_external_debt)

~~~
yummyfajitas
Um, Ireland had a big property bubble, which is the cause of their current
troubles.

High corporate tax rates didn't prevent a property bubble in the US or Spain,
why would they have prevented one in Ireland?

~~~
borism
Um, Ireland's structural problems are not limited to property bubble? Perhaps
it's the symptom, not the cause?

~~~
yummyfajitas
Ok, you tell me. Why do you believe low corporate taxes are the cause of
Ireland's problems?

Before making your argument, keep in mind that 12.5% of something > 33% of
nothing.

~~~
borism
I have a very hard time understanding how you translate my line of thought:

low tax rate->more multinationals->higher debt for local business and
government->higher tax rate->less multinationals->social catastrophe

into your line of thought:

low tax rate->more multinationals->property bubble->"current problems"

what are "current problems" you identify in Ireland anyway?

all I was saying is that low tax rate is not sustainable with level of public
and private debts in Ireland. Do you agree or disagree?

of course property bubble is connected to presence of many multinationals in a
way, but I wouldn't nor did I identify it with this primarily.

Property bubble was global as you might know. So why does Ireland have such
large problems when compared to other countries?

~~~
yummyfajitas
I originally thought you were implying that low tax rates to lure in business
was the cause of debt:

rmc: "In Ireland, these kinds of tax breaks are one of the foundations of our
economy."

You: "And that's the reason Ireland has something like 1000% external debt to
GDP"

I pointed out that a property bubble was the primary cause, and that low tax
rates are unrelated to this. Lets put aside your original argument, and focus
on the new one. You assert "more multinationals->higher debt for local
business and government". Could you explain this step?

As for why Ireland was hurt more than others, their bubble was bigger:

<http://en.wikipedia.org/wiki/File:Ireland_house_prices.png>

[http://upload.wikimedia.org/wikipedia/en/c/c1/Median_and_Ave...](http://upload.wikimedia.org/wikipedia/en/c/c1/Median_and_Average_Sales_Prices_of_New_Homes_Sold_in_United_States_1963-2008_annual.png)

~~~
borism
Oh well. But WHY was the bubble bigger in Ireland? Do Irishmen need some kind
of bigger houses and more of them than the rest of the world?

Anyway, we keep going and going in circles. Let's stop. The whole story
(including why more debt) is very well described here:
<http://en.wikipedia.org/wiki/Celtic_Tiger>

More on that later I guess.

Let me just add that it would be very simplistic to attribute "current
problems" just to the property bubble, or high debts to just low tax rate for
multinationals. So to make it clear, that's not how I think.

------
philiphodgen
(I do this stuff in my day job).

Leave aside the moral outrage and any sentence that has "should" in it. You're
not being rigorous in your analysis.

Next, think of the tax code as a giant bucket of Lego pieces. Google - and
many other multinationals (including very small startup tech companies of the
type that spring from the loins of YC) - simply assemble the Lego pieces as
they choose.

Looked at as a strictly engineering exercise? No big deal. Hire better
engineers (people like me) and get better results (cooler tax-Lego
structures).

OK, put on your moral outrage hats again. We are finished with the tax
engineering. Let's move on to the social engineering. Because that is what we
are talking about when we say "X _should_ pay more to support government
functions.". Except for a few people we will have general consensus that a
government is good and services need to be paid for. It's just a giant "Not
out of my wallet!" game now. Sometimes logic, sometimes "Think of the
children," sometimes whatever argument you can muster. All of these devices
are used to deflect the tax collector's attention to someone else's wallet.

That is how I look at this topic. And from this perspective I derive two
conclusions:

\- if you don't like the way multinationals create their Lego structures,
change what is in the bucket of Lego pieces. That is the job of Congress, not
Google.

\- if you plan to change the laws, expect the argument to devolve quickly to
uninformed "think of the children" arguments because politics is purely that.
No A/B testing is done. Statistical analysis is bent to prove a point, not
looked at dispassionately to optimize decisions.

Two last points.

\- Every dollar Google makes will eventually go out to employees, vendors, and
the government. (At the moment they don't pay a dividend, so the shareholders
do not get anything directly). A corporation is not some giant Jabba the Hutt
that grows bigger to infinity. It is ultimately just a money collector and
distributor.

\- the particular game they are playing in fact acts as a net revenue transfer
mechanism from the US Treasury to the Irish government. I will have to find
the article that describes this so clearly. I'm on my phone right now in
downtown LA about to give a speech in a few minutes. I'll be back. (Heh. What
a disappointment he turned out to be for California).

------
wallflower
Of course, this pales in comparison to Ikea, the world's largest non-profit
furniture retailer

<http://en.wikipedia.org/wiki/IKEA>

------
jbooth
From the article:

"Google's practices are very similar to those at countless other global
companies operating across a wide range of industries,"

So, why's the article about Google? Shouldn't the article be about "countless
global companies" bilking us for billions? I'm astonished at the lack of
outrage on this issue every time it comes up.

~~~
dtf
Because Google have a public image of behaving ethically. Everyone expects
banks and evil multinationals to do this kind of thing.

Is it ethical to avoid paying tax as an individual? Many would say no. But
when a company does it, they lay their blame on the shareholders and the
market. So the more outrage about this subject, the better. Our governments
can either raise taxes or lower taxes. But they shouldn't let individuals and
business get away with _pretending_ to pay taxes when they're not.

~~~
pg
_Is it ethical to avoid paying tax as an individual? Many would say no._

Do you mean avoid (by legal means) or evade (by illegal means)? Any government
that uses tax incentives to affect citizens' behavior is saying it's ok to
avoid taxes. If they promise your taxes will be lower if you do x rather than
y, they're counting on your desire to avoid taxes to motivate you to do x.

~~~
tyn
Using tax havens is certainly not one of these cases.

~~~
patio11
You probably mean "tax haven", which is a rhetorical slight-of-hand to suggest
that jurisdictions competing for attention via tax rates are somehow enticing
people to sin. Competing via tax rates is just another way of enticing people
to behave differently. Some people are under the impression that this happens
only internationally. This is incorrect.

One of the healthiest features of the American experiment is a federal system
where you have a broad spectrum of options in terms of tax rates versus social
services. People (and companies) can, and do, pick legal regimes which
optimize for the outcomes they find important. You may have heard people sort
of like living in California, especially if they work for political
subdivisions of it: that comes at a price -- you'll pay a gobsmacking amount
of money in taxes relative to a similarly situated individual in Texas. (I
managed to pay California several hundred dollars in taxes last year and I
don't even live there. Yay, hotel tax.)

Competition among governments internationally is also healthy, for much the
same reason. The market in tax and legal protection encourages governments to
not just expropriate all the surplus from their wealth-creating constituents.

~~~
tyn
My point was that when a company uses a foreign tax regime (which is what
google does, btw) it completely escapes any incentives created by it's own
government that are related to tax avoidance. Apparently the parent of my
previous comment (pg) doesn't think that US government's purpose is to give
incentives to US companies to move to Bermuda. Btw, I never implied that
moving to tax havens is some kind of a sin.

------
nysauhem
"The setup lowers Google's overseas tax bill, but it also affects U.S. tax
revenues as the government struggles to close a projected $1.4 trillion budget
gap."

It's a ridiculous notion that any single corporation's tax contribution will
put even the slightest dent in the budget deficit. Government spending is like
gas in a vacuum, it will expand to fill whatever space you give it.

~~~
ceejayoz
Google is hardly the only corporation doing this.

~~~
jacoblyles
Government spending is up 100% over 10 years. Maybe someone should look into
that.

------
joshklein
I was going to leave a comment about corporate citizens not doing their fair
share in America, but that got me thinking: should corporations pay tax? I'm
not asking this rhetorically to make a point. Really, should they?

I would imagine that whatever profits are passed along to shareholders are
taxed as capital gains. So, while it is a great headline to say Google pays
2.4% corporate tax, might it also be fair to say "Google shareholders pay 2.4%
additional tax on top of the regular tax they pay on their income from capital
ownership."?

Now, I'm not at all aware of how capital gains taxes and wage-style income
taxes compare, and my inner liberal slant / desire for social justice inclines
me to believe that those with the means should pay MORE than their "fair"
share.

But I can't help but think that, at least at a theoretical level, there is
someone, somewhere, who makes their living investing in corporations -
lubricating the gears of capital society - but isn't phenomenally wealthy, and
actually pays a total higher % of their "income" than a wage slave making a
comparable amount of money. VCs? Angels? Wouldn't we as a society want to
reward this behavior?

I can just as easily see the other side; maybe in theory this is right, but
the reality is that capital gains are the domain of the ultra-wealthy, and
corporations are frequently used as tax havens, pushing money around from
holding company to holding company. If the corporation buys something and the
owner uses it, that's an effective way to minimize your total "income" without
losing the benefits of your wealthy lifestyle.

I would love to hear thoughts on this, particularly from anyone more familiar
with tax law.

~~~
dbingham
Yeah, I'm not familiar enough with tax law to know the details of tax laws.
I'm sure they're terribly written. Especially in the United States. We need
desperate tax reform. Really it ought to be the first place we look for
solving the deficit: closing loop holes and raising taxes. But if those two
words are put in the same paragraph as each other -- "raise" and "taxes" --
there's mass panic.

------
duke_sam
Ireland usually gets a bad rep from this but companies like Intel, Google and
MS are the biggest employers in the country. If they were there for purely tax
reasons you'd expect them to be shell companies, rather than having multiple
fabs in the case of Intel or a few thousand employees in the case of Google.

------
dangrover
Startup idea: Company that cheaply sets up individuals/small companies to
evade taxes in the same way big corporations do. You pay a subscription fee or
something and they fill out the returns and set up a PO Box in Bermuda or
whatever.

~~~
bl4k
There are tons of companies who sell shelf companies online. ie. $800 and we
ship you a corp registration, a bank account, an office address etc.

For small companies with a single office etc., that is all that an offshore
tax structure is.

The point is that when you structure these things, you don't want anybody to
notice and you want to be a small target. Being a client of a startup whose
intended purpose is to minimize your tax bill is the opposite of remaining
unnoticed.

------
danilocampos
I had a distinct Randroid phase where I thought it was almost a moral
obligation to avoid taxation. Now things are fuzzier for me.

I make a truly decent wage. Not an earth-shattering one but a wage that beat
the hell out of anything my mom made while I was growing up. I am a very
fortunate man.

Heinlein wrote a thing about freedom:

"In terms of morals there is no such thing as a ‘state.’ Just men.
Individuals. Each responsible for his own acts. I am free, no matter what
rules surround me. If I find them tolerable, I tolerate them; if I find them
too obnoxious, I break them. I am free, because I know that I alone am morally
responsible for everything that I do."

In my case, I find taxation to be tolerable. It finances things like education
for people with fewer advantages than I have right now. Ideally, a much bigger
proportion of my taxes would go there. It also finances stupid things, like
the TSA and DHS, and that's unfortunate. It financed military adventure in
Iraq, which I find repugnant.

But I want to live in a society where you're not screwed based on the number
you draw in the ovarian lottery. Where you can be taught useful skills to make
the most of the opportunities you find. Where you don't have to pay for this
privilege – until later, when you pay taxes. I'm not aware of any scalable
solution to this that doesn't involve taxation of my earnings.

So I tolerate the imperfect because it's what I've got. Until there's a better
way to ensure that the next generation isn't screwed by bad luck, I can't
avoid that taxes are how I can do my part for the moment.

Meanwhile, Google is free to break or bend the rules, too. If they share my
values on this subject, I'd hope they'd do their part in some other way. But
that's up to them.

~~~
jacoblyles
Why don't you spend some of your own money directly on the causes that you
like? About 1/3 of American taxes go to the military, and another 1/3 goes to
non-means tested social support programs (not necessarily benefiting the
poor). The amount going to better education opportunities for poor people is
absolutely negligible, especially since the sitting government is hostile to
school choice.

Think with your head, not your heart.

------
karl11
What this should signal, is that the US should lower its corporate tax rate.
Even just making it competitive with other developed nations would probably
generate more revenue for the government. And though it would still be higher
than the effective rate many companies pay with all these transfer schemes, it
would make the hassle less worthwhile.

However, what it will actually cause lawmakers to do is increase regulations
to make income transfers like this illegal, and leave the corporate tax rate
as is.

~~~
spoiledtechie
The US Corporate Tax is one of the lowest in all the world.

[http://www.qbalance.com/Corporate_Tax_Rates_United_States.ht...](http://www.qbalance.com/Corporate_Tax_Rates_United_States.htm)

But Bermuda still beats out us at ZERO corporate tax rate.

~~~
charlief
Including others for comparison from Wikipedia
(<http://en.wikipedia.org/wiki/Corporate_tax>), interesting to note that
Vancouver, Canada, small business is taxed 13.5%, and to no surprise, there
are many startups in Vancouver:

Examples of corporate tax rates for a few English-speaking countries include:

Australia: 30%, however some specialized entities are taxed at lower rates.

Canada: Federal 11% or 18% plus provincial 1% to 16%. Note: the rates are
additive.

Hong Kong: 16.5%

Ireland: 12.5% on trading (business) income, and 25% on nontrading income.

New Zealand: 30%

Singapore: 17% from 2010, however a partial exemption scheme may apply to new
companies.

United Kingdom: 21% to 28% for 2008–2010.

United States: Federal 15% to 35%.[18] States: 0% to 10%, deductible in
computing Federal taxable income. Some cities: up to 9%, deductible in
computing Federal taxable income. The Federal Alternative Minimum Tax of 20%
is imposed on regular taxable income with adjustments.

~~~
andrewf
For Australia, you have to take franked dividends into account.

When profits flow onto shareholders, the shareholders receive tax credits for
tax that the company has paid on its profits. The result is often that, by the
time corporate profits end up in the shareholder's pocket, there is 0%
effective corporate tax over and above personal income tax paid on the
dividend.

EDIT: That's for profits. Companies still have to deal with state payroll tax,
collection of sales taxes, etc.

------
pragmatic
This story resonates because of the hypocrisy.

[http://www.google.com/intl/zh-
CN/corporate/responsibility_en...](http://www.google.com/intl/zh-
CN/corporate/responsibility_en.html)

"Look at how great we are" type giving: [http://www.prnewswire.com/news-
releases/the-brin-wojcicki-fo...](http://www.prnewswire.com/news-releases/the-
brin-wojcicki-foundation-leverages-social-entrepreneurship-with-1-million-
matching-grant-to-ashoka-89916937.html)

We hear corporate leaders (Gates, Brin, et al) lecture on social
responsibility, yet they undercut the very structure of society by skirting
tax laws.

How will we build universities, roads, public infrastructure without tax
revenue?

Now the hacker in me says, knowing how corporations behave, how do we fix
this? Do we have tax laws that encourage corps to pass along more earnings to
share holders? Implement 0% corporate tax rate and then capture tax revenue
out of individual capital gains and taxes on dividends?

It's one thing to rage about this, it's another to come up with a solution.

~~~
elai
I would trust google to spend its money more efficiently than any government.
People tend to talk about government as the only socially responsible charity
in town and the money not forcibly taken is somehow wasted in some black hole.

------
jonpaul
Am I one of the few who doesn't see a problem with this? If our tax structure
is so f'd up that it allows for this, we need to change it. In the meantime,
why wouldn't Google minimize its tax liability?

If you're an entrepreneur and are against this, I hope you voluntarily don't
take the tax breaks afforded to you, or else you're a hypocrite. Lunch with
business partners? Better not write that off. Your internet or cell-phone?
Don't write that off either. Part of your apartment where you code for 5 hours
a day? Don't write that off either.

------
barmstrong
Has anyone thought of or seen a startup designed to bring these kinds of tax
advantages to average citizens?

There would be a real value in streamlining this legal process of creating
shell companies or whatever is needed in some sort of mass market approach.

It seems like the only people this is available to are big companies or high
net worth individuals who can afford expensive one-on-one consultation with
accountants/lawyers.

~~~
Andrew_Quentin
Tax law changes all the time. It is a cat and mouse game. Loopholes are
closed, lawyers see the statue which closed them and come up with other
loopholes which are closed...

A start up could possibly hire such lawyers to do what they do for national
for the general public, but possibly each individual has his own requirement
and tax lawyers are quite expensive.

------
aristidb
Does Google not pay plenty in income tax on its employees, who in fact do
generate that precious intellectual property? Looking only at taxed profits is
misleading.

~~~
ceejayoz
How is that at all relevant?

If I steal a couch from a furniture store, I don't get to defend myself in
court by saying I bought a table from them.

~~~
jmaygarden
Who stole anything in this case? That's not a valid analogy as one act is
legal and the other is not.

~~~
ceejayoz
You're missing the point of the analogy. If the legal status of the two
alternatives is in question, fine...

"Sure, I cheated on you with your sister, but at least I didn't cheat on you
with your mum!"

Google is dodging taxes by shuffling their profits around the world. Everyone
knows the numbers are a legal fiction, and while legal, there are valid
questions about how ethical a practice it is. That they pay other taxes is by
no means a defense.

------
charlief
Welcome to the world of tax arbitrage. More information:

<http://www.freshfields.com/publications/pdfs/2007/boyle.pdf>

[http://faculty.chicagobooth.edu/austan.goolsbee/research/mun...](http://faculty.chicagobooth.edu/austan.goolsbee/research/munis.pdf)

[http://ideas.repec.org/a/eee/pubeco/v93y2009i1-2p142-159.htm...](http://ideas.repec.org/a/eee/pubeco/v93y2009i1-2p142-159.html)

------
hop
They follow the letter of the law. If the law is bad, change the law, don't
bash Google for managing it's tax liability cost effectively and accuse them
of being evil.

~~~
ceejayoz
"Don't be evil" and "Don't break laws" are very different things. If Google's
motto was just "don't break laws", they wouldn't be inviting quite so much
criticism for legal-but-dubiously-ethical stuff like this.

~~~
hnal943
It's not evil to keep money you earned.

~~~
BCGC
if you think you can earn money without the government.

------
ggchappell
Are we missing something here, maybe? _Google_ , as a legal entity, is really
nothing more than a piece of paper in someone's filing cabinet. As a
_corporation_ , it is just a legal vehicle for shuffling around money and
managing liability and ownership.

On the other hand, the _people_ who work for Google are ... people. And I'm
sure the great majority of them pay plenty of taxes (income, payroll, etc.) in
whatever jurisdictions they live in.

One of the primary functions of Google-the-entity, is to get that money to the
people. In doing so, Google-the-entity pays very little tax, but the people
pay lots. So the money is taxed, government programs are supported, and all is
well.

To put it a different way, Google's tax strategy can be considered as a way to
minimize the effect of governments taxing their people twice.

------
klochner
Google will get taxed if it brings any of that cash back into the US (
_repatriates_ the money) to pay dividends or acquire domestic companies.

The same goes for Goldman, et al., unless congress passes another
"repatriation holiday" in the name of stimulus.

------
newman314
I think it is a double standard that US companies get to avoid taxation
worldwide while US individuals have to be taxed on worldwide earnings
(regardless if it was earned in the US).

To me, it's insane that the US government feels that this is reasonable.

------
joshu
If Google thinks that they can more efficiently contribute to the public good
by using the savings to provide services directly than by paying taxes, they
have a moral obligation to minimize the taxes.

------
cletus
The most important part of this article is:

> The government has made halting steps to change the rules that let
> multinationals shift income overseas. In 2009 the Treasury Dept. proposed
> levying taxes on certain payments between U.S. companies' foreign
> subsidiaries, potentially including Google's transfers from Ireland to
> Bermuda. The idea was dropped after Congress and Treasury officials were
> lobbied by companies including General Electric (GE), Hewlett-Packard (HPQ),
> and Starbucks (SBUX), according to federal disclosures compiled by the
> nonprofit Center for Responsive Politics.

The issue is that the US (like many countries) has the best tax code money can
buy. The US has the additional problem of dual sovereignty such that the
states are competing with themselves to offer tax breaks to lure in companies
and thus jobs.

Companies are like water: they seek the lowest level. They're not immoral,
they're amoral.

A hideously complicated tax code is going to have holes in it so simplify,
simplify, simplify.

------
AlexMuir
I'm glad google keeps it's money and invests in developing google maps,
streetview, and gmail. The government would (and does) pay billions to IT
consultants to build much shitter systems.

In the UK our government has sunk billions into the Royal Mail, but we still
have to pay thousands a year for just a fraction of the functionality of
google's geocoding.

------
josiahq
LOL Google Ad irony: <http://api.markup.io/v/1qy21z5axxkv>

------
brianbreslin
The first thing that popped into my head after reading this was "That is
straight up gangsta" . Honestly I don't fault them for doing the most
allowable under the law. Hat-tip to google's army of accountants and CFOs for
figuring out these massively profitable loopholes.

------
bl4k
_"Apple (AAPL), Oracle (ORCL), Microsoft (MSFT), and IBM (IBM)"_

Those companies all sell hardware. Apple can't say 'lets book those Palo Alto
store sales in Bermuda'. Ads served are a total volatile good (their value is
the time they spend rendered on a screen infront of a user). Google has a huge
advantage because of this (and it also makes the ad trade ideal for money
laundering).

To relate this to startups :

If you are a startup and you are accepting foreign money and you are bringing
it straight into the US and paying tax on it, then you are doing it wrong. A
merchant account in Bermuda is easy to setup and is completely legal. If you
are not doing all you can to minimize your tax obligation then you are not
doing your job properly.

------
dh
As entrepreneurs in the US are trying to create jobs and companies we pay
30%+, just not fair.

~~~
jonpaul
I would hope most entrepreneurs don't have the attitude of "it's not fair."
Maybe it isn't fair. But as we all know life isn't fair. Meta-discussion
aside, any entrepreneur worth his salt won't be thinking like this.

------
neilc
_Irving H. Plotkin, a senior managing director at PricewaterhouseCoopers'
national tax practice in Boston, says that "a company's obligation to its
shareholders is to try to minimize its taxes and all costs, but to do so
legally."_

This is a pet peeve of mine: company directors are _not_ obligated to minimize
costs or maximize profits.

[http://crookedtimber.org/2008/07/25/what-obligation-
maximise...](http://crookedtimber.org/2008/07/25/what-obligation-maximise-
what/) <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1013744>

------
jackfoxy
I see this story delivering a full dose of irony that will be lost on so many
people. Google is a company that chose to affiliate with progressive causes
and personalities almost from the start. And one of the central tenants of
progressivism is business and the wealthy should pay their fair share of taxes
(meaning a proportionally higher share). But this state of affairs can never
really be reached. (Please give me a pass on this assertion, the argument is
long. Doesn't this story provide an iota of supporting evidence?) Ultimately
people pay taxes, and there are many more poor and middle class than rich.

------
HardyLeung
As always, Google did an excellent job making money left and right. You gotta
give them credit for that.

On the other hand, they are a bit "disingenuous" (Jobs' favorite word to
describe Google) about their mantra, as ultimately this profit is made at the
expense of American citizens (lower tax revenue). Why does it matter? Well it
matters because they (tangibly and intangibly) benefited greatly then and now
from the "Do No Evil" mantra, and they should accept that it comes at the
price of people holding them to a higher standard. It is "Do No Evil", not "Do
Less Evil" or "Do No Evil When Convenient".

------
daniel-cussen
Wow, these popups are unbearable.

~~~
riffer
<http://lab.arc90.com/experiments/readability/>

or

<http://summarity.com/bookmarklet_front>

------
SkyMarshal
If this scheme saves them that much money on overseas corporate taxes, why
send your sales revenues to Ireland, and then jump through these hoops to
avoid taxes on them, in the first place?

Why not move that part of the company, that collects all international ad
revenue and whatnot, to the Netherlands or Bermuda, and just skip the tricky
step of getting the money out of Ireland?

------
privacyguru
Google is smart and they are not alone in running their businesses like this.
Pros and Cons -- sure the gov't misses out on some revenue but also many of
those savings are reinvested into hiring and generating jobs and even more
profits, which in the end, can still generate revenue for uncle sam.

------
scaleordie
What was my tax rate again? Oh yes, somewhere around 40%... Nice to see that
everyone is doing their share.

~~~
maukdaddy
Unless you made a shitload of money I highly doubt your effective rate was
40%. The rate on the last x% of your money might have been taxed at 40% but
most places have a progressive tax structure. Deductions should lower the
effective rate further.

I'm speaking for the US, by the way.

~~~
camiller
Yeah, my combined marginal federal and state rates are like 33%, my effective
rate after mortgage interest and charitable deductions was like 8-9%. I'm
going to try to be more like Google though.... ;)

------
wolfenkraft
I really don't understand why we allow these things. Letter vs. Intention of
law should matter, right? I don't think a lot of the tax code and business
rules were written with the idea that a company would actually span continents
or maybe not even have a physical presence.

------
known
Big companies think & act in terms of _priorities_ and not what is _right or
wrong_.

~~~
zooey
Companies are about money. Countries are about people. Taxes build services
that are used by people. "Web Services" doesn't count too much as a service. I
would live without google search no matter what people say. But what about
hospital, street, public transportation, cheap houses for poor people, and on
and on and on...our society is based on taxes. The reason why people have to
pay taxes is to build a better society. Look at what is happening in Britain
with Cameron: no money to fix the deficit. Poor people take it all over their
a@@#@.

And, to put that simple, we are not talking about a couple of thousands dollar
a software engineer is not paying: we are talking about millions (billions?).
Greed is bad, is fucking bad. And all this talking about disruptive innovation
is usually a bunch of stupid Internet Services to play with. I think the
hacking community is overestimating its value.

No cancer cure. No cheap energy. No cleaner air. Just some web app, iPhone
app, something app.

Google taxes would fix a lot of problems, just letting millionaires a bit more
poor. I can live with that, why you can't?

~~~
known
Americans paid 92% income tax in 1950s.

------
pinchyfingers
Am I the only one who believes that taxes are evil? I can't wait until I can
afford lawyers to help me get out of paying taxes. If if I break even I'd
rather see my money going to a professional than a government,.

------
bl4k
Who cares. I would rather Google keep the money and buy a startup or two
rather than the government spending it to buy another battleship or aircraft
carrier.

------
dons
That's odd. Since when has Business Week had "TL;DR" summaries at the end of
the article?

------
Aegean
this is one reason youtube is banned from Turkey, the minister claims it is
because they make revenue in turkey and don't pay tax. It might be a valid
reason.

The second reason though (going off topic) is because they don't have anyone
to talk to in turkey for censoring stuff, which is very evil of them.

~~~
elai
And every other website in the world that might make advertising revenue off
of turkish customers and have no censorship contacts?

------
aneth
Lots of business practices are considered legal but sleazy, and above-board
companies won't engage in the them even if they increase profits - from high
pressure sales tactics to child labor where it's legal. Why is it that
companies like Google and Microsoft are given a pass on using their many-
million dollar legal budgets to push the US tax burden onto the rest of us?

------
motters
Google should pay their taxes like everyone else. Charges of tax evasion
aren't good for public relations.

~~~
TGJ
Everyone else would find every available loophole they could given the chance.
People just get mad because they are not the ones benefiting. It's human
psyche to keep other people down if you're not going up.

