
Google used a tax loophole to shelter $19.2B - hadenew119
https://www.engadget.com/2018/01/02/google-dutch-sandwich-tax-maneuver/?sr_source=Twitter
======
super-serial
Bloomberg likes to write about how "tech companies do this" whenever it's
something bad.

The fact is all companies do this... it's well-known every industry is doing
the same. Walmart, Exxon and Pfizer are just a few companies that tax-dodge
just as much as Google. It's estimated $700 billion in taxes are dodged so
singling out Google's $19 billion seems strange.

[https://americansfortaxfairness.org/corporate-tax-
chartbook-...](https://americansfortaxfairness.org/corporate-tax-chartbook-
how-corporations-rig-the-rules-to-dodge-the-taxes-they-owe/)

~~~
dkural
Yes, but they don't have the "don't be evil" motto, or executives claiming
some vague moral superiority to rest of the corporate world in "making the
world a better place".

~~~
totalZero
There is no moral obligation to pay additional taxes beyond the minimum that
tax law permits.

~~~
jstanley
I think you mean there is no _legal_ obligation to pay additional taxes beyond
the minimum that tax law permits.

Whether your moral obligation lies above or below the legal minimum depends on
your viewpoint.

~~~
totalZero
Your thought is incorrect. I mean precisely what I said.

There is no moral obligation to pay more than your legally required amount of
tax. The presumption would be that no moral obligation exists until one is
proven, for precisely the reason you mentioned (it depends on your viewpoint,
so we cannot begin with any one set of norms), so if you would kindly propose
one, I will disprove it.

~~~
jstanley
Assume the moral obligation lies at exactly the same point as the legal
obligation. Now assume the tax law changes. Has your moral obligation changed?

Edit: I wasn't saying there's a moral obligation to pay more than the legal
obligation. I was saying there's not _necessarily_ a moral obligation to pay
even the legal obligation. They're orthogonal issues.

You implied that there is a moral obligation to pay at least the legal
minimum, and I'm saying that's not a moral obligation but a legal obligation.

Edit further: imagine living in a regime with 90% income taxes, and which
takes that money and uses it to do terrible things. You have a legal
obligation to pay those taxes, but I'd argue at least that you _don 't have a
moral obligation to pay_, and perhaps that you actually have a moral
obligation _not_ to pay. Therefore the legal minimum tax payment is not a
moral obligation but a legal obligation.

~~~
totalZero
> Assume the moral obligation lies at exactly the same point as the legal
> obligation. Now assume the tax law changes. Has your moral obligation
> changed?

I don't actually believe that this assumption is generally true (nonpayment of
taxes can be a form of civil disobedience; Henry David Thoreau did this in
opposition to the Mexican-American War), but let's say that we believe in the
principle that "any entity has a civic duty to follow the law, and if it is
unjust, to protest it and endeavor to change it rather than simply disobeying
it." In that case, yes, the moral obligation changes, because it is based on
following the law.

> You implied that there is a moral obligation to pay at least the legal
> minimum, and I'm saying that's not a moral obligation but a legal
> obligation.

I don't believe I implied that. I just said there's no moral obligation to pay
more than the legal minimum. That is true even if there is no moral obligation
to pay taxes at all.

> Edit further: imagine living in a regime with 90% income taxes, and which
> takes that money and uses it to do terrible things. You have a legal
> obligation to pay those taxes, but I'd argue at least that you don't have a
> moral obligation to pay, and perhaps that you actually have a moral
> obligation not to pay. Therefore the legal minimum tax payment is not a
> moral obligation but a legal obligation.

OK, so even in this situation, there is no moral obligation to pay any more
than the minimum legally required tax. I fail to see where we disagree.

~~~
jstanley
If you didn't mean to imply that there's a moral obligation to pay the legal
minimum, then we don't disagree :)

------
thrill
There are no such things as tax loopholes. There is compliance with the law as
Congress has written with all of their agendas, and there is noncompliance.

~~~
cantrip
Exactly.

Do you think shareholders would stand for a company paying $19.2B more in
taxes than they should? That would be absurdly negligent on the part of
everyone leading the company.

Would an individual pay $500 more in taxes than they are required to out of
the goodness of their heart and belief in the American government?

Don't indict corporations for following the tax code, change the laws.

~~~
c22
> Would an individual pay $500 more in taxes than they are required to out of
> the goodness of their heart and belief in the American government?

I've done it. I also let the shopkeepers make "mistaken" change when I visited
Nepal. Sometimes I tip $5 even when I buy less than $25 worth of food at a
restaurant. Maybe I'm a moron, but I think of money as a tool and when I can
afford it I am happy to help others accomplish their goals. In the case of
taxes many of the government's goals are aligned with mine so I'm even happier
to contribute.

~~~
papermule
I think disposable income is great! I like having it as much as the next
person, but gosh do I waste it! If I saved all the cash I’ve “donated” in tips
and excessive spending I’m certain I’d have a couple $1000 more in the bank
and would be much closer to building that track car I’ve been fantasising
about.

------
strommen
When this loophole exists, it's tough to blame Google for not taking advantage
of it. You may as well ask them to donate their profits to the federal
government.

~~~
ocdtrekkie
Consider that most of Google's political positions lean liberal, in
subsidizing government services by raising taxes. For this same company to be
participating in a scheme designed to deprive the government tax revenue,
while advocating raising everyone's taxes to pay for things...

Suffice to say, this is not a company "doing the right thing", as their code
of conduct suggests they should.

And bear in mind, this is not a loophole in our tax code, it is a loophole in
international tax handling between multiple countries, and the primary result
of this is that all of those billions get stashed in Bermuda instead of coming
back to the US where it can enrich society.

~~~
burke
Corporations literally have a legal obligation to attempt to pay as little tax
as is legally possible (really, to maximize shareholder value, which might
even mean paying less tax than is legally possible, as long as the expected
value of the gambit is positive).

The issue is not corporations taking advantage of it, the issue is that we
have a system where an actor is obligated to optimize for certain variables
within the rules of a network of systems, but the network of systems is not
coordinated in a way that prevents "abuse" as everyone would like to define
it, but strictly speaking, haven't.

~~~
basseq
Exactly this. The term is "fiduciary responsibility". Their directors could be
sued for paying unnecessary tax, against which "doing the right thing" is not
a legitimate defense. ("Right" in that statement having different moral and
legal meanings.)

Or, put another way, it would have been _illegal_ for them to have _paid_ that
tax.

~~~
crdoconnor
>Exactly this. The term is "fiduciary responsibility". Their directors could
be sued for paying unnecessary tax

Directors have a responsibility to the corporation, they have no fiduciary
responsibility to shareholders.

No shareholder would win a case against a corporation for 'paying too much
tax' any more than they would win a case against a corporation for paying the
directors or the CEO too much money.

This myth needs to die already.

------
NelsonMinar
Related: the new GOP tax bill makes it much cheaper for US companies to bring
that money back in to the country while paying minimal taxes on it. Google's
been playing offshore accounting games for 10+ years waiting for this moment
of tax holiday. [http://www.businessinsider.com/trump-tax-reform-plan-
repatri...](http://www.businessinsider.com/trump-tax-reform-plan-
repatriation-14-us-companies-with-most-cash-overseas-2017-9)

~~~
mywittyname
The problem is companies keep getting these holidays. Investors were starting
to get antsy about having all this cash tied up overseas and were starting to
pressure companies into repatriating the funds.

I suspect that, had Clinton been elected, many of these companies would have
bit the bullet.

------
paulus_magnus2
tl;dr. Being an asshole isn't a crime.

Analogy to put this in perspective: at your daughter' school, there's a
collection for a new electronic whiteboard. Everyone pays their share. Except
due to an old / obscure rule families below poverty line are exempt. One rich
parent figured out how to hide all their income and qualify.

There are different ethical standards for corporations & individuals.
Companies get to navigate these quite cleverly.

~~~
andrewchambers
Your analogy doesn't hold too well. To be more accurate

1\. The collection would have to be a large percentage of all wealth, not a
fixed and small sum.

2\. A caveat being your child might not even use the whiteboard, and not
paying means you get kicked out of school.

3\. By 'hiding', you mean something legal.

------
iaw
Does anyone have more context on why Ireland's loophole will take so long to
close? I suspect they're worried about externalities and retooling costs for
entities obeying the spirit of tax law but it seems like they could put
monetary thresholds that lower yearly rather than an all or nothing in 2020.

e.g. Why not say "new tax code applies to any company doing >$1B worth of
business in 2018, >$500M in 2019, and all companies in 2020?"

Just curious if there's well-thought out reasons that this doesn't work.

~~~
rocqua
This source (in Dutch sadly) [1] might shed some light. In short a `coalition
of the unwilling' consisting of The Netherlands, Ireland, Cyprus, Malta and
Luxemburg are impeding tax reform. In public they talk the good talk. Behind
the sense they stall under the guise 'Need to ensure proper implementation'.

[1] [https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-
dwa...](https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwars-bij-eu-
aanpak-belastingontwijking.html)

~~~
iaw
Thank you! That explains a lot about what's going on.

------
finkin1
"regulatory filings show that Google shielded €15.9 billion (about $19.2
billion) in 2016 using the popular "Dutch Sandwich" tax trick, saving it about
$3.7 billion in taxes."

~~~
baal80spam
Must've been hell of a sandwich.

~~~
joefarish
[https://news.ycombinator.com/item?id=16029384](https://news.ycombinator.com/item?id=16029384)

------
crb002
In Iowa, the City of Waukee was bribed $100m by Apple to abate $170m in
property taxes. Think about that. You pay a $1000 bribe to the city and they
nerf $1700 of your property tax; screwing the local school
district/county/state.

Massive brazen tax fraud.

Apple even bragged about the $100m bribe in their press release calling it an
"endowment fund".

[https://www.apple.com/newsroom/2017/08/apples-next-us-
data-c...](https://www.apple.com/newsroom/2017/08/apples-next-us-data-center-
will-be-built-in-iowa/)

------
pfarnsworth
> Google is "using tax loopholes that obey the letter of the law, but not the
> spirit of it."

Absolute hogwash. So minimizing your taxes is somehow going against the
"spirit" of tax law? What should the spirit of tax law be? Pay as much taxes
as possible?

I would love to see what deductions this blogger takes and see if he complies
with the "spirit" of tax law. Typical socialist/communist viewpoint that
anything that a rich company does is somehow immoral.

~~~
rspeer
> I would love to see what deductions this blogger takes and see if he
> complies with the "spirit" of tax law.

It's likely that he takes exactly one, the standard deduction, as most people
do.

~~~
pfarnsworth
No, since the author is Canadian, not American. He probably is also claiming
business expenses since he's a contractor, not an employee.

------
Pica_soO
The morally reprehensible with this is not a cooperation acting in its own
interest, the moral reprehensible is a cooperation not investing into possible
risky ventures with these gained riches and instead using them to find zero
days in the tax law - and bribing devs to put them there.

Innovation should be the only acceptable tax haven.

------
yuhong
As a side note, I wonder if this is why Eric Schmidt left Google:
[https://citizensagainstmonopoly.org/](https://citizensagainstmonopoly.org/)

------
rdlecler1
I never understood how this isn’t interpreted as tax evasion. The SEC has wide
athority to interpret the intention even if it’s not written in law. I don’t
see how the IRS should be any different.

------
534b44a
They've got the best programmers, the best lawyers and the best accountants
apparently.

------
txsh
Awful headline. There is no "tax loophole" and billions are not being
"sheltered".

------
marknadal
Good for them :).

There seems to be a lot of people in the world who get "enraged" that
companies are greedy (and they are), but never care if governments are greedy.
Why is it okay for governments to be greedy?

------
wdn
This is actually good thing. I don't know about you, I would rather Google
keep more money and invest with it than handed the money to any government.
What would the government do with your money? They most likely wasted it with
0 accountability.

At least when Google failed, they go bully up. When government failed, they
get rewarded with more money and resources.

~~~
ocdtrekkie
Google isn't using or investing this money. They're hiding it in a bank
account in Bermuda. Whereas, if it was brought into the US, it would both get
taxed (with which the government could help pay for things like your
healthcare), but Google could also invest it or spend it here in the US,
improving our economy.

~~~
sbov
IIRC companies with offshore profits in Bermuda invest it in stocks/bonds/etc,
rather than having it sit there and do nothing.

~~~
SamReidHughes
Yeah, they'd lose big time if they let it sit in an account for ten years.

