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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.




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.


Including -- very relevantly for many people here -- huge incentives given to creating wealth via capital gains relative to creating wealth via salaried employment. I mean, memo from Congress to you: if you either a) make a business then sell it or b) invest in a retirement account, we will literally let you keep a few million more of your own money than we would have otherwise.


I mean avoid: employing sophisticated financial and legal engineering to reduce your rate of tax by an order of magnitude.

We all try to avoid paying too much tax, but that's not tax avoidance. Sending your profits to the Bahamas via Holland and Ireland is tax avoidance. I'd be happy to tell everybody and anybody about how I legally reduce my tax bill. Google's PR people would probably rather keep their methods on the down-low, out of the public eye, in spite of their utter legality. So why is that?


Using tax havens is certainly not one of these cases.


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.


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.


Hey, nobody's saying that businesses that don't operate in America and consume American gov't services should pay taxes. Airbus probably doesn't pay much in American taxes, and I'm not upset about it.

But if a corporation has a significant presence here and is consuming an american-educated work force, american highway spending, american police spending, american state dept actions to ensure supply of various things (the oil industry would grind to a halt without the cloak and dagger stuff)..

then they pull an accounting hack and we're supposed to believe 98% of their operation is in the Cayman Islands? We're getting ripped off. You don't like taxes, I get it. How do you like the idea that you're paying higher taxes (or taking on more gov't debt) because other people are bilking the system?


yes 'tax haven' is a slur invented by the high-tax rich countries to belittle their competing nations who have lower tax rates to attract individuals and corporations.

you never hear Singapore, Dubai or Hong Kong being called 'tax havens' (they are), the word is usually associated with 'Dutch Antillies, Bermuda, Jersey, Guernsey' (ie. evil nations who are taking our money)


I guess I'm being downvoted for stating the obvious.


Well, corporations are by their nature sociopathic entities that seek to maximize profit regardless of anything else. That's fine, and I don't think anyone can blame them for taking advantage of loopholes.

The question is, why do the loopholes still exist? Why aren't more people angry about them?

EDIT: Downmodded? Seriously, guys, noncontroversial statement. Go talk to an economist. Or a lawyer. Corporations are legally obligated to be sociopathic and maximize profit above all else. It's a feature, not a bug, invisible hand and all that.


> Is it ethical to avoid paying tax as an individual? Many would say no.

"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 any public duty to pay more than the law demands" — Judge Learned Hand


Ah, you beat me to that quote.

It is not evil to minimize your tax liability within the rules. If Google were spending millions lobbying to decrease their tax liability, then that might be evil. Minimizing your tax liability is perfectly reasonable. Not doing so would be doing a disservice to shareholders, and is arguable more evil.


Is it ethical to avoid paying tax as an individual? Many would say no.

They might say that, but their actions -- buying from duty-free stores, contributing to tax-deferred retirement accounts, filing jointly with a spouse, and claiming every possible deduction -- suggest quite the opposite.

There's a world of difference between illegal tax evasion and legal tax avoidance, and all indications point to what Google is doing as being tax avoidance. How many individuals went to the IRS and said "here's how I'm planning on reducing my income taxes; can you see any problem with this"?


We can argue what is legal or illegal, and whether something that is legal should be illegal etc for ages.

The fact is that they pay 2% tax while most US based persons pay at least 10x that rate.


Actually, if you go read the longer version of the article at http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho... you'll find that Google's overall effective tax rate was 22.2 percent last year. The BusinessWeek version of the article is radically shorter and suffered for those edits, in my opinion.


OK, let's make it clear once and for all:

22.2% - overall effective tax rate in US in 2009 (compared to 27.8% in 2008)

2.4% - average overseas tax rate 2007-2009 (that's what they pay to the Rest of the World, where they earn 88% of profit)


> The fact is that they pay 2% tax while most US based persons pay at least 10x that rate.

And this is Google's fault? If you don't like the outcomes that result from players playing by the rules, perhaps you should direct your ire toward the rulemakers rather than the players.


I don't think I suggested anywhere that it's Google's fault?


I got that implication from your response to cperciva, who was saying, in effect, that Google was acting neither unethically nor illegally.

Pointing out the "unfairness" of their reported tax rate does not directly refute cperciva's comment, but it seemed to stand in opposition to it nonetheless. I inferred that you think Google is at fault, here.


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

I hate that crap. It's possibly the worst thing about our media.

Mountain-top removal by coal mining company devastates 100 SQ mile ecosystem in West Virginia? Doesn't even make the paper.

Al Gore's electricity bill is high? PAGE ONE BABY. Al Gore's electricity bill is approximately 1 / 100,000,000 or so of the problem. But it makes us feel good to give do-gooders their comeuppance. Serves them right, for trying to improve things and making us feel bad that we don't do more ourselves.


"Al Gore's electricity bill is high? PAGE ONE BABY. Al Gore's electricity bill is approximately 1 / 100,000,000 or so of the problem. But it makes us feel good to give do-gooders their comeuppance. Serves them right, for trying to improve things and making us feel bad that we don't do more ourselves."

Al Gore has rallied to get the government to start forcing corporations to use carbon credits and buy them from companies that he is invested in. It's not that he is a "do-gooder", it's that he is an unethical hypocrite. These kinds of people need to be pointed out.


But you're focusing on individuals when, in reality, any one personality is far less harmful than the typical organization.

You could focus on shaming Al Gore into buying solar panels, or you could focus on some $100 billion energy company where you could actually make a measurable difference. It's about priorities.

The media likes personalities because individuals are a lot more salient than statistics, and offending an individual never alienated an advertising customer.


He's fat, too!


Can someone explain why companies should pay taxes at all? Their shareholders should and they do pay taxes according to their income but what's the purpose of an extra taxation to a legal entity?


When the corporate tax rate is low, people have a large incentive to create corporations to shelter their income. This already happens now quite a bit given corporate deductions and the low tax rates on dividends, but if you got rid of corporate taxes altogether, you'd just increase the amount of money that stayed within those little corporations, thus decreasing the total overall tax revenue.


If the money stays in the company forever, why should they be taxed? Imagine a company that makes billions but never distributes income in any form, a 90% shareholder could starve to death. Income should be taxed only when distributed, it's like it doesn't exist if it's not.




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