I don't think there is a justification for big corporations to do what they do and they have to be pursued. I've been working for a bank in a tax haven in Europe and I've seen that financial engineering powerful people use has been a known and accepted tool for the governments for a while, and now that Europe is living a financial crisis governments start asking.
These companies play in an absolutely different league than employees, self employed and small companies in Europe where they make you pay strictly all the taxes to mantain our social structure. They have big teams of lawyers, financial experts and advisors specialized in tax havens just to make grow their revenues in billions avoiding to pay taxes in the countries they have presence.
1. Fiduciary responsibility - Corporations have a financial objective to minimize their tax burden, in order to maximize shareholder value. Sure.
2. Legality. There are numerous loopholes that are technically legal. And it's remarkable how much gray area there is when it comes to tax law. This is why you have the big teams of lawyers to figure out how to best game the system and avoid taxation, while just barely staying on the legal side of the line.
3. Legal Consequences. And if they go to far and get caught breaking the law? No big deal. They can go to court and then settle. Sure, there will be a fine, but they knew that was a risk.
4. Jurisdictions and Multinationals. Countries can only make laws that take effect within their borders. But MNCs operate across multiple countries, and can effectively play jurisdictions off against one another.
5. Spirit of the Law. While lawyers may argue what they're doing is technically legal, it is certainly against the spirit of the law. The law did not intend for corporations to shift all the profits from where they are made to low tax haven jurisdictions.
Governments are trying to address these issues, as corporations will be doing their best to stay one step ahead of the law. This is why the OECD has started the BEPS movement to come up with a coordinated response. One of their initial goals is to create some transparency, so they can at least get some visibility into what's going on. That seems like a good first step.
1. This is why capitalism built on "everything to maximize revenue for shareholders" is broken. Maximize revenue by generating more revenue, not by evading - or avoiding - taxes. If your company cannot remain afloat without dodging taxes, your business is not viable and does not deserve to exist.
2. The fact that you can "game the system" and remain squarely in the "legal" column makes the system broken.
3. Considering that fines are typically a fraction of what they should be, again the system is broken. Consequences should threaten the ability of a company to remain afloat, not be a slap on the wrist that doesn't even dent the bottom line.
4. You perform business in a country? Pay the taxes for all revenue factually originating in that country, not technically based on loopholes. If revenue originates from a customer/client/subsidiary in country X, you pay taxes in country X; you don't get to have customers in country X, but pretend like your business in country Y really took their money. Simple as that.
5. Exactly this. The fact that it is not intended, but is possible, makes the system broken.
Governments need to crack down on this sort of thing - HARD. The laws need to be rewritten from the ground up, but this will never happen because of another ugly facet of capitalism - at least in the US - lobbying. Also, self-interested politicians - how many of the politicians who could rewrite the laws have their own businesses that are avoiding taxes which implies a conflict of interest? Large companies that threaten to abandon doing business because state X or country X makes them pay tax? Farewell, we don't need you. This also applies to incentives, which some states are famous for. Individual states should not be competing for companies' business by reducing taxes or offering reimbursement programs.
Although great in theory how do you collect the pay the taxes for revenues collected in every country? A big business like Google can handle this but a smaller business will be crushed by it. Imagine a 1-2 person. Imagine a 1-2 person business selling online. Are they capable of paying taxes in a hundred countries? That burden alone would crush them. Try managing the tax rules for 100 countries as a 1-2 person shop. Good luck.
Ignoring that who will enforce it? If say a Russian owes taxes to the US how will they get the payment if the person doesn't want to pay?
But even then why should the taxes go to that country? All the infrastructure to allow your business to operate in the first place is in your country. The roads to get your employees to work etc.
That being said if your going to open factories or offices in another country than I believe you should be required to have a corporation in that country and pay taxes in that country for the revenues those entities make. But even that is challenging. It's honestly a very hard issue to resolve...
Also just to add to the complexity what happens for online websites. If you're from Australia and visit Google and the server is in the US and you click on an ad, the a houldnt the revenue, and hence taxes, be paid in the US because the server is located in the US. That's were the revenue was made. Assuming that's true then wherever you host the server is where you should be taxed. And in that case certain countries would be more beneficial to put your hosting servers in.
Basically all I'm saying is that it's not an easy problem and there are no easy and obvious answers :(
I up-voted this because it highlights the legal issue so clearly to any of us techies.
Clearly the tax has to be paid somewhere, and I'll bet every jurisdiction has an argument why theirs is the right place to collect it. No wonder tax or trade treaties take so long to negotiate.
> Try managing the tax rules for 100 countries as a 1-2 person shop. Good luck.
The same justification could be made for accepting international credit card payments online, but companies like Stripe are happy to provide you with a service that takes away the hassle. If they can do that, then I'd say they would be perfectly willing to solve the local tax problem for you.
* You perform business in a country? Pay the taxes for all revenue factually originating in that country, not technically based on loopholes. If revenue originates from a customer/client/subsidiary in country X, you pay taxes in country X; you don't get to have customers in country X, but pretend like your business in country Y really took their money. Simple as that.*
You seem to be wanting a consumption tax rather than an income tax. This is known by economists to be the least distortionary tax, for the exact reason you argue.
It's also highly criticized by left wing types since it taxes people in proportion to the benefit they receive from society rather than what they produce for society. Typically poor people consume more than they produce, while rich people produce more than they consume.
Large companies that threaten to abandon doing business because state X or country X makes them pay tax? Farewell, we don't need you.
Except that very often, we do. Just look at Austin - as a result of their little feud with Uber/Lyft, they are now providing below sub-developing world level services.
1. This "fiduciary responsibility" is trotted out and misunderstood. There's not a requirement to do things that might be harmful for the company. People say this responsibility like it's some law that companies must do any and everything that shows any possibility of short-term profit. But it'd be totally fine for a company to decide to do something else. Justification can be as simple as "This increases trust towards our brand".
But the rest of the points are accurate. They are doing nothing illegal and it's stupid to expect people to pay more tax than they owe. If countries want them to pay more tax, then change the law. It's silly this is even a discussion.
The truly frustrating part to the average taxpayer is the one-sidedness of how the law develops. I have politicians telling me that TTP is vital and needs to pass, so we get strong protections for IP, more revenue for these american companies, blah blah. But when it comes to making laws to tax those same companies, well there's lots of issues, it's very complex, we need to study it for a long while.
It's very clear who lawmakers are looking out for.
> The truly frustrating part to the average taxpayer is the one-sidedness of how the law develops. I have politicians telling me that TTP is vital and needs to pass, so we get strong protections for IP, more revenue for these american companies, blah blah. But when it comes to making laws to tax those same companies, well there's lots of issues, it's very complex, we need to study it for a long while.
Just to clarify, did you mean TPP, TTIP, both, or something else?
Point #1 is silly.... Minimizing your tax burden does not always translate to maximizing shareholder value. Decision makers at corporations can (and should) take everything into account when deciding how to maximize shareholder value; the PR costs of evading taxes, the potential costs of settlements, etc.
I have never heard of a successful shareholder lawsuit over corporate leadership failing their fiduciary responsibility because they didn't find all the loopholes for limiting their tax liability.
26 U.S. Code § 7201 - Attempt to evade or defeat tax:
"Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law"
I have worked at companies performing the "double-irish". True, they aren't prosecuted. But legal? Because a british lawyer says it is? 26 U.S. Code § 7201 is extremely easy to read and meant to be very vague. It isn't complicated. They "could be viewed as" breaking the US law and that is enough for some IRS investigators. Why they don't? <- I feel, it is more profitable to tear apart thousands of small local businesses using algorithms and automated mailing. If there was any kind of left leaning shift in US politics I would assume a few congressional hearings. Sure Google,Facebook,etc got away with many years of tax evasion, but that doesn't mean the governments find it in anyway legal.
I think the taxes Google, Apple, et. al. are avoiding aren't imposed by that U.S. Code. The profits are not earned by U.S. Corporations; they're earned by alien corporations. In order for this regulation to cover these alien corporations, large parts of precedent, legislation, and regulation would have to be repealed/rewritten.
Intuitively, it feels bad. But until the profits actually come back to the U.S., the USG doesn't have much of a case.
I do think that EU countries, the EU parliament, and the European Council have a responsibility to their citizens to close these loopholes. It is not fair for Ireland to have a minor advantage (a few thousand jobs) at the cost of depriving other EU countries of billions of Euros of tax receipts.
"The profits are not earned by U.S. Corporations; they're earned by alien corporations." These alien corporations are then owned by proxy by US corporations, THUS a violation of 26 U.S. Code § 7201. It isn't a "it feels bad" thing, this is just a felony.
No, those shell offices were paid for by stolen american tax money, ran by foreign citizens controlled by proxy, using infrastructure controlled by proxy, producing things for the original company. "Why should that tax revenue instead go to a different country that didn't contribute to it?" Because it is a felony.
The cash used to "build" the offices was already taxed as net income. And what if it's a lease? Fixed cost investments happen all the time.
The employees in the offices are citizens of that country or immigrants approved by the local government of that country. If they are U.S. citizens then they typically pay income tax to the U.S. (depending on the reciprocity).
The infrastructure (roads, water, energy, police & fire protection, healthcare, etc.) being used by those offices and employees were paid for by that country.
Also the citizens in that country are the ones paying for a product or service - so again, why should a different company reap the tax revenue?
The argument that these large corporation's lawyers are putting forward is that the taxes aren't imposed on them by the tax code because the US government only taxes money when it is brought in to the US, and therefore, they aren't evading taxes.
Whether that's true or not is a task for the courts to decide, but considering that there is a long history of the US government not taxing overseas profit until it comes to the USA, I'd say that this is an indicator that the government has, to date, agreed with the corporations on this.
Since these are felony allegations (criminal not civil) IRS investigators should sit a few of these CFOs down in a cement room and ask: "Does any of this money come back to the US?"
Then the CFO has a few options:
1) lie to a federal agent (not a good plan)
2) plead the 5th (not a good plan)
3) state to a federal officer that none of the money is used, transferred, or used to pay employees of said corporation by proxy.
When the funds come back to the U.S., Google is taxed on them. But they haven't returned yet. Have you missed all the news stories talking about how many of these companies keep the funds outside the U.S. for this purpose?
Who cares about the taxes returning to the us? They're making money in foreign territories and should pay tax there. For instance here in nz Google reportedly only pays 200k in tax which is obviously outrageously low.
Yes I am well versed in the new stories. The entire point is to move funds out of the country and avoid taxes. They aren't investing in Spain's tech future. They will use this money (stolen from the US people) illegally to: produce products overseas by proxy, perform HR functions by proxy, marketing by proxy, etc. All these products/services are then sold under the company and for more US profit.
Why are you blaming the companies for acting rationally, rather than the governments for creating absurd tax environments?
I agree it's unfair, but I can't fault anyone for trying to legally minimize their tax burden. Tax law should just be simple enough that anyone can do it themselves.
I'm an energy investor and get to work with tax advisors and lawyers very often in order to maximise tax structures and cash repatriation. Everything we do is approved by tax authorities and positively seen by our shareholders. I agree to a certain extent with you that companies are acting rationally. I can assure you it's my responsibility to make the best use of these tools.
However, the direct and indirect pressure large companies exert on governments to promote/create these loopholes is absurd. I recently went to a latin american country which is promoting foreign investment. Guess what tools they are using to promote such FDI? Correct, tax credits, tax agreements with tax heavens, zero withholding taxes on dividends, etc. I won't go into more detail, but I've seen obscene (but legal) tax structures were little-to-no corporate taxes nor capital gains taxes have been paid in +billion euro transactions.
IMHO, this is unfair to everyday citizens. Citizens end up taking the burden of supporting the govt budget, at the expense of higher tax rates.
Unfortunately in the EU, there is very little interest from countries like The Netherlands, Ireland, and Luxembourg in implementing a common fiscal policy, with no loopholes, as this would considerably damage their "competitive" economies.
That is why many people have often called for tax simplification. The Flat Tax proposal (and for you progressives, yes we can make it progressive but that not the point) is designed to be as simple as possible and to provide few loopholes.
This is not the end all solution but it at least makes everything far, far simpler.
Flat taxes address the wrong problem. It's easy enough for individuals and corporations to look up their tax in a table once gross income (or profit) is determined. The complication is determining what counts as income, and flat tax schemes don't do anything to address that complication, particularly for corporations.
Most corporate tax avoidance strategies take advantage of laws intended to prevent different countries from taxing the same dollar of profit, and those rules will still exist in any reasonable tax structure.
Ok, but that's not tax avoidance because the companies are absolutely following government rules. Given the choice of having billions of dollars of investment in their country and thousands of jobs but no corporate tax; or no investment and no jobs and no tax, those governments are making a rational choice.
The real problem comes when these deals disadvantage local businesses competing with the big foreign conglomerates. But often these deals are really only necessary because the government has set up ridiculously high trade barriers, so the only way to get investment is with ludicrously generous deals. Brazil seems to be a classic example of this. The entire economic system is tangled mess of massive market distortions.
>Ok, but that's not tax avoidance because the companies are absolutely following government rules.
You're mixing up terms here. Tax avoidance is minimizing your tax bill within the law. Tax evasion is what you do when you pay less tax than your legal obligation.
It might be rational to hire a big team of tax lawyers to find loopholes.
It might be rational to launch PR campaigns to misinform the public about your tax affairs.
It might also be rational to hire private investigators to dig up dirt on politicians and blackmail them. Or bribe them, or otherwise corrupt them.
UK tax law is complicated partly because the large accountancy firms have become deeply entwined with the policy making process [1]. This is used as a way to introduce and then milk advantage from the complexity. This goes way beyond just playing the tax game by the rules.
I do think the government has a responsibility for allowing these abuses to occur. That doesn't make the abuses OK though.
Blaming is of limited use. What we need is a solution to make things better. Something like a global tax office to deal with global companies might do it.
You would quite literally see revolt / insurrection in the western world, especially America and other former anglo colonies, at the idea of a One World Tax Authority, which would rightfully be seen as a part of one world government, the so-called New World Order that conservatives have maintain DEFCON1 fear of for decades.
Even if it did exist, if if you had a global tax authority with the weight of a global government to enforce it... that doesn't necessarily solve the problem.
There are plenty of tax havens in American states despite a national legislature that could squash them.
On big reason Americans were unrepresented in the Panama Papers leak is that Americans used on-shored havens. They had far less need of an offshore haven when current corporate tax rules allow you to incorporate and tax dodge in Delaware or another friendly state without leaving the country.
If the US can't or won't control domestic tax havens, I'm not so sure a global government would have better luck.
Plus, one world tax authority means one single target for corruption. The Googles of the world, with literal billions to spend, they'd hyper-focus on corrupting that authority to their desires.
I see your objections. My idea is you could base it in the US possibly or have more than one and have them just work out the global earnings using GAAP and apportion it to the various countries by how much they sell there so you get a earnings figure for each country. The countries could then use that to come up with a tax demand at their chosen rate and the company could either pay up or face sanctions in that country. So it doesn't require anything like a world government, just some accounting and possibly trade agreements.
Seems like a grand solution when we're failing even the lesser and more obvious solution: Don't allow them to ship earnings into havens.
Saying we can tax them globally is like saying we can tax them domestically. We fail on the latter, so i can't imagine we'd succeed on the former.
And while i do agree that blame alone is of little use, blame is often the precursor to action. You have to decide who is at fault and or what to focus fixes on, via blame, before you can actually fix them imo. When i see blame discussions like the above, i just assume (perhaps foolishly) that it's the discussion prior to the fixing stage.
Not that the above discussion will fix anything, of course.. but if we can't decide on what is to blame, how can we decide what is to be fixed?
The trouble with don't allow them to ship earnings to tax havens is saying what a tax haven is. There are plenty of regular countries with low taxes such as Ireland or tax breaks such as the UK for movies or the US for various things.
I don't like that how tax evasion is called "rational" here. They're merely performing their prescribed role within a system, without regard for consequences. If a company were to look at the situation rationally, they might very well conclude that paying taxes is rational because taxes pay for the infrastructure that enables their business.
Which means, and this is a big one, you're going to have to deal with the people who sell influence for favours?
But that is the political class, and they are the ones driving the train for companies to pay more tax. Which doesn't make any sense if all that is truly required is for them to fix their own laws and unethical behaviours. Right?
I can't fault anyone for trying to legally minimize their tax burden.
I think what you're missing is the fact that the Tax Office is pursuing Google for an apparently grounded belief that they were, in fact, acting illegally. (That is, making false representations as to the true functional roles of its local subsidiaries, so as to make its locally-generated revenue appear much smaller than it actually is, per a recent El País article).
Not simply for being "clever" and minimizing their tax burden within established guidelines.
I believe you miss the small detail that "El Pais" and other Spanish newspapers and media are technically bankrupt because of Google.
Google and Facebook grew their profits by advertisements, traditional media (that did not innovate anything) lost all this revenue.
So they(traditional media) are terribly biassed against Google and make everything they can to harm the company. They destroyed Google News for example.
If you don't like what the newspapers are saying -- or are suspecting them of severely distorting and/or outright fabricating the reasons behind the raid conducted earlier today -- I'm sure the Hacienda will be putting out their own press releases soon, if they haven't already.
Why would they? If it is not in their interests ("their interests" as in "in the PR interests of politicians who control what the agency does") and there is no legal requirement to do so?
The parent raises a good point though: Tax law is extremely complex when it doesn't need to be. The only justification for this complexity (that I could come up with) is exactly that it's complex to enable tax evasion/tax burden minimization.
Partly, but partly its just that all regulatory frameworks naturally tend toward complexity.
First, the legislature often decides that raising or lowering specific taxes is a good way to encourage some behavior or other (i.e. mortgage tax deductions or extra taxes on cigarettes). Most of these are actually pretty justifiable individually, but eventually you end up with too many exceptions and special cases for any nonspecialist to keep them all in their head.
Second, there's a huge body of caselaw and regulatory rulings that crop up around the actual tax code. Dozens of courts somewhat haphazardly decide that this weird edge case counts as income, but that weird case doesn't. Again, almost all of these are pretty reasonable taken in isolation, but you end up with a swiss cheese of arbitrary and contradictory rules.
Finally, wealthy entities will inevitably try to game the system. They will try to find a few well-intentioned but poorly thought out edge cases and alter their finances to try and intentionally fit a huge percentage of their income into them. By the time this happens, it's often very difficult to fix without hurting the innocent bystanders that the edge cases were put in place for in the first place.
Wealthy individuals and companies do lobby for favorable tax provisions, and politicians do sometimes pass laws specifically to benefit those entities. But the reality isn't that simple. International tax law is an emergent phenomenon, and it's really only going to bend to systemic incentive changes.
Average voters are too dumb and uneducated to appreciate that complexity or the effects it has. People who do would rather participate in that tax scam.
The reason politics is full of vapid stupidity is that powerful entities want it that way. If the population wasn't distracted by guns, abortion, and gay sex they might actually be paying attention to issues that matter.
Agreed. If we are going to tax corporations then why not a flat tax on the gross revenues. In the U.S a 3% tax rate on gross is the approximate revenue the IRS currently collects. Pass the expense to your customer if you are in a low margin business.
A business can't tell their landlord that they owe no rent because they are "unprofitable" ? Why then do we accept this excuse from the businesses who benefit the most from our public systems.
Because we want to allow specialization to increase efficiency. Rather than the nail company selling its nails to hardware stores and the screw company selling its screws to hardware stores, it's more efficient if they both sell to a supplier that can then sell to stores - it means only O(N) rather than O(N*M) different relationships to maintain, and the nail manufacturer can concentrate on its core competency of making nails rather than having to employ a bunch of people who know how to get their products in stores.
Unethical != Illegal. If acting in an unethical manner causes a company fewer liabilities than acting ethically, which choice do you expect them (an amoral entity) to make? I expect that they'll keep pushing boundaries until it starts costing them.
Not only that, but as a shareholder, if acting "unethically" (for which there's no formal definition, just flimsy human opinions) but legally is in my best interest, I expect them to do it.
We do? Why? Because, by one interpretation, they pay lip service to it by saying "Don't be evil"/"Do the right thing"? I take those as marketing (both to the public and to their employees).
Even if we take their mottos as honest statements of intent, how do you know that their definitions of "evil" and "right" match yours? Or that their definitions won't shift to fit the situation?
> If they are amoral entity, I'm sure they won't care for Spanish government doing unethical but not illegal things to them as well.
Why would that be true? It would be inconsistent for them not to fight for their own self-interest. Also: Governments must be held to higher standards than corporations.
I expect the Spanish government to act (nominally) in the best interests of its citizens. I expect Google to act in its own best interests.
Separation of morality and law is a recent trend. For most of human history, morality was the law. As such, it was a social contract born out of necessity and not some arbitrary installation.
It's fine to take a modern, legalistic, maximize-shareholder-value-or-gtfo approach and eschew the ethics and spirit of law perspective altogether. However, generally it would be irrational for corporation to expect a favourable outcome in a survivalist game on a legal field against the host government. That's why most corporations at least do lip service to ethics, community values, social responsibility and so on. Which leads us to square one.
A government cannot provide its people with justice, human rights and quality of life without money, money that as a society we have chosen to collect through taxes. For better or worse, corporations have chosen (and legally fought for) the right to be treated as persons. That makes them part of the society and obligated to contribute to the society in the same way as every person. When they then dodge paying their fair share of taxes they act unethically and in violation of the needs of society and humanity. This behavior should not be glorified, it should be vilified and punished.
I can definitely fault them for trying to minimize their tax burden. Taxes shouldn't be seen as a burden, they should be seen as an opportunity. A way to contribute to the society that created that opportunity to pay taxes in the first place, since every dollar paid in taxes represents several earned on top of society's foundation.
> A government cannot provide its people with justice, human rights and quality of life
Justice like secret FISA courts and no-due-process restrictions on travel?
Human rights like free speech? Good job Merkle, Ergodan is proud. Due process? Haha. Protection from unreasonable searches and seizures? "Civil asset forfeiture" would like a word.
Quality of life? You mean the thing I get from novel technology, but that is constantly hindered by IP law and overregulation?
> as a society we have chosen to collect through taxes
Huh, I don't remember being privy to that decision... In fact, as best I can tell, most people are compelled to pay taxes by the threat of violence!
>A way to contribute to the society
And a way to contribute to droning of US citizens, and the funding of Israeli weapons programs, and corporate subsidies, and a way to pay for massive surveillance apparatus... Great!
You're right; society created many of the opportunities we have today. The government isn't society.
> Taxes shouldn't be seen as a burden, they should be seen as an opportunity.
What a load of garbage. Taxes are theft at the end of a gun and we have little choice in how they are used. It's downright ignorant to believe that most taxes are used for the betterment of society rather than to line the pockets of select constituencies. Your conflation of "society" with "government" is fictitious.
>Taxes are theft at the end of a gun and we have little choice in how they are used
That's a big reason why democracies became popular (see for example the french revolution, or the boston tea party). A democracy is a system in which the residents of a country (directly or indirectly) decide on matters of government, like which taxes should be collected and how they should be spent.
They are not theft, because a human does not have innate property rights(or any other kinds of rights for that matter). All your rights are provided and guaranteed by the state.
In the western society, people do have rights in fact, even if not granted formally by some government. This is because vast majority of other people respect those rights, without needing government to tell them. For example, most people accept my right to wear red shoes. Nobody really gave me that right; it is obvious. Similarly for the right to private ownership, the right to express myself and the right to move.
State != government. Also try putting brown shirt in Germany on whose shoulder there is red band with white circle. In which circle inside there is black painting in the shape of bent cross ... and we will see exactly what the western government of Germany thinks of your fashion choices and your freedom to express yourself. Hint - your right to move may be somewhat in peril.
By that reasoning, the state does not have an innate right or authority to provide or guarantee human rights.
And really, it's human's that guarantee the state's rights, not the other way around. The state is an abstract concept that exists only because humans gave it that right at some point.
I have to agree with Wyager here. Governments create incredibly challenging tax rules and environments. Those rules are hard to understand and they cripple the growing businesses. The small business just can't compete with the big player in managing their tax affairs. This hurts even more when you know that after all the hard work that you do, your tax money isnt even being spent in the right places. After the UK decided to bomb syria, though i still paid my tax, that became more and more painful. I didnt like what the government was doing with my hard earned money. Syria is just one thing in the line of many. There are so many things the government spends money on and it all comes out of taxpayers pockets. The ordinary citizen -- in reality -- has very little say with what happens to that money. That's why i dont blame people that avoid it. I can understand their reasoning.
I travel the world a lot and wars are the ugliest thing that could happen to a country.
I lived for 6 months in Damascus. It was an incredible city with lots of History. It breaks your heart to remember people younger than you that you know are dead now. The country is devastated and everything stops working.
You go to Servia, normal people could barely survive, long after the war. A few guys made themselves rich at the expense of normal people.
You go to Congo(old Zaire) and experience so much pain over the war there.
In Congo it is about Cobalt and coltan, diamonds, gold.
In Syria it is about strategic position, natural gas.
In Libia it is about energy resources.
A couple of powerful countries decide to plunder weak countries and war is the way they do it. If their leaders are not ok about plundering their own country you just give millions(or billions) of dollars in weapons to the opposition.
Once a war is started, it is like a drug, both sides needs weapons just for survival and they will do anything for getting them, basically selling their country for almost nothing.
A huge business at the expense of entire families dying and loosing everything they have, women being raped and the state collapsing, infrastructures destroyed.
I agree with your sentiment, but ultimately Governments are the ones allowing and enabling it.
If legal, corporations are just doing what is allowed. I hate them for it, but ultimately, i hate that it is allowed. If the law was put into place via illegal bribing/etc, then yes, both parties are to blame. But if it's all above board, then it's entirely on the Government imo.
Take America for example. Lobbying is an utterly disgusting practice in my eyes, yet i can't blame the groups doing the lobbying. I would too if i had the resources. I blame the government for enabling lobbying, and not shutting it down as it stands now.
Corporations have invaded Government, but ultimately the Government is what needs to be fixed to not allow corporations to get away with this.
edit: And of course, you could just continue with the blame train, saying people are to blame, etcetc. I'd agree with you there too. We all need to do something, to fix this damn Government(s).
I agree with your sentiment, but ultimately Governments are the ones allowing and enabling it.
Again, the key focus of the Spanish investigation is not into whether Google rationally took advantage of "loopholes" -- but whether they made false representations as to their business structure and the activities of their local subsidiaries.
See today's El País article for an explanation of the authorities' reasons behind the raid.
This entire (sub)thread was started about how companies shouldn't be the ones blamed because legislators make it sweet for them to do so, why should the legislators bought by the companies foot all of the blame?
Companies lobby governments to create or maintain favorable tax environments, governments look to be friendly to business. Everybody is being rational, so nobody is responsible? Everything is great right?
Your business does not deserve my money, my support, or my respect if you are not proud to pay your fair share for the common resources that are the foundations of its success.
The problem is that thanks to the complexity of the tax systems and the interaction of international tax treaties the tax avoidance/tax evasion boundary is fuzzily defined and at the end of the day only a judge can decide on the legality.
So if a company, instead of staying well within the boundary decides to skirt it (and I'm sure that they take into account the probability of being caught on the wrong side in their minimization process), it is only fair that they get a visit from the tax man.
It's only rational if the damage to reputation and potential legal consequences are less than the savings. The more often stuff like this happens, the less clear that it becomes that using tax havens is a net positive for companies. I agree with your point, though.
I think a point to remember, is that there is profound difference between common law and civil law in that in civil law country the spirit of the law is usually more important than specific wording, and precedents have much less impact.
I think the current chase after big companies is mostly a change in the interpretation of the spirit of the law. One could argue it creates a dangerous climate for business and it's probably right, but at the same time no one ever argued that what those companies did was moral in regard of the law, only that it followed it's wording.
(I personally think our laws should change, but at the same time it's obvious that countries like Ireland, Latvia, Netherlands... Would veto it at the EU level)
Corporations have a fiduciary responsibility to their shareholders to reduce their tax burden to the lowest possible levels. Assuming the tactics they embrace are legal, they are doing exactly what they can and should.
There are legitimate discussions that can be had about the specific strategies that companies should use to maximize shareholder value. For example, paying higher wages might mean better employees and ultimately more profits despite the increased costs. Long-term investments in R&D might result in higher overall value for the company, despite the short-term hit to the balance sheet.
However, I don't think a legitimate argument can be made that companies should pay what amount to optional taxes (taxes they could avoid but don't). Lawmakers are free to change the laws, but large corporations will always pay the minimum allowed by those laws.
That you cannot think of such an argument doesn't mean much. That such possible arguments wouldn't obtain "legitimacy" in your mind explains far more about your conception of the role of business in society. There are no optional taxes—any company that actively seeks ways to avoid taxes is not dealing justly or ethically with the society in which it exists. The same goes for citizens. A healthy and just society cannot exist when its citizens, and their corporations, seek to enjoy all the benefits of citizenship and the services provided, but simultaneously work diligently to avoid upholding their end of the arrangement to support and perpetuate a healthy and just society.
You are free to overpay on your taxes as well. I assume based on your reasoning that you give the government your entire income minus expenses.
Governments have the ability to levy taxes. If they need money they should levy a tax. It's that simple. There is no 'right amount' that a company should be paying that is more than the law requires them to pay.
Except there's a difference between overpaying and short term tax minimisation.
I, for instance, in my country, am relatively conservative on my tax returns. I do not push everything out to the point of maximal complexity & maximal returns.
The reason I do this is twofold. If my accountant makes a mistake or a bad call, I am still personally liable for the tax I didn't pay + penalties, even though I sought and obtained professional advice. I know of cases now where people have received "audit shocks" where it turns out the government disagrees with how far they're pushing things, and now they owe money + penalties. Increase that sting and those penalties and watch the risk/return equation change.
The other two reasons are: I pay to support local community and infrastructure. I don't mind paying a bit extra to support public transport in my area, for instance, so if I can find a way to make targeted contributions (as opposed, say, my money going to a contractor in Iraq), then I'll put a bit more in.
And the third reason I don't pay minimal taxes it's a form of social contract/political insurance. I know that if I'm a total prick, or want to do things in the future, if I haven't paid my share, or if someone wants to audit me and go through my books as a political game or to make a point, I have far more political capital and support from the population of I show I'm a good citizen vs "I basically will fuck you all to the maximum extent and screw you". This also provides me a clean conscience, legitimacy, authenticity, and general good will.
Plus if anyone does audit me, for political reasons or otherwise, maybe I'll get a small refund or ruling in my favour, which, at such times, I could really use...
I would love to give all my income minus expenses. I could easily make it so I have zero after my expenses. But that's not how things work for individuals... and that's a large part of the difference.
>I would love to give all my income minus expenses. I could easily make it so I have zero after my expenses. But that's not how things work for individuals...
Of course that's how it works. There is nothing that stops you from donating extra to the government. If you really wanted to you could easily do it.
No, your comment quite clearly implies that the corporations should not utilize the tax laws to pay the minimum required amount of taxes. You use words like 'avoid' to imply that it's evasion, but it's 'avoiding' in the same way as someone who 'avoids' taxes by taking a deduction for a dependent.
No, you've misread and inserted your own ideas as what I meant. The comment I replied to used 'avoid' in describing 'optional taxes'. I reused the word in disagreeing with the notion there are optional taxes, particularly as these allegedly optional taxes were suggested as taxes a corporation took action specifically to avoid.
[Edit]: Moreover, you still fail to address how I've suggested any notion of right amounts or paying more than the law requires. I have not. Since the comment I replied to used 'avoid', and you think avoid implies evading taxes, then you seem to assert I should understand the GP to be saying optional taxes are those taxes a company can take action to evade. This is even more problematic.
The effort a corporation expends to avoid taxes, such as those under scrutiny in the matter at hand, are not at all homologous to electing to take a dependent exemption for an individual citizen. Reducing one's tax bill via deductions and elected credits is not the same as going to great lengths to create special structures that enable a corporation to avoid tax bills altogether.
> The effort a corporation expends to avoid taxes, such as those under scrutiny in the matter at hand, are not at all homologous to electing to take a dependent exemption for an individual citizen. Reducing one's tax bill via deductions and elected credits is not the same as going to great lengths to create special structures that enable a corporation to avoid tax bills altogether.
You've said it's not the same. How is it different? Both ways of reducing tax burden are things that the laws permit, and that have been established as lawful from much precedent.
What is lawful != what is ethical. Most of my comments in this thread and on this subject engage the ethical responsibilities of citizens and corporations to their societies, and their parts in the establishment and perpetuation of just and healthy societies.
Beyond that, there is quite an orders of magnitude difference between electing to take an individual deduction as a citizen and establishing complicated structural entities specifically to avoid or reduce taxes by increasing the complexity of determining tax obligation. If you do not see these things are different, I doubt I could convince you otherwise.
>If you do not see these things are different, I doubt I could convince you otherwise.
If you can't articulate why they are different, then perhaps the distinction isn't as clear as you seem to think.
Why do you think a person incorporates a small business instead of operating as a sole proprietor? Why do you think small businesses save all kinds of receipts and pay accountants to ensure they are maximizing expenses?
Who says I can't articulate the difference? You seem to be incapable of avoiding jumping to some seriously erroneous conclusions throughout our exchange here. I most certainly can articulate the difference, and have succinctly done so more than once while reiterating what specifically I am targeting with my comments—a target you continue to ignore and brush aside. You seem to want to argue. I see no indication that writing hundreds of more words will move the needle of this discussion. You make assertions and ask questions that are wholly divorced from my point, and seem to somehow entirely miss the point of every statement I've made.
For your edification, I run a business. I do not pursue complicated measures or hire accountants to minimize or avoid taxation, maximize expenses, or anything similar. I practice what I preach, as the saying goes. And such behavior is entirely counter to everything I'm saying is important here.
Drawling on with small examples that seem obvious to you is worthless. It's not articulating anything, it's only proving the point that there is no real distinction other than one method of paying the legally required amount of taxes feeling more icky to you than another.
Is your line in the sand the involvement of accountants or lawyers? Any publicly traded company needs both of those anyway even if they have extremely boring returns. So what is it that draws the line for you?
I'm interested to hear your opinion on this, but you've got to actually explain, not merely state differences and conclusions.
> Who says I can't articulate the difference?
The comments have not included one so far. What you've said is that one thing is not the same as another, but you have not included an explanation of what difference you see there as being, or how that difference leads to one thing being moral and the other immoral.
> What is lawful != what is ethical.
> The effort a corporation expends to avoid taxes, such as those under scrutiny in the matter at hand, are not at all homologous to electing to take a dependent exemption for an individual citizen.
> Reducing one's tax bill via deductions and elected credits is not the same as going to great lengths to create special structures that enable a corporation to avoid tax bills altogether.
You've said they're not the same, but you haven't explained what the differences are, why the differences are significant to this discussion, and how the differences should support your analysis of the morality. Your comments leave it to the reader to infer what the differences are between one thing or another, and draw conclusions from them that support your point.
I read your comments as expressing the point, "These things are not the same, and one of them is immoral, and if you don't agree with me already then I don't see the point of explaining." It's fine if you want to hold that opinion. However, someone wrote a comment disagreeing with that point of view, and you've attempted to rebut it. People write comments on HN because they like to analyze and understand, but your comments don't include more than a pure opinion on your part that one of these behaviors is wrong without saying why. It's not very constructive to share an opinion without being willing to explain why you think it, especially given that you responded to people who sought to discuss it.
I think a strong argument was made against your point. I will restate it: "Governments have the ability to levy taxes. If they need money they should levy a tax. It's that simple. There is no 'right amount' that a company should be paying that is more than the law requires them to pay."
I think that's a pretty good point - don't you? What is your argument for why companies should pay more tax than they're required to pay? You seem to believe that there's some morally correct amount of tax that companies are morally obligated to pay, other than the amount specified by law, but you haven't provided a justification for why that is so, or for determining what that amount is. You have just said that corporate tax avoidance is different (in an unstated way) from individual tax avoidance. Even if we agreed that they're different in many significant ways, the morality or immorality of tax avoidance does not automatically follow from recognition of differences.
You could articulate your point better by starting with, "It's immoral for corporations to seek to lower their tax burden because..." and then follow up by explaining, "It's still moral for individuals and sole proprietors to seek to lower their tax burden because ... " It would illustrate the issue much better to explain what the essential difference is, and why that difference leads to it being immoral. What are the criteria for tax avoidance in an organization or company to be immoral?
You're entitled to your opinion (even if expressed in an insulting way, as you did here), and I'm certain that there are ways for you to maximize your personal tax bill to help satisfy the social responsibility that you feel others have. Lead by doing. However, I don't think you'll find tax maximization strategies in use at any major corporation, now or at any time in the future, and I'd expect shareholder lawsuits if they were ever utilized.
You, like your sibling respondent, appear to be replying to things I have not said. No suggestion was made for maximizing taxes or overpaying.
Also, I didn't express myself in an insulting way. You've edited this comment a few times now, and it's cool to just stick with the actual topic. I made no insults.
"That you cannot think of such an argument doesn't mean much. That such possible arguments wouldn't obtain "legitimacy" in your mind explains far more about your conception of the role of business in society."
Of course there is. I think there is a strong economic consensus that government subsidies can be bad. Your argument essentially invalidates that and supports a world where legal corruption is moral.
>Your argument essentially invalidates that and supports a world where legal corruption is moral.
No it doesn't. It implies that the correct fix is to eliminate tax loopholes, not attempting to guilt a corporation into paying more, which is about as effective as guilting the sun into cooling down.
How does that thinking apply when you consider that companies actively lobby and work to affect the laws?
Are you arguing that companies have a responsibility to change laws to maximize their profits? If a company could get a law passed that let them, say, remove all environmental restrictions, are you arguing that they should do that?
Do their fiduciary responsibilities trump their social ones?
If a company attempts to abolish environmental restrictions, in order to, say, get to sell food with carcinogenic substances, and in that way make more money — then one viewpoint can be, that the company attempts to make money by killing people. I.e. attempted murder.
Therefore the executives and people at the company, responsible for lobbying / bribing politicians, in order to remove all environmental restrictions so that the company can sell poisonous food — they should go to prison.
Right now I think that's what I wish would happen.
Tax evasion (= money "only"), though, is very different from removing environmental restrictions (= killing people).
So lobbying is the equivalent of murder.. but the party accepting the bribe.. that was entrusted to protect you from murderers.. should not go to prison?
Frankly, in this picture you've painted, I'm not sure what the point of this bribe accepting party is. This is like having a body guard that might shoot you if there's a higher bidder. The whole point of the body guard is to protect you from killers, but now he's shopping around for contracts on your head. It's almost like the State having a monopoly on violence is paradoxical to it's alleged end goal.
Should [a lawmaker accepting a bribe / lobbying-money to remove restrictions meant to prevent people from dying] go to prison? In some cases, yes I would probably want that to happen.
Imagine a company and a few lawmakers that via bribes/lobbying remove regulations around asbestos (which is very carcinogenic) and start building houses with asbestos (because asbestos is inexpensive). Now people are going to die in cancer, almost for sure. The company and lawmakers are, in my opinion, killing people to make money. So, they should go to prison.
So I think I want laws that prevent companies _and_ politicians/lawmakers from suggesting-to-remove and removing important environmental restrictions meant to save people's lives.
Perhaps it sounds weird with laws about what regulations/laws might be canceled. Some kind of "meta laws". One way to think about it, could be a defense-in-depth. Now it gets even harder for some evil company, to make money by destroying the environment & hurting people.
I'm not sure all this would work out well in practice though.
You're describing a bodyguard that might kill you if there's a higher bidder. And your solution is to give the bodyguard more power.
Dude. I just want you to consider that your relationship with said bodyguard is abusive and preventing you from thinking straight. And said bodyguard will never care about you more than the money his higher up friends will provide. I know this bodyguard told you a lot of lies, about always being there for you. About protecting and serving. Sorry dude, it's lip service. The bodyguard works for the highest bidder and the highest bidder isn't you or me.
The solution?? Higher a real god damn bodyguard! One with a collateralized contract and reliable arbitrator of your mutual choosing. Turns out social contracts aren't worth the imaginary paper they're written on.
Actually there is a misunderstanding. I didn't write about everything — I had in mind carcinogenic stuff, dangerous enough to make people sick and kill some (in a large population). So when you write "such a broad category" and you have in mind literally everything — then that's not what I meant.
Yes, but your definition for "carcinogenic stuff" most likely would be interpreted by activists to include e.g. glyphosate - which is now classified as "category 2A possibly causes cancer" and is getting a lot of attention. In reality, category 2A also includes manufacture of art glassware, hairdressers, and shift work, and the more dangerous category 1 includes e.g. beer.
Still you can bet the activists would use our murder charge approach to attack glyphosate manufacturers, not beer manufacturers.
Interesting, didn't know beer is carcinogenic. Googled about that — apparently, although alcohol it's carcinogenic, drinking a little bit, reduces the risk for cancer (and heart attacks).
Actually personally I didn't have in mind the possibly causes cancer category. I had in mind more obviously dangerous things like asbestos, and something that was in heavy use in Europe like 30? 50? years ago but then got forbidden because it resulted in severe birth defects. [Edit: I think it's called Thalidomide, was sold as a drug named Contergan]
Some activists do "attack" beer manufacturers :-) (I found out when googling for "beer carcinogens"). And this particular beer manufacturer did apparently listen to what people said, and removed some carcinogenic caramel coloring from a beer. http://organics.org/8-beers-that-you-should-stop-drinking-im...
For-profit corporations are not formed to serve the public good. They are formed to make money for their shareholders. They can and should always act in their own interest.
Lawmakers exist specifically to serve the public good. If they are allowing lobbyists to affect this responsibility, then they should be voted out of office.
So yes, corporations that can afford to do so have a responsibility to try to get laws passed that favor them, and elected lawmakers have a responsibility to the public to ensure the laws that they pass are in the public interest.
Doesn't matter -- when the principals signed documents agreeing to incorporate, they simultaneously agreed to abide by the what the law says in regard to paying taxes due as the law requires. If they thought these laws were "unethical"... well, that was their chance to make a principled stand against them.
Okay fair point. Though I don't necessarily see the correlation to taxation. I assume what perhaps is being implied is that the money from taxation can be used for ethical or unethical practices (as oldmanjay points out). Yet that analogy skips how tax is only possible with profit, not to mention the fundamental issue of whether or not taxation of profit is ethical in the first place.
Well, your original question was in response to an assertion that a corporation has an ethical responsibility to its society. You asked what if the taxes are unethical, which strikes me as a bit silly at best. I only offered a suggestion to your second question of why certain profits would be considered unethical. The matter of the choices made by leaders who spend tax revenue is independent of levying, paying, and collecting taxes.
If you have an argument that describes how taxing profits is unethical in contemporary society, as they are legislated by elected representatives, I'm sure there are others beside me who'd love to read it.
There are many ways a tax can be unethical. It may finance torture, invasion, and fomenting coups in undeveloped nations that lead to widespread suffering. For example.
Sure it is. Taxes can be levied for very specific purposes. Even ignoring that category of taxes, if you find that a whole country is operating immorally, then funding that company is immoral.
To reply to a comment I can't reply to:
spdy 7 minutes ago
But this is not the context we are talking about here. Spain is part of the EU and the so called "1st" world.
I'm not sure if you're being tongue in cheek or not, but the 1st world may have less repression and human rights violations but it doesn't have none. And member states have invaded other countries in recent memory, have been involved in torture, institutional racism, etc.
You can't willingly start a business in a country that finances torture and invasion, make yourself money, and then turn around and say you won't pay tax because the country is unethical. That will be hypocrisy of highest magnitude.
Taxation without representation has not been an issue in America since 1776. Unless you're referring to multinationals lacking direct representation in foreign legislatures. At which point, it's fair to both consider that as a reasonable consequence of choosing to engage in business in other national jurisdictions, and to admit they undoubtedly have indirect representation.
Don't blame the companies. Blame the politicians that make the laws.
Another example of this stupidity by governments is making gambling illegal due to "morals", and then hosting a government-run lottery. Clearly their motives are not morals, but money.
Get involved with politics and get the laws changed. In so many of these cases, the laws are so poorly written that you could drive a truck through them.
I'll bet the anything Google did wrong here (legally) is minor at the most. Check back in a year and down-vote me if I'm wrong.
Government makes tax laws. Those laws are tested in court. Government tax departments tend not to prosecute for non-payment of tax unless it's a flagrant example of tax evasion, because court cases are complex and expensive. Prosecuting Google would take many years and be very expensive.
When a bunch of companies start misusing tax laws the tax authorities will tell them that it's wrong, announce how they'll regulate that bit of tax law in future, and reclaim a bit of unpaid tax. The companies can challenge it in court if they wish.
Non-payment of tax exists on a scale, with normal and expected tax planning at one end, probably legal (the accountants and lawyers claim it is) tax avoidance through to outright tax evasion.
Google uses Bermuda (a British overseas territory) to avoid tax liability in the EU
“Google has paid €8.8 billion in fees to Bermuda,” S&D group MEP Peter Simon complained. [1]
The irony being that the current president of the European Commission, Jean-Claude Juncker, was Prime Minister of Luxembourg when his administration was organising the low tax environment. [2] [3]
And now the EU claims that "the Anti Tax Avoidance Package is part of the Commission's ambitious agenda for fairer, simpler and more effective corporate taxation in the EU." [4]
How can this still be possible? Shouldn't all tax legislation be such that if you break the spirit of it by having internal transfers (royalties, fees, interest) to a low-tax area, then you are still taxed based on the business that you had in the country in question, and not based on the net sum (i.e. zero).
The current state of tax law is that a billion dollar company pays almost no taxes but a million dollar company pays a lot. That can't be good for anyone (apart from the $1B company).
Are countries, simply put, afraid to put an end to tax schemes like this, because it would just mean that Ikea or Google would pack up and leave?
"Are countries, simply put, afraid to put an end to tax schemes like this, because it would just mean that Ikea or Google would pack up and leave?"
In an "odd" application of market-competition, that is precisely what happened. Countries where Google generally did business wanted to tax Google at some X. Then along came Ireland, or Google found Ireland, and saw that they could do some legal paperwork and pay Ireland's tax rate of X-Y instead of X in the "source" countries.
The point I'm making is that Google did pack up and leave, and it will happen again unless really drastic actions are taken against them. I don't think anyone wants to do that, at this point.
You either bully all countries from allowing loop holes such as this, even though they don't want to. Or you disallow Google from operating in your country if they don't pay taxes on the profit from "sales" you deem occurred in your country. Small countries that want/need that tax revenue from Google, even if it is X-Y, won't like it if you compel them into complying and causing Google to "pack up and leave". It also puts the "bullying" nature of whatever international body is tasked with enforcing this into light.
> The point I'm making is that Google did pack up and leave
No they did not. There is a Google Spain and a Google France. They can't escape the Spanish law or the french law if they have an office in these countries, no matter where Google trully is incorporated, and there is an obvious reason why they have officies in these countries.
So what Google Spain and Google France do is that they pay huge fees to Google Ireland for the use of Google brand, so they never make a profit officially, then the money is ex filtrated from Google Ireland to tax havens.
Google Search and Adwords are not developed in Spain or France. In effect these subsidiaries are just local distributors for a US product.
If Apple sells an iPhone (developed in the US and built in China) to retailers in Paris, should they have to pay French income tax on the entire profit of the phone? Of course not, that's ridiculous, even if the retailer is an Apple subsidiary.
This is utter nonsense. The problem is US tax repatriation laws introduced during the Clinton administration that allow US companies to leave their profits offshore in countries such as Bermuda or the Cayman Islands. Since they are only taxable on repatriation to the US, they pay no tax on them. Instead, they pressure Congress to introduce 'one-off' tax amnesties that allow them to repatriate at a much lower rate. This problem could be solved tomorrow if US politicians rescinded those tax laws. Ireland has no legal right to tax those profits, since they are earned by parent US company e.g. Google US. Which is perfectly correct, since the foundation of most of those profits are the intellectual property created primarily by the parent company. Don't let US politicians pull the wool over your eyes that this is a problem over which they have no control. In case you're interested, here's a good article that gives more background: http://www.rollingstone.com/politics/news/the-biggest-tax-sc...
And if they paid that tax in the US (which would then allow the US rate to be lower for the same revenue), how would that help Spain and France? The US would just be what Ireland currently is.
> (which would then allow the US rate to be lower for the same revenue)
While I'm sure it can be minimized, the US doesn't have a particularly low corporate income tax rate.
> And if they paid that tax in the US [...] how would that help Spain and France?
Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acquire their European competition. We're essentially in a trade war, just that Europe hasn't realized it.
Exactly! Basically US companies have a massive tax advantage over local competitors in other countries. Every time you see another local bookshop closing down because it can't compete with Amazon's 'economies of scale', you should realise in fact a large part of its advantages are due to US tax repatriation laws.
> Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acquire their European competition. We're essentially in a trade war, just that Europe hasn't realized it.
Except that "US companies" incorporated in Ireland aren't US companies. Can't European companies also incorporate in Ireland?
Yes but the point is that if their main HQ is in another European country they can't avail of the repatriation laws unless that country has similar laws. Of course many EU countries have lower corporate tax levels than the headline US tax rate, but not all. I'm more concerned though about the race to the bottom in terms of corporate taxation than any EU/US competition. Interesting discussion, thanks.
No, because Google isn't paying the Irish corporate tax but instead moving the money to a second Irish company (hence the double Irish) based in the Bahamas. A European company with a subsidiary based in the Bahamas would trigger anti-avoidance laws, which a US company won't (until they bring the money back into the US) because of a loophole in the US anti-avoidance laws.
I think you misunderstand. The whole premise here is that none of the principals care where you're incorporated.
A company whose primary employees are in Europe and whose primary customers are in Europe can still be incorporated in Delaware and traded on the NYSE. These tax avoidance mechanisms aren't for "US companies," they only work if you're in practice an international company. A "European company" which is also in practice an international company could do the same by becoming nominally a "US company" without changing anything of consequence about their operations. Because international companies don't really care where they're incorporated.
The trade war isn't between US companies and European companies, it's between companies big enough to be "international" and everybody else.
Seems like a reasonable thing to decide at international level. We have already more or less forced (or come to an agreement with) Switzerland to not hide "dark money".
Getting some stronger wording in the tax legislation on EU level should be doable, but of course the Netherlands would squirm a bit.
> How can this still be possible? Shouldn't all tax legislation be such that if you break the spirit of it by having internal transfers (royalties, fees, interest) to a low-tax area, then you are still taxed based on the business that you had in the country in question, and based on the net sum (i.e. zero).
How would that even work? The costs are actually costs.
Imagine it was actually a dozen different companies. One of them is in California and it develops software on contract, one is in Germany and it develops hardware on contract, one is in China and it manufactures hardware on contract, one is in Ireland and it has the original capital which it pays to the first three in exchange for copyrights, hardware designs and hardware, one is in Spain and it buys product/services from the Irish company and sells local advertising, etc.
It turns out the company with that owns the copyrights makes the most money. That's how it honestly works whether the companies are separate or not. If you made the Spanish company liable for taxes on the profits of the whole supply chain, every company in Spain that uses Google ads would owe taxes on the money paid to Google (and the same for anything they buy from anyone). In other words you would have enacted a sales tax. Which is fine, but isn't an income tax and isn't a tax on Google.
What you seem to want to do is to identify that the companies are actually owned by the same party and do something different in that case. But five seconds after you require that, they would separate. Specifically the company that exists in a jurisdiction that cares about that would become independent. You don't need to own the stock of a company to capture all of its profits when you're its only viable supplier. So now there is an independent contractor in Spain that pays Google Ireland for ad space and resells it for just enough money to pay its own bills and makes no profits.
The problem is fundamentally that income tax makes no sense across borders. People will move whatever it is you're taxing into the country with the lowest taxes if the cost of moving that thing is less than the cost of the taxes. The cost of moving profits is very small. You have to tax something which is harder to move, which is then no longer an income tax.
> Which is fine, but isn't an income tax and isn't a tax on Google.
It kind of is, though, isn't it? The online ad market is theoretically super efficient - if the market clearing price for an ad is $1, and then you add a 10% sales tax, it no longer makes sense to bid / pay $1 for that ad, knowing that you will be out of pocket $1.10. Instead you would bid about 90-91 cents, knowing that it would get marked up to $1 with tax. Net effect is that Google only makes 90 cents on that ad instead of a dollar, even though they aren't directly paying the tax.
> It kind of is, though, isn't it? The online ad market is theoretically super efficient - if the market clearing price for an ad is $1, and then you add a 10% sales tax, it no longer makes sense to bid / pay $1 for that ad, knowing that you will be out of pocket $1.10. Instead you would bid about 90-91 cents, knowing that it would get marked up to $1 with tax. Net effect is that Google only makes 90 cents on that ad instead of a dollar, even though they aren't directly paying the tax.
Not if you have to bid against people in other jurisdictions for the same ad spaces. Then the people in the taxing jurisdiction have to bid the market price or lose the auction to someone in another place that doesn't impose the tax. In theory this could have a negative impact on ad prices, but it isn't going to be anything like the entire amount of the tax.
Is there a reason that tax couldn't be imposed on the buyer, collected by Google at time of "sale" (click through by customer on ad), and remitted to the government, regardless of buyer origin? In other words, if I live in Montana (no sales tax) and I pay Google to display ads in Spain, I don't see a good reason to not have to pay Spain's "sales tax" (or whatever we're calling it) on those ads. I don't see why it should matter where the ad buyer lives, or where the ad clicker lives. I'm paying an entity in Spain, therefore the entity in Spain is taxed (and that higher cost ultimately flows back to me, the buyer). Or am I not really paying the Spanish entity when I buy those ads?
> Or am I not really paying the Spanish entity when I buy those ads?
I'm pretty sure you pay the entity in the country that you are located in, so the Montana rancher is paying Google USA. Basically, you need a corporate presence in most places in order to _sell_ to people in those places. People in Spain pay Google Spain to place ads _as far as I understand it_—I'm not an expert on EU tax regulations.
You forget that european VAT is cancelled with businesses upstream, that is, you can deduct the VAT charged to consumers with the VAT of your purchases so you only owe the net amount. Also there is no unified european tax rate, there are some tax havens inside the EU.
However, Google does not make very much purchases in EU, so there is not so much VAT to deduct, which means that much of the VAT is "real" tax revenue, not just a flow-through amount. This is simply because Google doesn't have a substantial part of its real operations in EU; it has sales offices, and in some countries it has data centers, but these are not such a big cost that the VAT would factor in by too much.
The actual value of Google is in its business concept, IPR and brand name, none of which are substantially developed in Europe.
> Google does not make very much purchases in EU, so there is not so much VAT to deduct
I was arguing about the scheme that AnthonyMouse discussed. Also they can't recover all the other taxes "owed" to Spain by means of VAT.
AnthonyMouse > So now there is an independent contractor in Spain that pays Google Ireland for ad space and resells it for just enough money to pay its own bills and makes no profits.
If the VAT rate in Spain were higher than in Ireland the difference would stay in Spain. In that case marginal increse in the VAT rate would increase tax revenues, whereas and increase in income tax would not.
But right now VAT is higher in Ireland(23%) than in Spain(21%) and increasing the VAT rate can have sideffects on the economy as a whole.
> How would that even work? The costs are actually costs.
I'm not sure how it would work. Corporate income taxes don't make much sense in itself of course. The profits could be taxed as cap gains and everyone would be happy - so long as companies weren't multinational.
The problem here is that a company may be making a huge profit in some country by using resources paid for by tax money in that country (such as roads, in the case of Uber) but due to licensing and the ownership structure, the company does little income in the country and no cap gains either because the owners are elsewhere.
The only solution to this problem if you do have corporate income tax is to establish how much profits Uber actually made in each country, and have the profits taxed correspondingly.
> The only solution to this problem if you do have corporate income tax is to establish how much profits Uber actually made in each country, and have the profits taxed correspondingly.
The problem is that's not how profit works. There is no "in each country" to calculate. They paid $15B to employees in 20 countries and then made $20B in revenue from 20 countries. There is then $5B of international profit, but how much of the profit belongs in each country is completely arbitrary. There is no objective reason that it should be where the software was developed vs. where the software is used vs. where the owner of the company lives etc.
The standard they try to use for these things is what would be negotiated in arms length transactions, i.e. as if each of the subsidiaries had separate ownership. So one entity pays $1000 to develop software, another can make $1200 in revenue if they buy the software, what price do they negotiate? It's ostensibly going to be something between $1000 and $1200, but whether it's $1020 or $1180 is down to the negotiating skill of the parties. Both numbers are completely reasonable and might be seen in actual transactions. But the difference determines where 90% of the total profits go! It's clearly then going to be quite plausible to arrange for the profits to end up where you want them, which is what happens.
Thats my point - now it's arbitrary and decided by the company who can setup whatever scheme necessary to transfer profits to where they are least taxed. Making it arbitrary for some companies how much taxes to pay in a country obviously isn't a good thing.
Maybe what it all comes down to is that it makes more sense to tax transactions and charge corporations for services (e.g use of roads) that are tax funded.
To avoid doubly charging companies that do pay taxes for profits one could charge fees for use of infrastructure and count taxes collected against those fees.
Companies like Google and Uber that use public infrastructure could be charged for it, and unless they paid enough taxes they'd owe the difference.
How much of the internet infrastructure Google should finance, or how much the cost of Ubers road use is will be somewhat arbitrary of course, just like the current situation - which is the lesser evil comes down to whether one is more comfortable leaving arbitrary decisions for tax authority bureaucrats or enterprises.
Charging for infrastructure is a bad idea. You pay the cost of building the infrastructure whether you use it or not and the cost of the marginal car or the marginal data packet is near-zero.
The whole problem with taxes is that you want tax revenue but you don't actually want to tax anything because taxing things causes people to avoid doing them. That's why everybody wants corporate income tax -- who cares if we discourage "corporate profits"? The problem is what you really end up doing is discouraging corporate profits in your country, so the profits end up somewhere else instead.
The best possible tax seems to be to impose VAT on everything, so that the rate stays low because there is a broad tax base and you're not discouraging anything in particular very much.
Fees for infrastructure are the opposite of that. A 20% VAT makes the thing 20% more expensive, which isn't that bad. An infrastructure fee for what would otherwise have been zero cost makes the thing infinity percent more expensive. It's basically the worst case scenario.
So for example a high tax on network usage is basically going to kill YouTube (and every other streaming video service) because the amount of bandwidth it uses for the amount of revenue it generates would no longer be worth it. Then your total network usage has been cut by 80% which means you need to quintuple the fee to make the amount of revenue you were expecting and it quickly snowballs from there.
I think you're on the correct track, but a concept that I saw and loved from one of the many earlier tax related discussions offers a more clear solution.
Tax ownership of assets.
It's rather difficult to hide that /someone/ owns a phone, a car, a house, some land. Tax the ownership of value, not it's transfer.
Globally you would see the impact of sales increase taxes most where the profit actually accumulates; assuming that those types of values are taxed properly. In practice I would imagine that this would be increasing taxes on ownership of 'financial instruments'.
Except that's what happens now. Uber UK pays Uber Luxembourg $1b to use the Uber brand. Lux pay 1% tax, shift it to Uber Bermuda who then hoarde it & wait for us tax amnesty
I'm making this example up but it's the general process of Transfer Pricing. Tax authorities now make you justify the prices which is why Google negotiated a settlement with UK Chancellor George Osborne, his superbowl seats and job for his son were just coincidences.
Just yesterday they put a whistleblower which published such tax evasion schemes in connection with Luxembourg into prison (LuxLeaks). They ruled that illegal state aid, because the Luxembourg tax authorities actively helped the companies setting up this scheme.
The then prime minister and ex-finance minister of Luxembourg Jean-Claude Juncker is now EU Commision president. So either he is incompetent and did not know about this, or he was involved. He claims he is only incompetent.
With the EU leadership being corrupt or incometent, it is no wonder the big companies are dancing circles around the national tax authorities.
> With the EU leadership being corrupt or incometent, it is no wonder the big companies are dancing circles around the national tax authorities.
Well, it’s more like the EU can not do anything while the national authorities can veto them, and the national authorities still have the competence for that, and the right-populists in the EU are proposing even less power for the EU authorities.
Yes, indeed. And now Juncker is trying to pass CETA without national parliaments and that is currently backfiring, too.
There was this moment during the crisis where I think we could have moved forward with EU bonds, a proper banking union, increased EU budged and debt relief for Greece. But now we are stuck with a deteriorating status quo.
I blame Merkel for lack of leadership but maybe she just knows the limits of what she can push through.
There's also the huge "problem" that the countries in the EU want to maintain sovereignty. France and Spain can't really stop Ireland from doing whatever the hell it wants without giving up some of their own sovereignty.
In the United States, one of the biggest powers of the Federal government is its power to regulate interstate commerce. No one in the EU is willing to give it so much authority.
> In the United States, one of the biggest powers of the Federal government is its power to regulate interstate commerce. No one in the EU is willing to give it so much authority.
To be fair, if the US is the model, you can imagine why they wouldn't want that. I don't think the people who wrote the commerce clause were imagining federal micromanagement of local schools or the War on Drugs.
A royalty, by default, is still payment for something. Take two identical cars, one with the Audi brand, and one without. What's the brand value now then? You should be able to deduct a part of your profit if said IP is held in a lower tax jurisdiction, which will almost always be the case, since multinationals have bases in many different countries.
Exactly the same man makes speeches that these agreements are bad. And that tax ways needs to be public.
I only have german articles but this guy is really really akward.
Other career politicians you should know: David Cameron, Boris Johnson, Hillary Clinton, Barack Obama, Angela Merkel, etc.
They do not have much of an own opinion they want to push – often they couldn’t care much, as both solutions would be okay for them.
So they vote for whatever polls or lobbies say is popular or profitable.
This isn’t necessarily bad – Merkel has been called at times the "walking infratest-dimap poll", specifically because she always pushed through whatever the people considered important according to polls. Kinda democracy, I guess.
But, in general, it’s nothing awkward, or special – in fact, it’s the way most of politics has been in the past decades.
And considering the alternatives of politicians that are still idealistic, which at the moment are only right-populists like Trump, Farage, Petry, Le Pen, I’m wondering if, for now, career politicians might not be the better solution.
So basically Google inc (in a tax haven) makes Google Spain pay for the use of the Google brand 8 billions. Google Spain never makes a profit since it needs to pay a fee for using the brand, thus never have to pay taxes on their huge profit, that's how they get away with it. Apple does it too, with Apple Ireland in Europe.
Then Google US and Apple US just have to wait for a tax amnesty in the US in order to bring back oversea un-taxed profits.
They most likely would be less taxed than un-taxed. My old boss used to say 'if you went looking and paid every tax you found that you might owe no one would be in business'. Of course there should be some middle ground.
>So basically Google inc (in a tax haven) makes Google Spain pay for the use of the Google brand 8 billions. Google Spain never makes a profit since it needs to pay a fee for using the brand, thus never have to pay taxes on their huge profit, that's how they get away with it.
I've seen you post this several times. Do you have a source that I could read up on this?
Typically the firm creates a subsidiary that holds its intellectual property like patents, software and trademarks in a tax haven like Bermuda. Since there is no operations or R&D in those locations they may have little or no employees.
The subsidiaries in the high tax jurisdictions then license the IP from the Bermuda entity which siphons off profits.
Without the IP cross licensing deals the French subsidiary would have access to Google's IP at no cost which would inflate their profits enormously. To offset this Google would need to build R&D centers in each market.
While either scenario would likely benefit France it wouldn't likely be beneficial to Google.
But how does not licensing IP make sense? That creates a whole set of new problems, i.e. why should affiliated parties allow IP to be licensed for free, where the same expenses would be tax deductible for unaffiliated parties?
It makes sense to license the IP. Pushing the IP fees to the point that the subsidiary doesn't make money, not so much.
Likewise, it makes sense to loan money to your subsidiaries so they can grow. But making large, unnecessary loans of money from tax havens to sink your subsidiary's profitability doesn't sound honest.
You've actually hit on the basic 'integrity rule' for these kinds of arrangements (at least in Australia): foreign related entities must charge on-shore related entities using 'arms-length' pricing (the 'transfer pricing' rule). Same goes for the interest rates on loans made by foreign related entities, because the interest is deductible against gross profits (the 'thin capitalisation' rule). I've simplified somewhat, but this is the basic thrust of the law.
Companies will end up in court when their definition of an arms-length price/interest rate is significantly higher than what the national tax authority considers to be reasonable. However, having worked in the offshore tax-haven unit in the Australia Taxation Office (I even went on a tax raid once), and then subsequently worked in tax policy for a few years, I don't think things clear cut with google (and others). I'm not even sure that transfer pricing and thin cap are particularly relevant issues.
In general, I think this issue is much bigger than a simple case of companies crossing the line on transfer pricing and thin cap rules. 'Tech capital' is extremely mobile; it can literally be moved from one country to another in a matter of hours. This creates strong incentives for countries to undercut each others' corporate tax rates to attract that capital. Tax havens (and Ireland) are extreme examples of this. The only way to extract any meaningful amount of tax from tech multinationals is through some kind of international agreement on minimum corporate tax rates (one that is ratified by countries representing a large enough proportion of the world economy). You'd also have to apply trade sanctions to any country, signatory or not, that goes below this minimum threshold.
In short, it's unlikely google and others will have to pay their 'fair share' of tax any time soon. This might sound defeatist, but I think countries will need to shift their tax burden on to less mobile (and therefore, more economically efficient) bases, such as domestic consumption and land.
Even minimum corporate taxes wouldn't work, no? You'd also need to make sure there is no way to artificially extract these profits by imposing withholding taxes on most transactions inside a specific economic system (i.e. the EU). This seems almost impossible to do.
> Companies will end up in court when their definition of an arms-length price/interest rate is significantly higher than what the national tax authority considers to be reasonable.
A second issue I see is that smaller countries will often see certain transactions as "at arms length", whereas larger ones (with higher corporate tax rates) will not. But if a multinational can produce valid evidence from, let's say, 3 different jurisdictions that a transaction is at arms length, this will often be accepted by the court as being at arms length. In most countries, the burden is on the tax authority to prove something is not at arms length.
So yes, countries are often screwing each other over. Add to that that each country wants to stop avoidance (loss of tax revenue), and at the same time attract investment (by granting fiscal deduction for special interest groups) and you end up with a big mess.
This whole tax game is essentially basic arbitrage within a complex framework.
Please post some analysis on the main thread; there is a lot of confusion regarding IP licensing and tax avoidance. It would be good to have an expert opinion promoted to the top comment.
"the background of all these investigations are the lack of tax harmonization in the EU and tax strategy of the company, like others such as Apple or Twitter, for example. Sales declaring these firms in each country are unrelated to their actual billing. Subsidiaries in Spain-and other European countries act as agents of another parent company based in countries with lower tax burdens as Holland or Ireland. National subsidiaries taxed only by the minimum commissions they receive from their Dutch or Irish matrix, most of the turnover recorded paying minimum tax rates."
I would expect google to keep all financial documents inside Google Drive. In doing so, I wonder what is left in the office for the Spanish authorities to find in a raid? (Google is ruthlessly paperless internally.)
Spain, and other Euro countries, have "paper" laws. Everything needs to be printed out and stored to make raids like these easier on the government. It also keeps their tax authority from ever having to worry about modernizing and, frankly, makes it easier for the government to manufacture "irregularities."
I think the financial crisis in some of these EU countries have reached a point where they are politically paralyzed (can't move to the right due to strong leftism in the electorate) so they'll just find a way to milk multi-nationals to keep the lights on. This isn't a long term strategy and is a sign of some bad stuff coming up. I believe in the long run the welfare state is unaffordable and without a move to the right these countries will suffer, especially as business moves to more tax friendly jurisdictions and leaves these markets over government abuse, low sales, low margins, etc.
Currently, Spain has 25% unemployment and almost 50% for those under 25. The GDP is falling at the same rate it is for France and Italy. The sudden interest in these countries to raid multi-nationals for tax reasons is no coincidence here. France just raided Google's office last month. I suspect Italy is next.
You are presenting a completely biased and anti-european view, looking at multinationals with the most rose tinted glasses.
Google, like many other multinationals pay absolutely minuscule taxes. They have eradicated large parts of national advertisement companies across Europe, who all have to pay normal tax rates, while Google pays close to zero.
You are not a leftwing nutjob just because you want companies to pay taxes for the money they earn in your country. A free market relies on a level playingfield and when multinationals can exploit loopsholes in this manner it distorts the competition.
I am not sure why you single out Euro countries as not interested in modernizing. I can't speak for other European countries but I can speak for Norway where I am from and our taxation system is decades ahead of archaic mess found in the US e.g. The fact that a large part of the American population have to pay professionals to fill out their taxes says something about the complexity and backwardness of the system.
> You are not a leftwing nutjob just because you want companies to pay taxes for the money they earn in your country. A free market relies on a level playingfield and when multinationals can exploit loopsholes in this manner it distorts the competition.
How would you decide what money they earn in your country? It's a tricky question for multinationals.
It is indeed, and the recent spat of seemingly-illogical laws commonly known as "vat-mess" is the first step in trying to clarify that.
The internet is a real mess for anything that has to do with jurisdiction, which is the underpinning of taxation. Free flow of capital could be acceptable when goods were eventually involved, since their physical presence decided jurisdiction; as goods become similarly immaterial, new parameters are required. The current "equilibrium" is anything but.
AFAIK Google pays the same VAT as everyone else, which is the bulk of collected tax (particularly when you consider that if Google has no significant operations in the country, it has no VAT payments to deduct).
Google (and other on-line operators) have taken market from national advertisement companies because they are much more efficient and offer more value, not because of taxes.
Not sure why you're being downvoted. I'm French and totally agree with your views except maybe that right wings here are just as leftist economically so I'm very pessimistic for the future.
Milking the multinationals is too bold a statement.
Consider that Europe has had austerity in several countries. The average person was told that they needed to suffer fiscally for a few years (in terms of social services being trimmed and taxes not going down, sometimes going up) in order to redress spending imbalances and show the bond markets that things are under control. Meanwhile, we learn that the very largest, cash-rich, profitable companies in the world are paying little tax compared to other companies and small businesses, all because of special tax treatment in some countries. Is it any surprise that politicians have to act on that? This is the connection.
And someone below said that the HN forum is far left. That's a little rich, pun intended, given that many of the people who contribute are directly related to venture capital, or own lots of stock or are self employed, or just wealthy. Sometimes the world can't as easily be broken into left and right.
Just to give some context, a few years ago the Spanish Police arrested the leaders of Anonymous [1]. As a Spaniard, my opinion is that this is just an intimidatory and political move.
And, there not being an active cabinet in office just now does not mean that there would not be politicians and politically selected civil servants doing things.
If hard drive is encrypted (and like most companies like Google, almost certain they would be), then you wouldn't be able to get much unless you someone got them to disable screensavers/computer sleep and keep the machines on for awhile
Law enforcement has specific tools that do precisely this. Google "USB mouse jigglers" for more info.
They also have gear that can splice into the power cord of a live machine without interrupting the flow-- the combination of these two devices allows them to seize unlocked computers and keep them accessible while taking custody of the machine.
That would almost certainly condemn the local employees to face obstruction of justice charges, turning a minor "you have to relocate" issue into "you are imprisoned awaiting a criminal trial" one.
You mean if you want them to think you destroyed the evidence, and thus incurring the wrath of the law, without actually destroying the evidence that might incriminate you?
Interesting idea. Keep the door closed, once opened (reed switch?) Write 0's to memory then pull power to the workstation. Just be sure to save your work before you go to the bathroom.
Yeah, don't cooperate with poor countries that just want taxes to be payed by civilians as well as mega rich companies. Not very nice. What would destruction of evidence get them (from a justice standpoint) in Spain?
Possibly, but that's not why they are paperless. I'm guessing the goal of going paperless is much less about being anti-investigative, and more about convenience, environment, etc. It just happens to have some aspects that are possibly anti-investigative.
This is the case. Spansish law requires companies to keep a copy of accounting books and register them periodically. That doesn't mean they have to be in paper form all the time, but they need to produce a copy if requested for tax auditing reasons. The "raid" goal is to prevent tampering of the files during the request.
I heard someone related to the Paris office raid comment when that happened. She was saying that multinational corporations always say that their organization and tax schemes are legal but that in reality it's so complex and spread in multiple countries that nobody really knows for sure and so it's only legal by default.
Isn't that true for almost everything though? The laws are so complex that no normal citizen can understand them. Even lawyers seem to disagree now and then.
No, the laws are complex when dealing with complex situations and ownership graphs of companies can be basically any finite directed graph.
But obviously most ownership is a simple two node thing with a single directed edge connecting the nodes. These are simple to decide if they are legal.
Unfortunately, law can still be complex in what seems like a simple situation. Statutes aren't exactly written with strongly-typed languages or run against integration tests before being passed. Laws are often vague and difficult to precisely interpret, and they usually have unintended consequences. This is true regardless of the complexity of the situation to which the law is applied.
Add to this words attributed to Napoleon Bonaparte: "A Constitution should be short and obscure."
Tax raids are often a symptom of such legislative tradition where laws are written so as to allow authorities to apply loopholes to get their way (as opposed to loopholes for citizens or companies). In my country (Finland) there are practically none, and the tax collection procedure is very effective. This amount of control comes at a price, of course; regulation is predictable but there's a lot of it (and recently the development has been towards more and more rapid and unpredictable changes, often somewhat to do with how to apply EU regulations).
Actually I read somewhere that it differs by country. I think the UK is legal by default unless the law specifically makes it illegal. While in Germany its illegal by default unless it is specifically made legal. (I am no expert, it was probably a comment I read on here).
It's part of an old joke (crops up in Yes Minister, may go back further): in Germany, everything is prohibited except that which is allowed; in the UK, everything is allowed except that which is prohibited; in Russia, everything is prohibited including that which is allowed, while in Italy everything is allowed especially that which is prohibited.
And typically, when some non-government organisation campaigning for higher taxes claims that company X is doing tax evasion for Y billion €, and the matter is investigated by tax authorities and arbitrated by courts, then in the end the outcome is that some decisions and definitions done by X are not according to the interpretation of law, but the final impact is about 0.001 Y, and this is just a matter of reasonably differing views on interpretation of law, and no crime has been committed.
Every time you pass a new law you have to think about how it interacts with all other current laws, and how it affects how current laws affect each other.
Passing more laws just inhibits small businesses. As said before, big businesses are able to afford the small army of accountants and lawyers to navigate the lawyers, whereas small businesses just kind of have to take it.
Sort of how the super rich are able to pay a lower tax rate than a solidly middle class family.
I'm going to hazard a guess. The french did found something useful to crack google down in that raid and gave their buddies in Spain a nudge so they can combine the efforts and maybe strike a big one against the Double Irish.
I don't know. It's just as likely they found nothing and asked the Spanish to take a second crack at it. Irish tax law is stupid enough already. Europe sounds like they are jumping the gun.
This is ridiculous and a form of bullying. If you want multinationals to pay tax, fix the laws. Were they really expecting Google to fake anything? No, they were looking to cause bad press. Form international alliances and create a proper incentive structure if you want to collect.
Another PR stunt of the minister, Montoro. No more than that. He also makes public a lost of debtors to the IRS (which should be illegal but he gets away with anything).
It might be PR, but he's just basically following the law and not breaking it. Spanish IRS (Hacienda) must publish the list of debtors who owe more than €1M by law.
Given the current climate of corruption, fraud and tax evasion in Spain, there is no problem in my book with publicly shaming offenders and fraudsters, specially when most of them are elite actors or millionaires.
The problem is that the names are being made public while they are "under investigation", which destroys the basic right of presumption of innocence, and (more importantly) they are being released by a Minister who belongs to an embattled and corrupt government, so it absolutely smells like the tax ministry is being used as a political weapon.
Shaming them is not legal because it is defamation and the authority (Montoro) is obliged to denounce it, not to make it public. Let the media make whatever is public, public, but not the minister.
He has, several times, menaced the media (for example, "El Mundo", to "speak out about you")...
I find that dirty.
Edit: And a corruption of justice (presumption of innocence even for fiscal deeds).
(See comments above): he is required by Law (since 2003) to make that list public. However he (coincidentally) started publishing it last year (election year...). From my point of view, this is pathetic.
Well, I suppose anyone who is a debtor to the IRS is a criminal . In The Netherlands it isn't legal to use the full name of a criminal in any publication, so it could be that the EU is a bit different in the way it treats criminals.
Why can't Spanish (and French) authorities simply subpoena any info they need from Google? Is Google able to shield relevant data by keeping it in Ireland or the US?
If they feared that Google might destroy evidence a raid makes sense over subpoenaing. It's also bigger and flashier so if the government wanted to make a show of it and 'send a message' (either to other companies or just seem to voters like they're being tough on companies dodging taxes (legally)) that's another reason that they'd go with a raid.
Because these raids are PR stunts. Tax laws are setup in such a way that by LEGALLY taking advantage of various incentives, a multinational company can vastly reduce it's tax burden. Individual countries are somewhat powerless to do anything b/c they'd have to have some sort of power to influence the tax laws of other countries (not going to happen).
This is why there's so much talk over international agreements.
In the case of the Spanish subsidiary, the Tax Office is analyzing why Google pays so little tax in Spain despite making multimillion-selling. With this action, the Agency's technical investigators seek to determine if the international structure of the world's leading Internet search engine is not legitimate. Toward this aim they will try to prove that functionality the group attributed to its Spanish subsidiary are less than they actually performed.
The record is linked to an investigation into possible tax evasion. The company, known for its Internet search engine, has spent years in the crosshairs of Finance for its tax system, as part of their income managed through Ireland. Thus, it could be artificially reducing its business in Spain and lowering its tax bill.
Tax Office searches Google Spain and Google Ireland for evidence of tax fraud
Panama Papers showed a significant fraction of EU officials stash money in low tax havens. Icelands PM resigned as a result. The Panama Papers was a leak of terabytes of documents from a legal office who sets up these corporations and accounts.
Ironically the USA is a top tax haven due to anonymous shell corporations you can create in several states. Lots being stashed here due to anomymity and economic safety.
The US is a pretty poor corporate tax haven. Our corporate rates are higher than pretty much everybody in the EU (including soon-to-be-out-of-the-EU Britain). It's one of the major contributing factors to corporate inversions (the moving of corporate headquarters out of the US) and companies like Apple not bringing overseas profits back to the US.
Actually, I find the bouncing around of fees and payments behind these internet companies very complex, and maybe even justified to some extent. The value-add that generates the taxable income is almost entirely elsewhere.
Let's say Google Spain got €100M in revenue and had €20M local expenses (mostly sales, local support and localization). Now, say they owe €30M to US HQ for the service, servers, R&D, IP, support, etc... among other expenses. (For simplicity, let's suppose everything is hosted and originates in California.)
That leaves Spain with €50M in profit, ready to be taxed by Spanish tax authorities. This sounds quite out of proportion. The great value-added is not in Spain, it's in the US.
Google HQ could easily establish Google Spain owes €80M in service costs, thus local profit is nil. To me that's fair: corporate has the right to charge whatever they see fit for their services and collect profits accordingly.
They way I see it, paying fees to the Bermudas is a US, not Spain, tax evasion problem.
Going to be honest, a little confused where the Bermudas or the US comes into this...
Apparently this is regarding Google reporting the bulk of their sales out of Ireland and therefore not paying taxes in Europe? This is based on maybe a loophole where Google makes sure to have Ireland staff conclude all sales contracts...
This all points back to the Multilateral Agreement on Investment, which reveals the intention of transnational corporations to try to limit sovereignty. It didn't pass but it's terrific object lesson (especially in the aftermath of Brexit).
The irony is that the economic incompatibility thesis claims liberalization of capital tends to undermine free trade, because capital flows make very volatile markets, ultimately making it much harder for trade to take place. So what happens is the reaction to freeing up capital is increased protectionism which is what's generally happened since the '70s.
Paperwork that contradicts statements the company has made, which would be shredded long before an inspector's arrival should a more formal appointment be arranged.
> Or whether it is just a display of force.
This is usually a factor in such raids too, but it only works if there is a chance something might be found so they wouldn't do it purely as a show of force.
So, I'm not an expert in tax evasion, but if you give false statements to the tax office, why would you keep statements that can bring you down on paper in your office?
"The Paris raid aimed to establish whether Google Ireland has a permanent base there, and whether the firm was meeting its tax obligations. It was part of a probe into aggravated tax fraud and organized laundering of the proceeds."
IMO Google is so rich and so profitable that it could afford to pay all taxes due in all countries fairly, without any "optimization", while staying profitable and not undermining any R&D program or long-term project.
Google's infrastructure is almost all custom. There's a lot of people who would be out of a job if there was suddenly a >30% premium added to Google's infrastructure when compared to OEMs. If you want the laws to change, change the laws. The issue is the government, not the companies that are simply playing by the rules.
"Simply playing by the rules". No they aren't. They are paying a small fortune to figure out how to avoid paying taxes by following the letter of the law. However they break the spirit of the law, and hence are not playing by the rules.
This is not different from using drugs to win sports which hasn't yet been banned because it is too new. Strictly speaking it is legal, but it is both immoral and unethical.
The problem with depending on every possible behavior being described in the law and closing every loophole is that that would create a very draconian legal system nobody wants.
It is the same as with contracts between two parties. It is easy to screw each other over if one nitpicks about everything and don't follow the spirit of the contract. However the problem with such behavior is that it dramatically increases transaction costs, because one can not trust each other and have to make extremely complicated legal contracts.
I've noticed when dealing with American how the lack of any trust, makes any kind of business deal very expensive. Contracts are completely over the top.
I don't think this is how one wants society to develop. Parties in an economy have to be able to play fair with each other most of the time without resorting to ever more insane details and regulations.
I run a rental business and purposely purchase products that I need for personal use such that it can be deducted as a rental expense. As long as I use it >50% for rental stuff it's tax deductible.
Should I feel bad?
More specifically, does this violate the "spirit of the law?"
Even more specifically, every other rental owner does the same thing, so even if I change my behavior, I'm at a disadvantage with my competitors.
Again, your issues are with the government, not the companies that are following the law.
If I wrote a program with bugs in it and it returned unexpected and undesirable results, I couldn't reasonably say that the code breaks the spirit of my program. I simply wrote bad code and should fix it. I can no more expect a company of tens of thousands of individual to all perfectly adhere to some nebulous "spirit" than I can expect my computer to magically intuit my desires and do that rather than my actual mistaken request.
It's very easy to look at Alphabet's financials and see that there are no preferred or common shareholder dividends. Since you haven't done that, I presume you are genuinely curious.
There are probably a lot of reasons that people invest in corporations that don't pay a dividend. The "most obvious" is that you believe the company is growing. The organization will reinvest in itself -- instead of paying you a dividend -- and increase share price to a degree greater than you would have gotten with a quarterly dividend.
I don't see how you can possibly make this comparison. What VW did is so much worse than legal but creative tax strategies. VW deserves to pay for all of the harm it did to the environment and our lungs.
Do you have a source? Those are extraordinary claims. I'm not aware of any other cheating anywhere close to the magnitude of what VW did. Also, what "defeat device" are you talking about? VW's cheat was in software; it wasn't some specific device.
And are you seriously surprised that it can take 1.5 years for a massive multi-billion dollar lawsuit to wind its way through federal courts? If you think 1.5 years is long, look at the Exxon-Valdez settlement, parts of which are still unpaid 28 years later!
The "defeat device" was a specific piece of software that Bosch provided with the chips they sold.
Also, it was 1.5 years from discovery to investigations being started.
And regarding the claims: They’re not extraordinary. 4 companies have been in the original report that incriminated VW, others incriminated themselves [1], etc.
Germany is deciding to ban GM cars in Germany because they used the same defeat "device" VW used but refuse to fix things, etc.
The wheels of justice grind slowly but exceedingly fine. VW is the largest and first target to be taken down, but hardly the last. I don't think your expectations of all of this getting resolved very quickly are realistic. Mitsubishi is currently being investigated by US regulators as of this past April, and will probably be charged on a similar timeline as VW. Keep an eye out for it. http://www.reuters.com/article/us-mitsubishimotors-regulatio...
As for the Germans taking on Chrysler, good. If Chrysler did it then they should pay, same as VW has and Mitsubishi is going to. http://www.autoblog.com/2016/05/23/germany-fiat-chrysler-ban... No one deserves to develop lung disease because some stupid manufacturers decided to cheat on tests rather than passing them. I still don't see how this is a trade war, when it clearly looks to me like an environmental enforcement issue.
In theory, millions or euros that should be spent in taking care of the environment and the health system are going to someone's pockets through Ireland, so they would deserve to pay that harm too.
Nothing to do with laziness. It's a matter of pragmatism. Some wild conspiracy theories are so out of touch with reality that engaging in correction or education (a rebuttal) is a futile effort and a complete waste of time.
If I told you that "I can't speak freely because agents of the shadow government are watching my every move via microchips implanted into my brain at birth", would you really take the trouble to respond with a rational rebuttal? By your own standard, would you be lazy not to do it?
I find it seriously hard to believe that you live your life by the motto that "every misguided thought deserves a rebuttal". You'd be an extremely busy person if that were the case.
If I cared about you, I would at least make the effort to respond rationally. In some sort of theoretical sense, I care about all sentient beings, but I just don't care about you enough.
HN is pretty intolerant of anything that isn't the far left, which is a bit ironic for what's supposed to be an entrepreneurial forum. This change seemed to happen a year or two ago. I suspect HN has been fully "redditized" now with college identity politics being the prominent narrative. The drive-by downvotes are just a symptom of that.
You think HN is dominated by the radical leftists, I see it being composed by a majority of anti-statist libertarians. But neither perspective is accurate.
I think reality is what dang touched upon yesterday: that on HN you can't avoid opinions that conflict with yours, and you assume that everyone is out to get you. But if you take a look even within this thread, you'll see plenty of opinions that match your own, and even exceed it. Hell, one person actually questioned the morality of taxation itself.
As linkregister points out, there could hardly be a clearer example of the bias I described yesterday, in which people imagine that HN is dominated by their political enemies.
It's also bone-crushingly tedious and off-topic, so please don't do this on HN.
HN tends to downvote any political comments, especially comments that turn the discussion more political, even in a story that already tangentially touches on politics. The HN guidelines more-or-less document the former; the latter seems like a natural consequence. In general, politics is almost always off-topic here; there are many other places to discuss politics.
Downvotes are a symptom of that: people downvote politics they disagree with and upvote politics they agree with. Politics, more so than many other topics, tends to bring out "downvote = disagree", not just "downvote = not a contribution". That's in addition to the people (myself often included) who downvote any comment that turns the discussion more political, because such comments typically reduce the quality and novelty of the discussion.
What is the definition of "political"? If it's a question of tax, of stock options, of a free speech law, which top HN submissions often are, these are all political in the traditional definition. I feel your definition is something you have in mind, but haven't articulated. By political it seems like you are talking about "right versus left explicitly" type politics?
> In general, politics is almost always off-topic here
This attitude is one of the most damaging flaws in tech culture. There is this idea that engineering, design, and sometimes even business are somehow outside of politics, which is absolutely incorrect.
Politics is simply how humans interact to negotiate the mechanics of society. Creating a good or service has political consequences. Often these consequences are small, but modern technology has had an amplifying affect on political consequences that has grown rapidly. Silicon Valley culture even has a word that recognizes this: "disruption".
As politics is increasingly important in technology, traditional powers have started to fight back. A good example is the current drama over encryption (Apple/FBI, WhatsApp/India, etc); giving people the ability to communicate without government (or other) eavesdropping is not only a political act, it's also a significant shift in power that upsets the traditional political equilibrium. Local tax law is merely the current battlefield.
When you create something that affects people - even in small ways - you are taking a political position. Pretending that your work is somehow outside of politics doesn't make technology and engineering politically neutral. Ignoring politics is still a political statement; you're saying you don't care about the political consequences, which is irresponsible.
> there are many other places to discuss politics
HN is exactly the place that the politics of technology should be discussed.
> reduce the quality ... of the discussion
While I agree that rudeness, personal attacks, and other low-quality rhetoric should be discouraged, remember that attempting to silence political discussion is itself a political statement. You aren't removing politics completely; you're de facto stating that any point of view outside the status quo shouldn't be heard.
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There is "no neutral ground in a burning world"[1]. Please consider and discuss (politely) the political consequences of technology as we integrate it into our lives. If you don't, someone else will.
Solving political problems, or more broadly solving real-world problems, is definitely on-topic. But just expressing political viewpoints or rhetoric in ways that don't actually improve the discussion is off-topic. We're not here to signal affiliation and spout rhetoric; there are plenty of cesspools on the Internet to do that in rather than turning HN into one.
This is, by far, the most political site I go to. The top comments are often politicized and the top stories are typical social media "outrage" stories.
I think you're painting a picture of HN that really doesn't exist, but did probably long ago. HN now suffers from the 'eternal September' many popular forums do. Techy forum participants are often high school and college students with far left anti-US views common in youth. Its no surprise that these viewpoints are the dominant narrative here.
I imagine there are people who downvote all politics, but they are clearly a minority here. The downvote button is just a agree/disagree button in practice and shows an obvious political bias.
Your the one creating the "eternal september" discussion in this thread. You take a story about international trade and make into a left-right issue, promoting your pet opnion that Europe have moved to far to the left. Then you turn the whole thread into meta by complaining how HN is turning into reddit (something so common it even is warned against in the guidelines).
Not only are your comments utterly predictable, and therefor uninteresting, they are factually incorrect. It's often the right wing that want to protect the local market. The US just forced China to limit subsidies on exports [0]. The UKs exit of the EU is largely a result of the left wing not being able to convince their votes, in favor of right wing conservatives.
That Europe has turned to the left as a result of the financial crisis is also not substantiated [1][2]. The few countries that have in recent years are have all been forced to enact (right wing) economic reforms. Including Greece, France and Portugal. Which is why people are protesting, not because they have suddenly become more leftist.
If you think HN has become leftist it's very likely that you are simply older than most people on HN. Young people today, whether they consider themselves left or right, are forced to care about things like housing, healthcare, employment and other issues that were previously considered left wing because society is changing.
We must not be reading the same threads because I don't see anything remotely "anti-US" when reading HN. It almost sounds like you are accusing us all of being unamerican, which is one of the sillier political epithets history has provided us.
What I do see is a realization that the US is a fairly small minority of the global population, and that globalization and automation are stampeding across labor-based economies, and discussions of solutions to the resulting societal problems.
> HN tends to downvote any political comments, especially comments that turn the discussion more political, even in a story that already tangentially touches on politics
That's... really not true. Case-in-point: look at any frontpage post that talks about health insurance, wage floors, guaranteed minimum income, etc. There's a clearly dominant opinion, and left-leaning opinions tend to be the most frequently-posted (as well as the most frequently upvoted). This is ignoring tech-politics (ie, net neutrality, digital privacy).
People do use the downvote as a signal of disagreement (which is a problem[0], because it just polarizes discussions even more by driving away constructive, dissenting opinions[1]). But the people who downvote any political sentiment don't outweigh the rest, as evidenced by the end results.
[1] There are topics on which I have a lot of domain knowledge relative to the typical HN commenter. I used to be more proactive with sharing this information in HN comments when relevant, but I only do this a small fraction of the time compared to a few years ago[2]. There's nothing more discouraging than writing a 500-word comment with multiple footnotes and external citations to primary sources and peer-reviewed articles, only to be downvoted for expressing a contrary opinion, or even simply a more nuanced version of the dominant one.
[2] I won't say whether it's gotten better or worse, but I've certainly learned from those experiences over time, and from my observations, so have other users.
The fact that your excellent and sourced comment has been downvoted to the point of it being near invisible on my screen just further proves your point.
>There are topics on which I have a lot of domain knowledge relative to the typical HN commenter.
I also agree with this. I have domain knowledge in a couple odd places and the top voted comments on these domains on places like reddit or HN are embrassingly wrong. It used to be we'd get a random expert drop some serious knowledge but those people seem to be gone. If you're just a run of the mill Joe and finding your random musings racing to the top via upvotes, chances are you don't know what you're really talking about, but you know how to "work the room."
Experts usually have better things to do and probably get easily discouraged by being downvoted and having to real with disingenuous or ignorant replies. Internet forums have a real problem with Dunning-Kruger suffering participants. Say, some geek does a little light reading and now thinks he's an expert on some topic. The guys upvoting him did the same light reading. So if you disagree with that Salon or Guardian or Huffpost narrative, then you're going to be downvoted because it goes against what the "local experts" think. The problem is that article, even if it isn't biased, certainly has not exhausted the problem domain or touched upon more advanced criticisms or alternative theories. How could it, in an article written for a general audience and often under 700 words?
Its a bit like being in a small town. You don't criticize the local pastor or mayor, unless you want an earful on how "we all know better than you." This is also why certain types of people flee small towns. Its insular nature is same as on internet forums unfortunately. Being mindful of this seems to be the only sane path forward and having serious skepticism of popular internet narratives as well.
I haven't seen this to be true at all, but this comment is also a good example of something that doesn't add anything to the conversation (and gets downvoted).
I have seen more downvoted content here lately, but it's largely due to it not being very good--one liners, throw-away stuff, etc. I'm glad that's getting shuffled off to the side.
As for any shift in politics, I haven't seen that, but I have noticed that unchecked assumptions about libertarian-leaning ideas no longer get a pass. Still, that doesn't mean the site's becoming a leftist "college identity politics" (I can't even respond to that) thing, just that people expect thoughtfulness.
These companies play in an absolutely different league than employees, self employed and small companies in Europe where they make you pay strictly all the taxes to mantain our social structure. They have big teams of lawyers, financial experts and advisors specialized in tax havens just to make grow their revenues in billions avoiding to pay taxes in the countries they have presence.
Totally unfair for regular people like me.
http://www.uspirgedfund.org/reports/usp/offshore-shell-games...