7 ms·

Why would Google not pay as little tax as possible?

43 points by swombat 17y ago

hussong 17y ago
"And yet the UK press and politicians, yesterday and today, have been up in arms that Google’s theoretical UK tax bill could have built hospitals and purchased helicopters for troops in Afganistan." Theoretically, they could. But in the current economic situation they would more likely be spent on cash infusions or EU transfer payments to keep the Irish economy from collapsing. So, in the end, it doesn't make that much of a difference.
- anigbrowl 17y ago
  In some respects, the Irish economy is collapsing anyway. It would arguably be worse without the presence of multinationals attracted by the low corporation tax, but the sad fact is that having a multinational in your country doesn't necessarily mean all the best jobs they have to offer are going to be available to the workforce. In some cases they'll just up and go somewhere else when it becomes more economically attractive, as Dell did. Being Irish myself, I have very mixed feelings about the country's corporate tax policy. It looked terribly smart a few years ago, but so did a lot of other fiscal and economic policies that seem pretty foolish in hindsight. The low-tax regime has come at the expense of higher and higher rates of personal income tax coupled with crippling unemployment.
  - gaius 17y ago
    This is why Ireland has always voted against EU expansion. It doesn't want to see all the money go to Eastern Europe. It's funny, driving around Western Ireland, say Dingle, there are immaculate roads with EU flags on the signposts, then the money runs out and it's abruptly back to the crumbling ashphalt there was before (which is normal considering how sparsely populated and lightly traficked the area is... It just doesn't make economic sense to plough a lot of money into the roads there).
teralaser 17y ago
The Economist is up in arms with the new Britain "let's tax the rich too" , for instance -out of many articles- http://www.economist.com/opinion/displaystory.cfm?story_id=15127107 http://www.economist.com/opinion/displaystory.cfm?story_id=1...
- electromagnetic 17y ago
  The rich should be taxed. After all, when the top 20% are taking over 80% of the money, they should be paying 80% of any nation's taxes too. If they're not, the system is unfairly biased to keeping the rich rich. If you can pay $1 million in income tax in a single year, I figure you're doing fucking amazing out of life and it's where any entrepreneur should want to be in life.
  - chwolfe 17y ago
    "when the top 20% are taking over 80% of the money" Who exactly are the rich "taking" money from in general? Creating wealth is not a zero-sum game. If you insert the word "earning" in the above phrase, the argument you present loses some luster.
    - jmillikin 17y ago
      If I "earn" a dollar, where did that dollar come from? If my company paid me, they are poorer by $1. If the government paid me, the aggregate citizenry is poorer by $1. If the government printed it, the total value of US dollars in circulation has decreased by $1. Technically, activities like mining precious metals or gems could count as creating wealth, but obviously basing an economy on an arbitrarily-priced material as silver or gold is a bad idea. Anybody who believes gold isn't a fiat currency is mad. The most successful way that governments seem to have found to tax the wealthy is inflation, which is a "tax" on liquid currency. But there's ways for the wealthy to avoid inflation which aren't available to the working class, such as buying various foreign currencies. A direct tax, rather than "stealth" taxes, is a healthier and more sustainable choice.
      - 17y ago
lionhearted 17y ago
When I learned of Nash Equilibriums, it changed the way I saw a variety of fields - government, business, advertising, and so on. http://en.wikipedia.org/wiki/Nash_equilibrium http://en.wikipedia.org/wiki/Nash_equilibrium > In game theory, Nash equilibrium (named after John Forbes Nash, who proposed it) is a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy unilaterally. It's fascinating stuff. Nash equilibriums are regarded as "stable" - no one will change what they do. Things tend to trend towards Nash Equilibriums and settle there until there's new technology. Government legislation, including higher taxes, frequently breaks equilibrium. The new best solution for large players might be to divert earnings or leave the area they were doing business. Frequently, this results in the legislators getting angry and legislating more solutions. One that immediately springs to mind is North Carolina and Amazon. North Carolina legislators were annoyed that Amazon customers in NC didn't pay sales tax because Amazon didn't have a presence there. They passed a law that made it so Amazon having affiliates there would count as them having a business presence, so Amazon would have to start charging their NC customers sales tax and remitting it to the NC government. Amazon responded by canceling NC affiliates. This was the start of that email: > We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of North Carolina. Now, that obviously wasn't an NC legislator's intention. But it turned out to be the new stable best solution for Amazon. They must've done some math and decided that not charging sales tax in NC is important than letting affiliates with a NC address continue to participate in earning referral fees. Too often legislators think people will accept their legislation and things will go according to their planned scenario. They don't stop and think, "How does this change people's incentives? What nasty secondary effects could come from this?" When the nasty secondary effects come, they either try to shame the organization in line (which doesn't usually work), or they pass even harsher legislation. You can see where this leads - it's not pleasant. Disrupt Nash equilibriums if you must, but do it with your eyes open that there could be some really nasty secondary effects to the process.
pbiggar 17y ago
Well, if Google paid tax in the European country where they have the largest presence, they would pay it in ... Ireland. Just like they do now.
messel 17y ago
International tax law begs to be hacked. It doesn't feel very rational due to the conflict of national interests.
- jmtulloss 17y ago
  I don't understand what you mean by this. There is no "international tax law", just national tax law. Britain's tax law happens to allow exactly what Google is doing. The EU does have something that might be described as international tax law, but it's really EU tax law, where the EU is something very similar to a federalist nation.
  - crc32 17y ago
    It was clear to me. He means laws regarding tax issues that cross national boundaries, for example "transfer pricing". He is saying that it is easy to exploit such laws. (Whether it is intentionally easy or not)
    - messel 17y ago
      Thanks for the clarification crc32 while I was away

43 points by swombat 17y ago

"And yet the UK press and politicians, yesterday and today, have been up in arms that Google’s theoretical UK tax bill could have built hospitals and purchased helicopters for troops in Afganistan." Theoretically, they could. But in the current economic situation they would more likely be spent on cash infusions or EU transfer payments to keep the Irish economy from collapsing. So, in the end, it doesn't make that much of a difference.

anigbrowl 17y ago
In some respects, the Irish economy is collapsing anyway. It would arguably be worse without the presence of multinationals attracted by the low corporation tax, but the sad fact is that having a multinational in your country doesn't necessarily mean all the best jobs they have to offer are going to be available to the workforce. In some cases they'll just up and go somewhere else when it becomes more economically attractive, as Dell did. Being Irish myself, I have very mixed feelings about the country's corporate tax policy. It looked terribly smart a few years ago, but so did a lot of other fiscal and economic policies that seem pretty foolish in hindsight. The low-tax regime has come at the expense of higher and higher rates of personal income tax coupled with crippling unemployment.
- gaius 17y ago
  This is why Ireland has always voted against EU expansion. It doesn't want to see all the money go to Eastern Europe. It's funny, driving around Western Ireland, say Dingle, there are immaculate roads with EU flags on the signposts, then the money runs out and it's abruptly back to the crumbling ashphalt there was before (which is normal considering how sparsely populated and lightly traficked the area is... It just doesn't make economic sense to plough a lot of money into the roads there).

teralaser 17y ago

The Economist is up in arms with the new Britain "let's tax the rich too" , for instance -out of many articles- http://www.economist.com/opinion/displaystory.cfm?story_id=15127107 http://www.economist.com/opinion/displaystory.cfm?story_id=1...

electromagnetic 17y ago
The rich should be taxed. After all, when the top 20% are taking over 80% of the money, they should be paying 80% of any nation's taxes too. If they're not, the system is unfairly biased to keeping the rich rich. If you can pay $1 million in income tax in a single year, I figure you're doing fucking amazing out of life and it's where any entrepreneur should want to be in life.
- chwolfe 17y ago
  "when the top 20% are taking over 80% of the money" Who exactly are the rich "taking" money from in general? Creating wealth is not a zero-sum game. If you insert the word "earning" in the above phrase, the argument you present loses some luster.
  - jmillikin 17y ago
    If I "earn" a dollar, where did that dollar come from? If my company paid me, they are poorer by $1. If the government paid me, the aggregate citizenry is poorer by $1. If the government printed it, the total value of US dollars in circulation has decreased by $1. Technically, activities like mining precious metals or gems could count as creating wealth, but obviously basing an economy on an arbitrarily-priced material as silver or gold is a bad idea. Anybody who believes gold isn't a fiat currency is mad. The most successful way that governments seem to have found to tax the wealthy is inflation, which is a "tax" on liquid currency. But there's ways for the wealthy to avoid inflation which aren't available to the working class, such as buying various foreign currencies. A direct tax, rather than "stealth" taxes, is a healthier and more sustainable choice.
    - 17y ago

lionhearted 17y ago

When I learned of Nash Equilibriums, it changed the way I saw a variety of fields - government, business, advertising, and so on. http://en.wikipedia.org/wiki/Nash_equilibrium http://en.wikipedia.org/wiki/Nash_equilibrium > In game theory, Nash equilibrium (named after John Forbes Nash, who proposed it) is a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy unilaterally. It's fascinating stuff. Nash equilibriums are regarded as "stable" - no one will change what they do. Things tend to trend towards Nash Equilibriums and settle there until there's new technology. Government legislation, including higher taxes, frequently breaks equilibrium. The new best solution for large players might be to divert earnings or leave the area they were doing business. Frequently, this results in the legislators getting angry and legislating more solutions. One that immediately springs to mind is North Carolina and Amazon. North Carolina legislators were annoyed that Amazon customers in NC didn't pay sales tax because Amazon didn't have a presence there. They passed a law that made it so Amazon having affiliates there would count as them having a business presence, so Amazon would have to start charging their NC customers sales tax and remitting it to the NC government. Amazon responded by canceling NC affiliates. This was the start of that email: > We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of North Carolina. Now, that obviously wasn't an NC legislator's intention. But it turned out to be the new stable best solution for Amazon. They must've done some math and decided that not charging sales tax in NC is important than letting affiliates with a NC address continue to participate in earning referral fees. Too often legislators think people will accept their legislation and things will go according to their planned scenario. They don't stop and think, "How does this change people's incentives? What nasty secondary effects could come from this?" When the nasty secondary effects come, they either try to shame the organization in line (which doesn't usually work), or they pass even harsher legislation. You can see where this leads - it's not pleasant. Disrupt Nash equilibriums if you must, but do it with your eyes open that there could be some really nasty secondary effects to the process.

pbiggar 17y ago

Well, if Google paid tax in the European country where they have the largest presence, they would pay it in ... Ireland. Just like they do now.

messel 17y ago

International tax law begs to be hacked. It doesn't feel very rational due to the conflict of national interests.

jmtulloss 17y ago
I don't understand what you mean by this. There is no "international tax law", just national tax law. Britain's tax law happens to allow exactly what Google is doing. The EU does have something that might be described as international tax law, but it's really EU tax law, where the EU is something very similar to a federalist nation.
- crc32 17y ago
  It was clear to me. He means laws regarding tax issues that cross national boundaries, for example "transfer pricing". He is saying that it is easy to exploit such laws. (Whether it is intentionally easy or not)
  - messel 17y ago
    Thanks for the clarification crc32 while I was away