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Google Lowered Taxes by $2.4B Using European Subsidiaries
- wrong_variable 11y agoThis tells me more about how dysfunctional the EU is then Google being 'evil'.
- dazc 11y ago> This tells me more about how dysfunctional the EU is ... Exactly, the European Union was originally conceived as a 'common market' but individual countries can set their own corporate tax levels. Google have had a lot of bad press here although most of it is badly misinformed. The bar for accuracy of reporting is generally set quite low for American companies operating in the UK.
- kilroy123 11y agoIt's interesting how some of these companies are sitting on piles of cash but are still so tax avoidant. Many companies aren't doing anything with the money they're saving on taxes. I don't understand it.
- toyg 11y agoThat money will keep the lights on (or pivot) when hard times come, which they will (because of economic cycle, landscape changes etc etc). Unlike nation-states, corporations have little incentive to distribute their wealth as soon as they accumulate it.
- charlesdm 11y agoWhy pay $5 when you can pay $2? They're being efficient and are optimising business processes.
- mtgx 11y agoI wonder if Google will soon use its Deep Mind AI to optimize for where to pay the lowest possible taxes in the world for every single service they offer (and I hope I didn't just give them this idea).
- jjawssd 11y agoYou don't need AI for something this simple
- charlesdm 11y agoHiring a tax law firm at $1,000 an hour is probably way cheaper :-)
- wickedlogic 11y ago... waiting to hear about google's indirect funding of sea steading projects.
- bpodgursky 11y agoThe cash is factored into the stock price. Stockholders figure that sooner or later there will be a tax holiday or equivalent which will let companies bring this money into the US for free, or at least cheaply, and pay it out as dividends or share buybacks. Also, lots of US companies use this overseas cash as collateral to take out low-interest debt from inside the US to fund US expansion (again, because those issuing the cheap debt know that Google etc * could * pay it off if necessary, it's just dumb to pay the 35% if you don't have to).
- charlesdm 11y ago+ they can use it do fund big acquisitions outside the US. Luxembourg based Skype, for example, for which Microsoft (probably, maybe) overpaid significantly was acquired with foreign reserves. Overpaying on a deal isn't nearly as bad if the alternative is to lose 35% of said money.
- jsprogrammer 11y agoThe money isn't really lost though. It would go towards services and infrastructure for everyone. Are those alternatives considered in the corporation's accountings? Please, take this down to -4.
- lotharbot 11y agothe IRS is on record as telling people that they should practice tax avoidance. Tax evasion is about lying to the government so you don't have to pay the taxes you should. Tax avoidance is about changing your behavior in order to reduce your tax burden based on what the government has chosen to incentivize.
- charlesdm 11y agoAbsolutely, and they are completely irrelevant to a corporation. For example: a canadian pension fund doesn’t care one bit about paying taxes in France; they care about hitting their targets and achieving a certain annual yield on their (tens of) billions of dollars under management for their beneficiaries. If I’m said fund and a shareholder in a company, if I notice management paying excessive taxes somewhere, I will intervene and force them to reduce taxes as much as legally possible.
- mc32 11y agoIf people think this is wrong the same people should ignore taking any deductions on their personal taxes. If we want companies to pay their "fair share" then governments should institute international tax reform and have a tax treaty where signatories abide by whatever they agree to. Here companies are rationally choosing ways to pay as low a tax burden as the laws allow. As they say, hate the game, not the player.
- jjoonathan 11y agoIf the player is able to rewrite the rules of the game (or prevent such rewriting) in order to benefit themselves, they gain culpability. Yes, we should focus on fighting them, but that was never in question.
- mc32 11y agoI'm not opposed to countries capturing whatever they feel is just to tax corporations, however, crying foul when they allow this by their own laws is their problem. Pass the laws, make everyone abide by them and we'd be good. I simply don't agree when they allow a loophole and them complain about companies using the loophole. Same with corporate inversions. If we don't think it should happen then get some tax treaties in place and enforce it.
- mike_hearn 11y agoExcept Google, Apple etc did not write these tax laws. Actually, the EU and Ireland did. The companies came later to take advantage of them ... in Ireland's case, it was done quite knowingly for that exact reason. They prefer having the companies and employment than having the corporation tax.
- jgalt212 11y ago> If people think this is wrong the same people should ignore taking any deductions on their personal taxes. That's a false equivalency and and you should be smart enough to know it.
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- vonklaus 11y ago<satire> This makes me fucking sick. Google is a beautocratic monolith and doesn't deserve to be subsidized by the people. They should pay the government in full so we can finally get back to making progress. I don't want to suggest Google would spend all that money on hammers(as this was largely a myth) but they certainly won't be spending it protecting the american people. Google should do the right thing here and pay up. Almost 3400[0] people die from terrorism, if you include people in the middle east directly interacting with terrorists as well as domestic terrorism and also actual instances of terrorism. Does google really think 463billion is enough to protect America? Leave the decision making to the people who are qualified cyber security is a big deal and I need a group with a success record to protect me. </satire> Edit: Made it clear this was in jest. While I regularly state we incur risk using google for everything pretty obvious it is a net good and even from a non-financial return on value, i would invest my taxes in google. [0]http://www.cnn.com/2015/10/02/us/oregon-shooting-terrorism-gun-violence/ http://www.cnn.com/2015/10/02/us/oregon-shooting-terrorism-g...
- swampthinker 11y agoThe article was about taxes. How did you go from taxes, to terrorism, to cyber security? Never mind the fact that this is representative of EU disfunction, not Google "being evil".
- vonklaus 11y agoWhile I don't love google, I thought I made the claim rediculous enough that everyone would be able to realize it os satire and google could probably do 10x of what any govt could with the money.
- swampthinker 11y agoThe /s went flying over my head.
- outside1234 11y agoBasically everyone in Corporate America is doing this. Its not just Google. If the EU (or us, or whoever) doesn't like this, then we need to change the laws.
- wheaties 11y agoWe do, no other country makes companies pay taxes on income earned outside their domicile. It's supposed to be taxed by the country where it's earned. That said, this double dutch or whatever is taking things to an extreme.
- DanBC 11y agoGoogle doesn't pay income in England on stuff they sell, because they claim the tax is due in the US where the IP (search, ad sense) is created. They then don't pay the tax in the US because something something.
- toast0 11y ago> Google doesn't pay income in England on stuff they sell If you'd like them to pay tax on what they sell, then you should be charging a sales tax, a value added tax, or a receipts tax, not an income tax.
- DanBC 11y agoVAT is paid by the consumer, not by the seller.
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- icebraining 11y agoTechnically, yes. In practice, what difference does that make beyond making ecommerce sales rates vary?
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- jacques_chester 11y agoThere's an ancient saying worth meditating on, when statistics like these surface: Hate the game, not the player.
- joelrunyon 11y agoAh - the old ancient proverb :)
- jstalin 11y agoOutstanding. Tax competition is a good thing.
- haberman 11y agoSomething recently occurred to me. The fundamental problem here is that as companies have grown multinational, something that used to be mostly a one-to-many relationship (country contains many taxable entities) has become a many-to-many relationship. It wouldn't be fair or logical to tax any multi-national as if it existed 100% in each country where it does business. So the question is how to write the rules such that a business's overall operation is taxed by each sovereign state in a way that is "fair" compared to the amount of operation / amount of benefit it is getting in each. This might be obvious to most people but it was a new way of thinking about it for me.
- x5n1 11y agoWe have this for income, why does it not apply for corporations. Then countries make treaties with each other as to who gets what so corporations are not double taxes. The corporations have to declare all their income to all the countries that they operate in and then those countries have to work out a logic on how that is to be taxed.
- cowsandmilk 11y agoUh, it is this way for corporations. This is why Google can pretend it made most of its european money in Bermuda and not pay taxes on it.
- x5n1 11y agoWhy does Google get to decide this? I mean what's the logic for this. For people it's wherever you spent most of your time. For a corporation it should be where and how and from whom you derived most of your revenue.
- tonfa 11y agoUsually the tricky part is when you have to decide licensing. Eg for Amazon, most of (all?) the site is developed in the US, so every local subsidiary has to license it. How much this license is worth is the whole question. Some gov would like to say 0, so they can get a higher share of the tax, companies might say it is worth all their local income (so they pay 0 tax locally). The truth is probably in between. Other issue might be that this IP often ends up being owned in a tax heaven, instead of the US which would be the logical owner.
- ksk 11y agoIts interesting how many of these companies do business with the US government, yet continue to dodge taxes. (Any) Government in theory could choose a vendor using any arbitrary criteria, for e.g. manufacturing the product in the US, not funneling profits outside the country and many others. Unfortunately, its all about - Privatize the gains, subsidize the losses - these days.
- bitmapbrother 11y agoIf Google saved 2.4B then Apple must have saved 5 - 7 Billion. Where's that story, Bloomberg?
- sjg007 11y agoAt some point taxes are irrelevant. That's the justification. But they are also an excuse and the reason we don't fund education and social services.
- joering2 11y ago... and that boys and girls is called "tax planning". But don't try it at home - for you, me and every other regular Joe Doe or small-business owner, this would be labelled as "tax avoidance".
- paulddraper 11y agoTax avoidance is nothing to shy away from. Tax evasion, on the other hand, is illegal.
- spacehome 11y agoTax avoidance is legal.
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- mtone 11y agoI like the CRA's (http://www.cra-arc.gc.ca/gncy/lrt/vvw-eng.html http://www.cra-arc.gc.ca/gncy/lrt/vvw-eng.html) categories: - Tax planning: within the spirit of the law - Tax avoidance: within the letter of the law - Tax evasion: unlawful
- rdlecler1 11y agoI'd like someone to explain to me how this is not tax evasion. This is a US incorporated company that developed its IP in the US. It has its headquarters in the US and it trades on a US stock exchange. Moreover, a good portion of its revenue comes from the US. This business of paying some sort of technology license to a subsidiary you own in Bermuda to avoid taxes seems like outright tax evasion. Whether that is US tax evasion or European tax evasion where the earning were made. If Google is reporting billions of dollars in earnings to Wall Street and they get the benefit of that from the market, then Google should be paying taxes on that and not funneling it to a jurisdiction where they have no actual or tangible business.
- Narkov 11y agoIANATL (tax lawyer) but why can't they sell those US developed rights to Bermuda? Don't hate the player, hate the game.
- baudehlo 11y agoIn this case why can't we hate the player? We apply similar hate to people who abuse the welfare system too. This is very similar.
- Narkov 11y agoThe root cause is still the rules that allow the abuse. It's lazy on all our part to blame Google et al when it is really the rules that force them to do this. See the '5 whys' for why we should look deeper: https://en.wikipedia.org/wiki/5_Whys https://en.wikipedia.org/wiki/5_Whys
- baudehlo 11y agoNothing I said disagrees with that. But if you are on the side of "don't hate the player" you have to feel that way about all abuses of the system. You don't get to pick and choose when you take that stance.
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- peteforde 11y agoJust because something is legal doesn't mean that it's okay, from a values and ethics perspective. This is precisely why so many people are frustrated with the very notion of a corporation; it has most of the rights and none of the moral compass of a human. I find it troubling that so many folks here are quick to argue what distills to, "if it won't land you in prison and it's better for your shareholders, you pretty much have a responsibility to behave in an antisocial manner". Antisocial as in: short term profits over societally accretive goals for the future. I feel comfortable in my position because corporations benefit directly and indirectly from infrastructure provided by all three levels of government; everything from roads to schools for their employees kids. A smart player would put money back into the public coffers so that people could be taken care of, not hoard it for the already-wealthy. Why? Because there needs to be a functioning middle class to buy your products (and click on your ads). I'm reminded of Penn Jillette talking about how he rapes and murders exactly as much as he wants (eg. not at all) without needing a divine entity to tell him not to do those horrible things.
- gaius 11y agoThe metaphor I like is that these companies convert common social capital into their own financial capital.
- olalonde 11y agoFor what it's worth, Penn Jillette would most likely disagree that giving more money to the government is the way towards "societally accretive goals for the future". I don't want to start a political debate on HN but let's say things are not as black and white as you paint them to be and that it is possible to hold an opinion different than yours without being already-wealthy.
- austerity 11y ago> Just because something is legal doesn't mean that it's okay, from a values and ethics perspective. Exactly. And taxation is a prime example of that. Just because a racket gang decides to spend some of their proceedings for the betterment of society (in their or your definition of it) doesn't make their activities morally justified and certainly doesn't make anyone (be it person or corporation) morally obliged to pay up.
- Aoyagi 11y agoWell, if Google keeps dodging taxes, I'll keep dodging any advertising and snooping they might employ. Not that tax-dodging was the only reason for that, but it could be a sole reason for it.
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- jokoon 11y agoI don't think those issues will be solved politically speaking, between countries. Voters are consumers, and I don't think politicians have a lot of leverage against those corporations. If they hit corporations, consumers will complain. Even in a global economy, I don't think nations are enough organized to fight multinationals, since they might defend the corporation or their home country. Maybe the goal of the TPP is to fix exactly just that, to lay some ground rules about taxes, but if it fails, it will show how nations are unable to collect taxes. That's my greatest fear, that people become dependent on corporations, so much that they would side with them. Today I'm sure people prefer their iPhone and internet than firemen, police, an administration, etc.