4 ms·

> Which means the company in the US made $1, the company in Germany made $1 and the company in Ireland made $999. Any reasonable judge in their sound mind woul

> Which means the company in the US made $1, the company in Germany made $1 and the company in Ireland made $999. Any reasonable judge in their sound mind would find it to be a tax avoidance, because it is! I'm very certain and can put my $100 on it, that US courts know thousands of cases where same scheme has been put in works and people in charge put behind bars. But not Google...

AnthonyMouse 11y ago
Tax evasion is the thing where Al Capone makes a lot of money without reporting it to the IRS and goes to jail. Tax avoidance is the thing where Ford builds a plant in Chihuahua instead of Detroit in part because Mexico has lower taxes. There is an obvious PR nightmare when the entity that makes all the profit is in a jurisdiction where they have hardly any operations, but seizing that as an opportunity to lambaste them in public does nothing to solve the actual problem. The underlying problem is this: When Google buys something from Google, how do you determine when the seller should act like a monopoly or the buyer should act like a monopsony? If you can't answer that question in a way that can't be gamed then you can't in practice tax international corporate profit.
- fleitz 11y ago
  Exactly Google would be happy to ship the jobs overseas if they needed 'substantial' operations to take advantage of the tax code. Since workers pay most of the tax it's a double FU to the jurisdiction with high taxes
baddox 11y ago
Of course it's tax avoidance. Tax avoidance is by definition perfectly legal, so no judge would be in a position to accuse a company of it.
- ptaipale 11y ago
  And there are very many kinds of tax avoidance. Apocryphically: at the time when Sweden's income taxes were on their most absurd levels [0], medical doctors would reduce their working hours because their marginal tax rate was well above 50 % and they got little in return for extra hours. This was clearly tax avoidance, or course. Someone then noticed this and made a proposal to tackle it with a tax called "tax on income avoided by refusal to work". That law didn't pass even in Sweden in 1970's. But clearly it was tax avoidance which thus was allowed to run rampant. [0] https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania
refurb 11y ago
I would imagine that sort of thing falls under "transfer pricing" of which there are plenty of laws and regulations already. If you have a company in the US, but parts are made in China, you can't have the US company pay $99 to their plant in China and claim only $1 in profit in the US. That issue was addressed a long time ago.
- ascorbic 11y ago
  Yes, there are laws, they're completely ineffective. They need to end the fiction that subsidiaries of a multinational are in any way independent financially.
  - icebraining 11y ago
    Saying they are not independent doesn't solve the issue of in which country they should pay their income taxes.
  - ptaipale 11y ago
    You see this claim, and at the same time you see the very same activists insist that there must be "country by country reporting" of independent financial country organisations. Well, that pretty much exists already. But the claim that the laws are "completely ineffective" is unsubstantianted.
    - ascorbic 11y ago
      The fact that the kind of artificial arrangements exist proves that the laws are meaningless.
      - ptaipale 11y ago
        What artificial arrangements? OECD countries in general and CJEC countries in particular have signed agreements that enforce tax rules such that the tax collecting authorities as a rule bypass any artificial arrangements. To be lawful, national tax regulations must be proportionate and specifically aimed at preventing "purely artificial arrangements".
morgante 11y ago
Yes, it is "tax avoidance." Tax avoidance is 100% legal. Tax evasion is what's illegal and they're not doing that here. Everything they're doing is by the book—there aren't any secrets to be found.
- justincormack 11y ago
  I don't know why you are convinced it is legal. Google and Apple are currently making settlements with pretty much every government in Europe. Apple may well have to pay Ireland several billion dollars in taxes because the deal they did is likely to be ruled illegal.
  - sokoloff 11y ago
    The difference is that tax avoidance is defined as legal and tax evasion defined as illegal (at least in the US). If it's a legal activity aimed at minimizing taxes, it's avoidance. Likewise, if it's avoidance, it's legal, and if it's not legal, it's not avoidance. From the IRS manual, section 25.1.1.2.4 .1 & .2 [0] [1] Avoidance of tax is not a criminal offense. Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means. One who avoids tax does not conceal or misrepresent, but shapes and preplans events to reduce or eliminate tax liability within the parameters of the law. Evasion involves some affirmative act to evade or defeat a tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are. If I move to Florida or Texas to escape paying state income tax on my earnings, that's avoidance. If I earned the money in Massachusetts and simply decide to not declare and pay tax on it, that's evasion. What's happening to some of the multi-nationals is that their attempts at structuring their affairs are being judged on the wrong side of the line. While it may not be being called evasion legally in all cases, it's exceeded the bounds of avoidance, resulting in settlements. [0] - https://www.irs.gov/irm/part25/irm_25-001-001.html#d0e299 https://www.irs.gov/irm/part25/irm_25-001-001.html#d0e299 (light emphasis mine) [1] - That section numbering scheme itself gives a clue as to how complex the tax code is.
    - justincormack 11y ago

AnthonyMouse 11y ago

Tax evasion is the thing where Al Capone makes a lot of money without reporting it to the IRS and goes to jail. Tax avoidance is the thing where Ford builds a plant in Chihuahua instead of Detroit in part because Mexico has lower taxes. There is an obvious PR nightmare when the entity that makes all the profit is in a jurisdiction where they have hardly any operations, but seizing that as an opportunity to lambaste them in public does nothing to solve the actual problem. The underlying problem is this: When Google buys something from Google, how do you determine when the seller should act like a monopoly or the buyer should act like a monopsony? If you can't answer that question in a way that can't be gamed then you can't in practice tax international corporate profit.

fleitz 11y ago
Exactly Google would be happy to ship the jobs overseas if they needed 'substantial' operations to take advantage of the tax code. Since workers pay most of the tax it's a double FU to the jurisdiction with high taxes

baddox 11y ago

Of course it's tax avoidance. Tax avoidance is by definition perfectly legal, so no judge would be in a position to accuse a company of it.

ptaipale 11y ago
And there are very many kinds of tax avoidance. Apocryphically: at the time when Sweden's income taxes were on their most absurd levels [0], medical doctors would reduce their working hours because their marginal tax rate was well above 50 % and they got little in return for extra hours. This was clearly tax avoidance, or course. Someone then noticed this and made a proposal to tackle it with a tax called "tax on income avoided by refusal to work". That law didn't pass even in Sweden in 1970's. But clearly it was tax avoidance which thus was allowed to run rampant. [0] https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania

refurb 11y ago

I would imagine that sort of thing falls under "transfer pricing" of which there are plenty of laws and regulations already. If you have a company in the US, but parts are made in China, you can't have the US company pay $99 to their plant in China and claim only $1 in profit in the US. That issue was addressed a long time ago.

ascorbic 11y ago
Yes, there are laws, they're completely ineffective. They need to end the fiction that subsidiaries of a multinational are in any way independent financially.
- icebraining 11y ago
  Saying they are not independent doesn't solve the issue of in which country they should pay their income taxes.
- ptaipale 11y ago
  You see this claim, and at the same time you see the very same activists insist that there must be "country by country reporting" of independent financial country organisations. Well, that pretty much exists already. But the claim that the laws are "completely ineffective" is unsubstantianted.
  - ascorbic 11y ago
    The fact that the kind of artificial arrangements exist proves that the laws are meaningless.
    - ptaipale 11y ago
      What artificial arrangements? OECD countries in general and CJEC countries in particular have signed agreements that enforce tax rules such that the tax collecting authorities as a rule bypass any artificial arrangements. To be lawful, national tax regulations must be proportionate and specifically aimed at preventing "purely artificial arrangements".

morgante 11y ago

Yes, it is "tax avoidance." Tax avoidance is 100% legal. Tax evasion is what's illegal and they're not doing that here. Everything they're doing is by the book—there aren't any secrets to be found.

justincormack 11y ago
I don't know why you are convinced it is legal. Google and Apple are currently making settlements with pretty much every government in Europe. Apple may well have to pay Ireland several billion dollars in taxes because the deal they did is likely to be ruled illegal.
- sokoloff 11y ago
  The difference is that tax avoidance is defined as legal and tax evasion defined as illegal (at least in the US). If it's a legal activity aimed at minimizing taxes, it's avoidance. Likewise, if it's avoidance, it's legal, and if it's not legal, it's not avoidance. From the IRS manual, section 25.1.1.2.4 .1 & .2 [0] [1] Avoidance of tax is not a criminal offense. Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means. One who avoids tax does not conceal or misrepresent, but shapes and preplans events to reduce or eliminate tax liability within the parameters of the law. Evasion involves some affirmative act to evade or defeat a tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are. If I move to Florida or Texas to escape paying state income tax on my earnings, that's avoidance. If I earned the money in Massachusetts and simply decide to not declare and pay tax on it, that's evasion. What's happening to some of the multi-nationals is that their attempts at structuring their affairs are being judged on the wrong side of the line. While it may not be being called evasion legally in all cases, it's exceeded the bounds of avoidance, resulting in settlements. [0] - https://www.irs.gov/irm/part25/irm_25-001-001.html#d0e299 https://www.irs.gov/irm/part25/irm_25-001-001.html#d0e299 (light emphasis mine) [1] - That section numbering scheme itself gives a clue as to how complex the tax code is.
  - justincormack 11y ago