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"Several have been accused of using legal methods to minimise their tax bills." Since when is it illegal to follow the law? Sure, we all have different opinion

by ersii 10y ago

"Several have been accused of using legal methods to minimise their tax bills." Since when is it illegal to follow the law? Sure, we all have different opinions on the legal gray areas and of whether certain or all laws are legitimate and to what extent - but come on, that quote is just ridiculous.

hrnnnnnn 10y ago
It's not the most eloquent phrasing. I think what they're trying to say is "People find legalistic tax-dodging unethical, and they're sick of rich people and big companies getting away with it."
- derekp7 10y ago
  In other words, they found a bug in the way the law is written, and they are exploiting that flaw to their benefit.
  - batmansmk 10y ago
    Yes, and it is forbidden, as in France what matters is the spirit of the law and not the way it is expressed. It helps keeping common sense upfront; keeping readable and compact text laws.
    - ptaipale 10y ago
      That sounds somewhat scary. The law is not what is written, but what someone says is the "spirit" of it? The end result is going to depend on who gets to interpret the spirit, and this idea is frightening.
      - derekp7 10y ago
        Isn't that almost how laws in the US actually work in practice? It isn't about what is written, but how it is interpreted by a judge, and possibly re-interpreted upon appeal(s)? So you have the written law, but also case law on top of it (so to figure out if you are breaking the law, you need to see how your situation compares to the possibly hundreds of somewhat similar but possibly subtly different cases that have already been decided).
- lloyd-christmas 10y ago
  Solution: Get rid of tax law as one of the major sub-industries of the legal profession. When I no longer need a lawyer to submit my taxes, I'll start caring about corporate tax loopholes.
  - ciaranm 10y ago
    Most people in Europe don't need Lawyers to submit their taxes. In fact, until I started my own company (UK) - I didn't 'submit' taxes. It was calculated (and taken) automatically based on my salary and otherwise declared income.
    - charlesdm 10y ago
      This depends a lot on the country. For example: I'd say most self employed people in Belgium use an accountant to file their taxes. Some (a subset) of those also have a tax lawyer who helps them optimise certain things. Self employed people (i.e. entrepreneurs) who make decent money will have a tax lawyer, because inevitably, you'll bump into an unfriendly tax collector somewhere down the road.
      - emp_zealoth 10y ago
        From my experiences with self-employed people (doctors, hundreds of them - im in an MD-motorcycle club) they will try to write off anything and everything and the accountants are there to talk them out of it
        charlesdm 10y ago
        That's only because those tax deductions are often accepted. If one can write off an entire holiday home with a reasonable chance of success, say 80%, then you'd be crazy not to try. If countries don't want that, they should change their laws. In some higher tax countries, a lot of things are technically allowed, because that way they can tax "the little man" a lot and not tax higher earners as much (i.e. doctors, notaries, high earning entrepreneurs, etc).
      - 10y ago
- charlesdm 10y ago
  So let's raid the place. Excellent idea. Which judge is going to issue a judgement against Google if they're not breaking any tax laws? I would expect any issues to pop up quite fast during a routine audit of their accounts. This almost feels like blackmail. Pay up, or we'll keep harassing you, raiding your offices etc.
- deleted 10y ago
  [deleted]
- JoshTriplett 10y ago
  If you don't like the tax law as written, change it. Until then, following the law as written is perfectly reasonable.
onli 10y ago
In Louis Begleys Matters of Honour, there is a similar passage. A big international company in France uses loopholes to not pay taxes, until France strikes back with devastating outcome for the company (don't worry, knowing that spoils nothing important). I think the point is that countries make the law, and companies thinking they can use use the law to act against the interest of countries won't end well. There is precedent.
realusername 10y ago
All the laws are judged on intent, not on the exact wording, why would finance laws be any different than the other ones ?
- mike_hearn 10y ago
  No, people are judged on intent. Laws are meant to be applied as written. That's why you hear about people getting off on a technicality, and why you hear about obviously dumb rulings like two teenagers who get into a relationship and end up guilty of paedophilia. That obviously wasn't the intent of the lawmakers, but it's the result of the law as written. The notion of intent is a very important protection in law ... for the accused. For lawmakers, not so much.
  - gsnedders 10y ago
    > Laws are meant to be applied as written. That's why you hear about people getting off on a technicality, and why you hear about obviously dumb rulings like two teenagers who get into a relationship and end up guilty of paedophilia. This isn't true in the English legal system, which seems worthwhile to note given its wide reaching influence. When dealing with statue law (because obviously common law cannot be applied as written!), judges have three options as to how to interpret the law: the literal rule, where the law is interpreted literally as written; the mischief rule, where something that would have been judged illegal under common law can be judged to have been intended to be illegal under the statue law even though it is not literally; and finally the golden rule, which essentially allows the judge to avoid an absurd result. (It's relatively similar under Scots law, and I cannot comment as to elsewhere.)
- DannyBee 10y ago
  Wait what? in the US, laws are judged on exact wording first, and then intent only if the wording is unclear.
bambax 10y ago
Don't know about American law, but in French the notion exists and is called "abus de droit"; just because you can do something "in general", you can't do it with the specific purpose of circumventing another legal obligation. For example, as an Irish company, you can open a subsidiary in France to do business in France. That's a right. But if you're doing business in France essentially, you can't make the French company a subsidiary of an Irish one that doesn't have any other activity, in the sole purpose of evading French taxes. That would be abusing the right (of opening subsidiaries). It may conform to the letter of the law but not to its spirit, and can be punished. Of course, this is all a very grey area and up to the judge to evaluate (and my explanation perhaps lacks clarity); but it's real nonetheless!
- deleted 10y ago
  [deleted]
- charlesdm 10y ago
  Who says they don't have activities in Ireland? A lot of Google's employees are actually based in Ireland. > Just because you can do something "in general", you can't do it with the specific purpose of circumventing another legal obligation. Most countries have laws that say you can't do something JUST for tax purposes. You can, however, structure things in a tax friendly way, if there's a commercial motive to do so.
  - ucaetano 10y ago
    http://www.independent.ie/business/technology/google-hits-5000-employee-level-in-dublin-now-one-of-capitals-biggest-employers-31480103.html http://www.independent.ie/business/technology/google-hits-50... Over 5k employees apparently.
    - charlesdm 10y ago
      If that's not sufficient substance then I don't know what is. Yes, obviously they structured it like that intentionally and Ireland is happy with them being there. But it seems reasonable for a structure like that to fall within the scope of the law.
partiallypro 10y ago
It's illegal when the government is short of cash, I guess.
bksjdf 10y ago
'using legal methods' could mean using lawyers/law firms to hide their illegal tax activities.
SEJeff 10y ago
Also, remember that they have a legally binding fiduciary duty to their shareholders to maximize shareholder value. If they know they can pay (made up numbers) 5% effective tax instead of 20% tax, they are obligated to. The proper solution instead of raiding these firms, is to fix the tax laws that make this possible in the first place.
Kell 10y ago
Disclosure : French law is my field of work but I only have knowledge of this case by the media (which is terrible in legal matters in France, really, worse than the US sometimes). It seems that the prosecutors are using a small clause in the French Irish tax treaty saying that the taxation rules applying to a corporation officially incorporated in Ireland are different (implying much higher than the Irish 12.5%), if this corporation has a "stable establishment" in France. The prosecutor is arguing that this applies to Google, so that paying only the Irish 12.5% was illegal. So no, they are not being accused of using legal methods to minimise their tax bills. The main problem is actually a even more complicated. It rests on the understanding of the wording of the convention relating to the words "Fixed installation of affairs used only for purposes of advertising (...)" (those are exempted from the "stable establishment" exemption).Google argues that their advertising business makes them exempt to it. Meanwhile French prosecutors argue this clause is intended for companies advertising their own products (imagine Tesla having an agency in France advertising the Tesla cars because they intend to open a point of sale in France, but not selling them yet), not the actual sale of advertisement space like Google do. And frankly when reading the elements of the convention the Prosecutors have made public... they seem to have a pretty solid ground. PS : Yay at last, being a tech fan with french legal background is useful !
- robert_foss 10y ago
  Thank you, that was really helpful.
- hvalika 10y ago
  Thanks Kell - I must ask - did Google ever approach the French Revenue Authorities and try to get a ruling ahead of time? I assume they are arguing that Google does not have a permanent establishment in France.
  - Kell 10y ago
    We don't know if they tried to get a tax ruling beforehand. And unfortunately I'm not familiar enough with the case to speculate on it.
kafkaesq 10y ago
The sentence you're quoting refers to the actions of other companies which have come under scrutiny. The BBC article itself doesn't explain the reason behind the raid on Google's office.
jahewson 10y ago
You've misread the sentence. I'll grant it's not clear, but this sentence follows the fairly common British form of "legal methods" meaning "acts involving lawyers", not "acts which are not illegal". So this BBC article is simply stating that various companies have been accused of engaging in legalistic and accounting techniques to minimise their tax bills. Nothing is suggested about whether or not those techniques are illegal. Tax evasion is certainly illegal though!

by ersii 10y ago

hrnnnnnn 10y ago

It's not the most eloquent phrasing. I think what they're trying to say is "People find legalistic tax-dodging unethical, and they're sick of rich people and big companies getting away with it."

derekp7 10y ago
In other words, they found a bug in the way the law is written, and they are exploiting that flaw to their benefit.
- batmansmk 10y ago
  Yes, and it is forbidden, as in France what matters is the spirit of the law and not the way it is expressed. It helps keeping common sense upfront; keeping readable and compact text laws.
  - ptaipale 10y ago
    That sounds somewhat scary. The law is not what is written, but what someone says is the "spirit" of it? The end result is going to depend on who gets to interpret the spirit, and this idea is frightening.
    - derekp7 10y ago
      Isn't that almost how laws in the US actually work in practice? It isn't about what is written, but how it is interpreted by a judge, and possibly re-interpreted upon appeal(s)? So you have the written law, but also case law on top of it (so to figure out if you are breaking the law, you need to see how your situation compares to the possibly hundreds of somewhat similar but possibly subtly different cases that have already been decided).
lloyd-christmas 10y ago
Solution: Get rid of tax law as one of the major sub-industries of the legal profession. When I no longer need a lawyer to submit my taxes, I'll start caring about corporate tax loopholes.
- ciaranm 10y ago
  Most people in Europe don't need Lawyers to submit their taxes. In fact, until I started my own company (UK) - I didn't 'submit' taxes. It was calculated (and taken) automatically based on my salary and otherwise declared income.
  - charlesdm 10y ago
    This depends a lot on the country. For example: I'd say most self employed people in Belgium use an accountant to file their taxes. Some (a subset) of those also have a tax lawyer who helps them optimise certain things. Self employed people (i.e. entrepreneurs) who make decent money will have a tax lawyer, because inevitably, you'll bump into an unfriendly tax collector somewhere down the road.
    - emp_zealoth 10y ago
      From my experiences with self-employed people (doctors, hundreds of them - im in an MD-motorcycle club) they will try to write off anything and everything and the accountants are there to talk them out of it
      - charlesdm 10y ago
        That's only because those tax deductions are often accepted. If one can write off an entire holiday home with a reasonable chance of success, say 80%, then you'd be crazy not to try. If countries don't want that, they should change their laws. In some higher tax countries, a lot of things are technically allowed, because that way they can tax "the little man" a lot and not tax higher earners as much (i.e. doctors, notaries, high earning entrepreneurs, etc).
    - 10y ago
charlesdm 10y ago
So let's raid the place. Excellent idea. Which judge is going to issue a judgement against Google if they're not breaking any tax laws? I would expect any issues to pop up quite fast during a routine audit of their accounts. This almost feels like blackmail. Pay up, or we'll keep harassing you, raiding your offices etc.
deleted 10y ago
[deleted]
JoshTriplett 10y ago
If you don't like the tax law as written, change it. Until then, following the law as written is perfectly reasonable.

onli 10y ago

In Louis Begleys Matters of Honour, there is a similar passage. A big international company in France uses loopholes to not pay taxes, until France strikes back with devastating outcome for the company (don't worry, knowing that spoils nothing important). I think the point is that countries make the law, and companies thinking they can use use the law to act against the interest of countries won't end well. There is precedent.

realusername 10y ago

All the laws are judged on intent, not on the exact wording, why would finance laws be any different than the other ones ?

mike_hearn 10y ago
No, people are judged on intent. Laws are meant to be applied as written. That's why you hear about people getting off on a technicality, and why you hear about obviously dumb rulings like two teenagers who get into a relationship and end up guilty of paedophilia. That obviously wasn't the intent of the lawmakers, but it's the result of the law as written. The notion of intent is a very important protection in law ... for the accused. For lawmakers, not so much.
- gsnedders 10y ago
  > Laws are meant to be applied as written. That's why you hear about people getting off on a technicality, and why you hear about obviously dumb rulings like two teenagers who get into a relationship and end up guilty of paedophilia. This isn't true in the English legal system, which seems worthwhile to note given its wide reaching influence. When dealing with statue law (because obviously common law cannot be applied as written!), judges have three options as to how to interpret the law: the literal rule, where the law is interpreted literally as written; the mischief rule, where something that would have been judged illegal under common law can be judged to have been intended to be illegal under the statue law even though it is not literally; and finally the golden rule, which essentially allows the judge to avoid an absurd result. (It's relatively similar under Scots law, and I cannot comment as to elsewhere.)
DannyBee 10y ago
Wait what? in the US, laws are judged on exact wording first, and then intent only if the wording is unclear.

bambax 10y ago

Don't know about American law, but in French the notion exists and is called "abus de droit"; just because you can do something "in general", you can't do it with the specific purpose of circumventing another legal obligation. For example, as an Irish company, you can open a subsidiary in France to do business in France. That's a right. But if you're doing business in France essentially, you can't make the French company a subsidiary of an Irish one that doesn't have any other activity, in the sole purpose of evading French taxes. That would be abusing the right (of opening subsidiaries). It may conform to the letter of the law but not to its spirit, and can be punished. Of course, this is all a very grey area and up to the judge to evaluate (and my explanation perhaps lacks clarity); but it's real nonetheless!

deleted 10y ago
[deleted]
charlesdm 10y ago
Who says they don't have activities in Ireland? A lot of Google's employees are actually based in Ireland. > Just because you can do something "in general", you can't do it with the specific purpose of circumventing another legal obligation. Most countries have laws that say you can't do something JUST for tax purposes. You can, however, structure things in a tax friendly way, if there's a commercial motive to do so.
- ucaetano 10y ago
  http://www.independent.ie/business/technology/google-hits-5000-employee-level-in-dublin-now-one-of-capitals-biggest-employers-31480103.html http://www.independent.ie/business/technology/google-hits-50... Over 5k employees apparently.
  - charlesdm 10y ago
    If that's not sufficient substance then I don't know what is. Yes, obviously they structured it like that intentionally and Ireland is happy with them being there. But it seems reasonable for a structure like that to fall within the scope of the law.

partiallypro 10y ago

It's illegal when the government is short of cash, I guess.

bksjdf 10y ago

'using legal methods' could mean using lawyers/law firms to hide their illegal tax activities.

SEJeff 10y ago

Also, remember that they have a legally binding fiduciary duty to their shareholders to maximize shareholder value. If they know they can pay (made up numbers) 5% effective tax instead of 20% tax, they are obligated to. The proper solution instead of raiding these firms, is to fix the tax laws that make this possible in the first place.

Kell 10y ago

Disclosure : French law is my field of work but I only have knowledge of this case by the media (which is terrible in legal matters in France, really, worse than the US sometimes). It seems that the prosecutors are using a small clause in the French Irish tax treaty saying that the taxation rules applying to a corporation officially incorporated in Ireland are different (implying much higher than the Irish 12.5%), if this corporation has a "stable establishment" in France. The prosecutor is arguing that this applies to Google, so that paying only the Irish 12.5% was illegal. So no, they are not being accused of using legal methods to minimise their tax bills. The main problem is actually a even more complicated. It rests on the understanding of the wording of the convention relating to the words "Fixed installation of affairs used only for purposes of advertising (...)" (those are exempted from the "stable establishment" exemption).Google argues that their advertising business makes them exempt to it. Meanwhile French prosecutors argue this clause is intended for companies advertising their own products (imagine Tesla having an agency in France advertising the Tesla cars because they intend to open a point of sale in France, but not selling them yet), not the actual sale of advertisement space like Google do. And frankly when reading the elements of the convention the Prosecutors have made public... they seem to have a pretty solid ground. PS : Yay at last, being a tech fan with french legal background is useful !

robert_foss 10y ago
Thank you, that was really helpful.
hvalika 10y ago
Thanks Kell - I must ask - did Google ever approach the French Revenue Authorities and try to get a ruling ahead of time? I assume they are arguing that Google does not have a permanent establishment in France.
- Kell 10y ago
  We don't know if they tried to get a tax ruling beforehand. And unfortunately I'm not familiar enough with the case to speculate on it.

kafkaesq 10y ago

The sentence you're quoting refers to the actions of other companies which have come under scrutiny. The BBC article itself doesn't explain the reason behind the raid on Google's office.

jahewson 10y ago

You've misread the sentence. I'll grant it's not clear, but this sentence follows the fairly common British form of "legal methods" meaning "acts involving lawyers", not "acts which are not illegal". So this BBC article is simply stating that various companies have been accused of engaging in legalistic and accounting techniques to minimise their tax bills. Nothing is suggested about whether or not those techniques are illegal. Tax evasion is certainly illegal though!