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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 Europ

• wyager 10y ago
  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.
  • bleepbloop22 10y ago
    Shouldn't blame the companies for lobbying and creating the tax laws either -- they're just acting rationally! Maybe we can blame people for behaving unethically instead of believing this shlock?
    • tim333 10y ago
      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.
      • criley2 10y ago
        "Global tax office" 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.
        • tim333 10y ago
          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.
      • fizzbatter 10y ago
        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?
    • ews 10y ago
      > Shouldn't blame the companies for lobbying and creating the tax laws either -- they're just acting rationally! spot on. this.
      • Ntrails 10y ago
        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?
    • majewsky 10y ago
      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.
  • Gargoyle 10y ago
    Yes, those absurd tax environments are in no way created by companies and their money. Not at all.
    • threatofrain 10y ago
      Do legislators not possess primary responsibility for their own actions?
      • kafkaesq 10y ago
        No -- we do, unfortunately. And we don't have to put up with it, if we don't want to.
      • pherq 10y ago
        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?
    • fizzbatter 10y ago
      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).
      • kafkaesq 10y ago
        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.
  • qsymmachus 10y ago
    This is why abuse of rights is an important legal principle: https://en.wikipedia.org/wiki/Abuse_of_rights https://en.wikipedia.org/wiki/Abuse_of_rights Rational != Ethical
    • goodplay 10y ago
      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.
      • louprado 10y ago
        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.
        • lmm 10y ago
          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.
      • colechristensen 10y ago
        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.
  • kafkaesq 10y ago
    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.
    • pipio21 10y ago
      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.
      • kafkaesq 10y ago
        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.
        • ptaipale 10y ago
          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?
          • kafkaesq 10y ago
            Either way, I'm not sure what the point is in trying to shift focus to the newspapers or the politicians.
  • Joeri 10y ago
    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.
    • x3n0ph3n3 10y ago
      > 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.
      • venomsnake 10y ago
        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.
        • effie 10y ago
          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.
  • antr 10y ago
    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.
    • ianai 10y ago
      On the other hand, it's an incentive for countries to do what it takes to increase the wages of their citizens. Ie minimum wage laws.
    • simonh 10y ago
      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.
      • 10y ago
  • colechristensen 10y ago
    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.
  • krmmalik 10y ago
    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.
    • pipio21 10y ago
      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.
  • gpderetta 10y ago
    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.
  • conjectures 10y ago
    Rational actions can be deeply unethical. 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. [1] https://www.theguardian.com/business/2013/apr/26/accountancy-firms-knowledge-treasury-avoid-tax https://www.theguardian.com/business/2013/apr/26/accountancy...
  • kmkemp 10y ago
    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.
  • ionised 10y ago
    Those same companies lobby governments to create those absurd and favourable tax arrangements. They are all to blame.
• downandout 10y ago
  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.
  • andrewprock 10y ago
    Yet, they also have an ethical responsibility to the society in which they operate. Being legal and ethical are two different things.
    • deleted 10y ago
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    • mrschwabe 10y ago
      What if the taxes are unethical?
      • andrewprock 10y ago
        That's like asking "what if profits are unethical?"
        • mrschwabe 10y ago
          Why would profits be unethical?
          • bobwaycott 10y ago
            Profits would be unethical if they were derived from unethical business practices. This isn't difficult to imagine.
            • mrschwabe 10y ago
              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.
• nolok 10y ago
  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)
• ransom1538 10y ago
  Tax cheats. 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. Further: https://upload.wikimedia.org/wikipedia/commons/c/c3/Double_Irish_with_a_Dutch_Sandwich.svg https://upload.wikimedia.org/wikipedia/commons/c/c3/Double_I... The above info graphic clearly shows an attempt to defeat the US the 26 U.S. Code § 7201. This is not only illegal but morally reprehensible.
  • linkregister 10y ago
    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.
    • deleted 10y ago
      [deleted]
    • ransom1538 10y ago
      "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.
• varunom 10y ago
  For a wider prospective of how this whole tax haven thing got setup [0] is a nice read. 0: http://michael-hudson.com/2016/04/laundering-havens-for-war-budgets/ http://michael-hudson.com/2016/04/laundering-havens-for-war-...
• dailo10 10y ago
  There are multiple aspects at play here: 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.
  • developer2 10y ago
    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.
• refurb 10y ago
  Yes, but it's the gov't who decides what the actual tax laws are, right? The corporations are just following those laws. If the gov't wants to put an end to this behavior, they can. They just need to change the laws.
  • DanBC 10y ago
    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.
• MR4D 10y ago
  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.