14 ms·

There are no such things as tax loopholes. There is compliance with the law as Congress has written with all of their agendas, and there is noncompliance.

by thrill 9y ago

kosei 9y ago
Sure, but there are also ways for governments to close these loopholes as well. It's not necessarily on tech companies to solve, but it is up to the government and its citizens to ask for change (if this does not follow the spirit of the law).
debt 9y ago
Incorrect. Loopholes are the side effect crappily written laws. And in many cases, loopholes are unearthed by an army of high-paid law firms. Unintentionally created, but very intentionally exploited. As these loopholes are closed(again, because they're unintentional), these mega corporations are moving around their money from tax haven to tax haven; they're actively exploiting these loopholes in various countries. It is depriving these countries of very real income. Ya know to pay for the roads, emergency systems, mental health clinics, etc. of ordinary people. So, sure, it's legal in the same way the many multitudes of immoral things of history were legal.
- flor1s 9y ago
  Companies pay low tax in one country for money they earned in another country. Almost every multinational does that, there are buildings in The Netherlands in which a dozen of international firms have a postbox just so they can redirect their revenue and pay the lowest tax on it. Being Dutch, I am ashamed that our government does not do anything to change the laws which allow for this to happen.
  - debt 9y ago
    Poor countries use tax havens as well. Those countries are the most hurt by the use of tax havens. Many people in poor countries depend on tax dollars to survive. https://www.theguardian.com/commentisfree/2013/may/14/tax-havens-entrenching-poverty-developing-countries https://www.theguardian.com/commentisfree/2013/may/14/tax-ha... It's a disgusting practice, that many on this forum seem to have no problem defending. Astounding.
saas_co_de 9y ago
It is not at all that cut and dried. Engaging in sham business activity for the specific purpose of tax avoidance is not legal. Many of these tax schemes could be declared invalid at the discretion of the IRS (or other governments - the EU already has in some cases). These companies are not complying with tax law. They are cheating and paying bribes or doing favors to get away with it, and everyone knows it.
- refurb 9y ago
  Right, that would be non-compliance as the OP already pointed out.
- compiler-guy 9y ago
  These companies are paying the minimum amount of taxes that they can make a reasonable legal case to pay for. They have armies of lawyers that check and recheck the scheme. Yes, there are many judgement calls, and as with all judgement calls, there may be differences of opinion. But you can bet that they all believe that they can make a strong case that they are within the law.
- notliketherest 9y ago
  LOL saas_co_de accuses Google of engaging in a sham business.
  - dang 9y ago
    We've banned this account for repeatedly violating the HN guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
    - notliketherest 9y ago
      Fuck you and your bubble world.
joelg 9y ago
"There are no such things as bugs in code; the computer always executes the code as written." Loopholes and bugs are differences between intent and effect.
- colonelxc 9y ago
  That supposes that there was no intent to leave the loopholes in. "It's not a bug, it's a feature"
- jdavis703 9y ago
  What about a software bug that was actually a deliberate "backdoor"? Or what about a tax statute that was written with warnings that it was ripe for abuse (e.g. the pass through income tax cut)?
  - reificator 9y ago
    That some bugs are deliberate has no bearing on the non-deliberate ones.
- nradov 9y ago
  It's rather difficult to determine the intent of legislators, especially after some time has passed. Courts sometimes look at Congressional debate transcripts when deciding complex issues of federal law. But different congresspeople often have different conflicting intents even when they vote the same way.
  - berberous 9y ago
    Sure, especially with respect to some edge cases, and that may be an argument for not throwing people in prison that exploit certain loopholes. On the other hand, there are certainly cases where a loophole is obviously not the intent of the legislators, and regardless of the legality of exploiting it, one could justly view exploiting it as immoral. For example, sticking with the analogy of computer bugs, a multiplayer videogame that has an obviously unintended glitch, which lets you cheat against your fellow players.
DanBC 9y ago
Laws are interpreted by the courts. Congress might write a law with some expectations. A well paid accountant and lawyer team might interpret the law differently. The company employing the team is trying to obey the law, so this isn't illegal tax evasion. But it is tax avoidance, and the use of loopholes may be found to be illegal by the courts, or the law might change to make it illegal. "Loophole" is just short hand for "unexpected use of law that hasn't been tested by the courts".
- Codestare 9y ago
  Sometimes I wonder if all those laws could just be distilled into a few universal truth laws or something. The amount of legal gymnastics going on in court cases and things like this... It never ceases to amaze me. It all seems so inefficient.
gowld 9y ago
Loopholes exist, because language is imprecise and imperfect. Laws have loopholes like code has bugs. In this particular case, it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails to tax overseas income of corporations. In many cases, tax law says or (implies) "you pay $X to us, but you get credit for tax paid to other countries".
- refurb 9y ago
  Yes language is imprecise and imperfect and that is why we have tax courts to clarify it. If a company misinterprets tax code, they will eventually have to pay the price for it. And I feel like "loophole" doesn't do justice to the authority the US gov't has. If Congress can't get their act together enough to write clear tax law, then they should go back and fix it. Don't blame the company for imperfect and imprecise language - they didn't write it.
- basch 9y ago
  >it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails They did change the law, and this workaround will stop working around 2020
- omarforgotpwd 9y ago
  > the US government has made no effort to change how the law fails to tax overseas income of corporations Of course they have made an effort to fix this -- the recently passed tax reform bill makes this a thing of the past by dropping the tax rate for foreign profits to 0%.
- yakitori 9y ago
  > Loopholes exist, because language is imprecise and imperfect. That's one way for loopholes to exist. Another way is for companies to pay/lobby politicians to write loopholes into tax laws. > Laws have loopholes like code has bugs. Sure. And software also has backdoors placed there intentionally by developers.
Density 9y ago
I feel the revulsion is aimed mostly at our corrupt Congress that made this possible, but also at the corrupting companies who are benefiting.
- rocqua 9y ago
  Blame here lies with the Netherlands as well (I am Dutch). The politicians here want a nice "business establishment climate" (direct translation). The reasoning being that dodging taxes here gets us office jobs and perhaps whatever is left of the taxes. The U.S. has threatened to put us on the list of tax havens, and we've made some moves to fix things, but apparently we are dragging our heels. According to this source [1] we talk the good talk, and behind the scenes do our very best to slow down as many of these new procedures as possible. Supposedly this is in the name of "Ensuring proper implementation". The new government is going to abolish the tax on dividends. I don't know the details, but it's a controversial move. The opposition parties are really against it. I guess a small country needs to make some moves to stay relevant. [1] https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwars-bij-eu-aanpak-belastingontwijking.html https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwa...
cantrip 9y ago
Exactly. Do you think shareholders would stand for a company paying $19.2B more in taxes than they should? That would be absurdly negligent on the part of everyone leading the company. Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government? Don't indict corporations for following the tax code, change the laws.
- cryptoz 9y ago
  Obviously the law should be changed. But your comments are otherwise incorrect. > Do you think shareholders would stand for a company paying $19.2B more in taxes than they should? What do you mean, 'should'? They 'should' pay the amount that is expected of them - the amount proportional to their profits. Each corporation should pay what is expected of them in full. This would produce is vastly more stable economy which would then let those corporations earn more money. It would benefit the shareholders of every corporation to have a stronger and stabler US consumer base than to have a crippled middle class like they create by not paying their taxes. Yes, of course Google should have paid that $19.2B. > Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government? Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes.
  - monktastic1 9y ago
    > What do you mean, 'should'? I read it as something like 'are required to by law.' > Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes. I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that?
    - cryptoz 9y ago
      > I read it as something like 'are required to by law.' I would have said 'have to' to be required by law. 'Should' implies a moral code, a desire to do right and good. In this case, Google absolutely 'should' pay those taxes. > I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that? If you have more money than necessary, and you know that others don't, and you know that a good portion of your taxes goes to helping others, the rational thing to do could be to help out and not attempt to claim every tax break and benefit you could. I'm not saying that's always right, I'm saying it can be rational for people to do it. Paying as little taxes as possible to avoid jail is absolutely not the rational move for people or corporations. This is a classic tragedy of the commons: if people and companies paid taxes as due, we would all be better off for it. The rational move is to fully pay all expected taxes, not use offshore secret hideouts to avoid improving your own country.
legulere 9y ago
That’s like claiming that you there’s no such thing as hacking someone. The exploit just follows the rules of the code. And code has pretty clear-cut semantics, while law is up to interpretation to a certain point. Laws are buggy like code and using loopholes is just hacking the law.
andrepd 9y ago
Yes, there is such thing as the "spirit of the law" vs the "letter of the law". OJ got away with murder but that doesn't make him any less guilty.
dkural 9y ago
You're wrong. There are such things as tax loopholes; and this fact is acknowledged by lawmakers, lawyers, tax experts, corporations. People don't like judgment so they say we're keeping with the law. Yes, they are, but by abusing tax loopholes. Corporations have come up with a lot of banned phrases; and encouraged phrasing to hide the true nature and psychological, social, and material impact of their actions. Where does it say in the tax code to go set up Bermuda corporations and launder revenue earned in various territories through Ireland and Netherlands to avoid taxation in those territories?
joeblow9999 9y ago
definition of loophole: legal tax condition I don't approve of.
olfactory 9y ago
True. The tax code is complex and absurd because many interests benefit from it being that way.
eitland 9y ago
My economics teacher actually used the word loophole but explained to us: You are allowed to use any loophole: if there is a tax break for doing x and you normally do y then you are allowed to do x to save tax. You are not allowed to lie: If you didn't do y after all you should not pretend you did.

There are no such things as tax loopholes. There is compliance with the law as Congress has written with all of their agendas, and there is noncompliance.

by thrill 9y ago

There are no such things as tax loopholes. There is compliance with the law as Congress has written with all of their agendas, and there is noncompliance.

kosei 9y ago

Sure, but there are also ways for governments to close these loopholes as well. It's not necessarily on tech companies to solve, but it is up to the government and its citizens to ask for change (if this does not follow the spirit of the law).

debt 9y ago

Incorrect. Loopholes are the side effect crappily written laws. And in many cases, loopholes are unearthed by an army of high-paid law firms. Unintentionally created, but very intentionally exploited. As these loopholes are closed(again, because they're unintentional), these mega corporations are moving around their money from tax haven to tax haven; they're actively exploiting these loopholes in various countries. It is depriving these countries of very real income. Ya know to pay for the roads, emergency systems, mental health clinics, etc. of ordinary people. So, sure, it's legal in the same way the many multitudes of immoral things of history were legal.

flor1s 9y ago
Companies pay low tax in one country for money they earned in another country. Almost every multinational does that, there are buildings in The Netherlands in which a dozen of international firms have a postbox just so they can redirect their revenue and pay the lowest tax on it. Being Dutch, I am ashamed that our government does not do anything to change the laws which allow for this to happen.
- debt 9y ago
  Poor countries use tax havens as well. Those countries are the most hurt by the use of tax havens. Many people in poor countries depend on tax dollars to survive. https://www.theguardian.com/commentisfree/2013/may/14/tax-havens-entrenching-poverty-developing-countries https://www.theguardian.com/commentisfree/2013/may/14/tax-ha... It's a disgusting practice, that many on this forum seem to have no problem defending. Astounding.

saas_co_de 9y ago

It is not at all that cut and dried. Engaging in sham business activity for the specific purpose of tax avoidance is not legal. Many of these tax schemes could be declared invalid at the discretion of the IRS (or other governments - the EU already has in some cases). These companies are not complying with tax law. They are cheating and paying bribes or doing favors to get away with it, and everyone knows it.

refurb 9y ago
Right, that would be non-compliance as the OP already pointed out.
compiler-guy 9y ago
These companies are paying the minimum amount of taxes that they can make a reasonable legal case to pay for. They have armies of lawyers that check and recheck the scheme. Yes, there are many judgement calls, and as with all judgement calls, there may be differences of opinion. But you can bet that they all believe that they can make a strong case that they are within the law.
notliketherest 9y ago
LOL saas_co_de accuses Google of engaging in a sham business.
- dang 9y ago
  We've banned this account for repeatedly violating the HN guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - notliketherest 9y ago
    Fuck you and your bubble world.

joelg 9y ago

"There are no such things as bugs in code; the computer always executes the code as written." Loopholes and bugs are differences between intent and effect.

colonelxc 9y ago
That supposes that there was no intent to leave the loopholes in. "It's not a bug, it's a feature"
jdavis703 9y ago
What about a software bug that was actually a deliberate "backdoor"? Or what about a tax statute that was written with warnings that it was ripe for abuse (e.g. the pass through income tax cut)?
- reificator 9y ago
  That some bugs are deliberate has no bearing on the non-deliberate ones.
nradov 9y ago
It's rather difficult to determine the intent of legislators, especially after some time has passed. Courts sometimes look at Congressional debate transcripts when deciding complex issues of federal law. But different congresspeople often have different conflicting intents even when they vote the same way.
- berberous 9y ago
  Sure, especially with respect to some edge cases, and that may be an argument for not throwing people in prison that exploit certain loopholes. On the other hand, there are certainly cases where a loophole is obviously not the intent of the legislators, and regardless of the legality of exploiting it, one could justly view exploiting it as immoral. For example, sticking with the analogy of computer bugs, a multiplayer videogame that has an obviously unintended glitch, which lets you cheat against your fellow players.

DanBC 9y ago

Laws are interpreted by the courts. Congress might write a law with some expectations. A well paid accountant and lawyer team might interpret the law differently. The company employing the team is trying to obey the law, so this isn't illegal tax evasion. But it is tax avoidance, and the use of loopholes may be found to be illegal by the courts, or the law might change to make it illegal. "Loophole" is just short hand for "unexpected use of law that hasn't been tested by the courts".

Codestare 9y ago
Sometimes I wonder if all those laws could just be distilled into a few universal truth laws or something. The amount of legal gymnastics going on in court cases and things like this... It never ceases to amaze me. It all seems so inefficient.

gowld 9y ago

Loopholes exist, because language is imprecise and imperfect. Laws have loopholes like code has bugs. In this particular case, it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails to tax overseas income of corporations. In many cases, tax law says or (implies) "you pay $X to us, but you get credit for tax paid to other countries".

refurb 9y ago
Yes language is imprecise and imperfect and that is why we have tax courts to clarify it. If a company misinterprets tax code, they will eventually have to pay the price for it. And I feel like "loophole" doesn't do justice to the authority the US gov't has. If Congress can't get their act together enough to write clear tax law, then they should go back and fix it. Don't blame the company for imperfect and imprecise language - they didn't write it.
basch 9y ago
>it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails They did change the law, and this workaround will stop working around 2020
omarforgotpwd 9y ago
> the US government has made no effort to change how the law fails to tax overseas income of corporations Of course they have made an effort to fix this -- the recently passed tax reform bill makes this a thing of the past by dropping the tax rate for foreign profits to 0%.
yakitori 9y ago
> Loopholes exist, because language is imprecise and imperfect. That's one way for loopholes to exist. Another way is for companies to pay/lobby politicians to write loopholes into tax laws. > Laws have loopholes like code has bugs. Sure. And software also has backdoors placed there intentionally by developers.

Density 9y ago

I feel the revulsion is aimed mostly at our corrupt Congress that made this possible, but also at the corrupting companies who are benefiting.

rocqua 9y ago
Blame here lies with the Netherlands as well (I am Dutch). The politicians here want a nice "business establishment climate" (direct translation). The reasoning being that dodging taxes here gets us office jobs and perhaps whatever is left of the taxes. The U.S. has threatened to put us on the list of tax havens, and we've made some moves to fix things, but apparently we are dragging our heels. According to this source [1] we talk the good talk, and behind the scenes do our very best to slow down as many of these new procedures as possible. Supposedly this is in the name of "Ensuring proper implementation". The new government is going to abolish the tax on dividends. I don't know the details, but it's a controversial move. The opposition parties are really against it. I guess a small country needs to make some moves to stay relevant. [1] https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwars-bij-eu-aanpak-belastingontwijking.html https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwa...

cantrip 9y ago

Exactly. Do you think shareholders would stand for a company paying $19.2B more in taxes than they should? That would be absurdly negligent on the part of everyone leading the company. Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government? Don't indict corporations for following the tax code, change the laws.

cryptoz 9y ago
Obviously the law should be changed. But your comments are otherwise incorrect. > Do you think shareholders would stand for a company paying $19.2B more in taxes than they should? What do you mean, 'should'? They 'should' pay the amount that is expected of them - the amount proportional to their profits. Each corporation should pay what is expected of them in full. This would produce is vastly more stable economy which would then let those corporations earn more money. It would benefit the shareholders of every corporation to have a stronger and stabler US consumer base than to have a crippled middle class like they create by not paying their taxes. Yes, of course Google should have paid that $19.2B. > Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government? Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes.
- monktastic1 9y ago
  > What do you mean, 'should'? I read it as something like 'are required to by law.' > Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes. I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that?
  - cryptoz 9y ago
    > I read it as something like 'are required to by law.' I would have said 'have to' to be required by law. 'Should' implies a moral code, a desire to do right and good. In this case, Google absolutely 'should' pay those taxes. > I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that? If you have more money than necessary, and you know that others don't, and you know that a good portion of your taxes goes to helping others, the rational thing to do could be to help out and not attempt to claim every tax break and benefit you could. I'm not saying that's always right, I'm saying it can be rational for people to do it. Paying as little taxes as possible to avoid jail is absolutely not the rational move for people or corporations. This is a classic tragedy of the commons: if people and companies paid taxes as due, we would all be better off for it. The rational move is to fully pay all expected taxes, not use offshore secret hideouts to avoid improving your own country.

legulere 9y ago

That’s like claiming that you there’s no such thing as hacking someone. The exploit just follows the rules of the code. And code has pretty clear-cut semantics, while law is up to interpretation to a certain point. Laws are buggy like code and using loopholes is just hacking the law.

andrepd 9y ago

Yes, there is such thing as the "spirit of the law" vs the "letter of the law". OJ got away with murder but that doesn't make him any less guilty.

dkural 9y ago

You're wrong. There are such things as tax loopholes; and this fact is acknowledged by lawmakers, lawyers, tax experts, corporations. People don't like judgment so they say we're keeping with the law. Yes, they are, but by abusing tax loopholes. Corporations have come up with a lot of banned phrases; and encouraged phrasing to hide the true nature and psychological, social, and material impact of their actions. Where does it say in the tax code to go set up Bermuda corporations and launder revenue earned in various territories through Ireland and Netherlands to avoid taxation in those territories?

joeblow9999 9y ago

definition of loophole: legal tax condition I don't approve of.

olfactory 9y ago

True. The tax code is complex and absurd because many interests benefit from it being that way.

eitland 9y ago

My economics teacher actually used the word loophole but explained to us: You are allowed to use any loophole: if there is a tax break for doing x and you normally do y then you are allowed to do x to save tax. You are not allowed to lie: If you didn't do y after all you should not pretend you did.