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The missing profits of nations
- dang 8y agoEditorializing titles like this is against HN's guidelines (https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html). When accounts do this, they eventually lose submission privileges. If you'd read the guidelines and follow them when posting here, we'd appreciate it. (Submitted title was 'Don't be taxpayer – Google Alphabet made $19.2B in revenue in Bermuda'.)
- kooow 8y agoOk. Sorry.
- eecc 8y agoAlso because the original title is a smug pun on “the wealth of nations”, Adam Smith’s essay that (neo)liberists trump around like Mao’s Red Book... Smith argued that letting capitalism loose would benefit us all - the wealth in his title - yet there seems to be quite a bit of it missing ;)
- ralusek 8y agoAre you suggesting that capitalism has not benefitted us all?
- flexie 8y agoAnd this is where the main issue is. Local newspapers, local advertising companies, global search companies that could have been; all of them are competing with Google on vastly unfair terms. Google is not paying tax. The others have to.
- TAForObvReasons 8y agoSame thing played out with Amazon. The embedded 7-9% sales tax advantage gave them a massive price advantage (even if the headline price is the same, the price the consumer pays is less) that retailers couldn't keep up with.
- candiodari 8y agoYou forget the effects of the "full reinvestment" policy. Amazon barely paid any tax at all. Not on sales, not on storage space, not on profits, not on ... (note: Jeff Bezos DID get enough money out of it to become the richest man on earth, but not through profit. Rather he got "capital gains on his shares", which is the same thing in practice, but a very different thing for the IRS. Oh, and since it's "paper profits only" (mostly) he hasn't paid tax on it either) People think the internet businesses got successful because it's "just a better way to do business", but it gets a ~20% government subsidy. 30% if hailing from China (for instance, free shipping really is free from China, or I should say, paid by the US taxpayer mostly) The reality is Amazon, and to a lesser extent Google, Apple Yahoo, Microsoft and Facebook are government-sponsored companies that have been given extreme preferential treatment for close to two decades now. Without that 20% advantage, there is no way Amazon could compete with Walmart. Without that, the business model is absurd, even now. Microsoft, selling software "locally" (ie. tax free in the Bahamas) but internationally, and even more so, Yahoo, Facebook, Google, ... selling services "locally" (in Delaware, Ireland and the Bahamas) is a homongous tax loophole. (note: they don't sell to "you". They sell to, say, Microsoft Ireland for $final_price - 5%, then the "only profit" is that 5%, and that's all they pay tax on. For FB/Yahoo/Google/... it's even worse) As an analysis of the cost structures of these companies will tell you : if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size. This seems absurd to many, but rewriting the financial statements of these companies taking normal tax structures into account will tell you this.
- Hermel 8y agoLarge companies should be taxed where the value is created. And because that’s hard to measure, cost should be used instead. So if Google spends 60% of its budget in the US, 60% of its profits should also be attributed to the US. (Side note: the alternative of taxing profits where the revenue is generated does not make much sense as this would be equivalent to a sales tax.)
- kyrra 8y agoAll large multi-national corporations do this. For example, NYT did a piece about Apple doing it[0]. Wikipedia has a list of companies that used the Double Irish setup[1]. The double-irish has been closed (via regulation) and most companies will be moving off of it by 2020. [0] https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.html https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.... [1] https://en.wikipedia.org/wiki/Double_Irish_arrangement#US_multinationals_using_Irish_tax_schemes https://en.wikipedia.org/wiki/Double_Irish_arrangement#US_mu...
- soneil 8y agoThey'll figure out an alternative. eg, Liechtenstein only has 2.5% corporate tax rates for IP & royalties. So create a shell there, sell it your IP, and then license it back.
- hinkley 8y ago> U.S. IP-heavy multinationals now employ a quarter of Ireland's private sector workforce,[28] pay 80% of Irish business tax,[29] pay 50% of Irish salary tax and VAT,[30] and create 57% of economic value-add.[28] Doesn’t that mean Ireland is fucked in 2020?
- paulryanrogers 8y agoDoes that risk pushing their spending to low tax jurisdictions?
- DubiousPusher 8y agoProbably some amount but I reason this would be much harder. You must pay workers where they live and buy resources from where they are produced. It's easier to offshore a made up entity like a corporation than a bunch of people and their hardware.
- nautilus12 8y agoThis is disgusting. Literally stealing from the pockets of the american people. It doesnt matter that its technically legal. This news should bring outrage.
- dang 8y agoMaybe so, but please don't post unsubstantive comments to HN.
- dane-pgp 8y ago"Literally stealing ... technically legal". I think at least one of those four words must be incorrect or poorly chosen.
- gaius 8y agoWell... legal where? The tax avoidance strategy of choice, the Irish Sandwich, is perfectly legal in Ireland and the Irish government actively invites companies to use it. They take taxes away from EU countries and collect generous subsidies from those same countries, double-dipping. Focus your ire there, or Luxembourg, or any of the other countries who have made a whole industry out of it.
- tcfunk 8y agoMaybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal? I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in US taxes that same year. Is it because "making the use of tax havens illegal" is hard/impossible?
- ThrustVectoring 8y agoIn the ideal world, corporate tax rates and taxes on investment income are zero. Google et al should be paying taxes on its earnings when it spends it on compensating employees, buying equipment for their offices, renting office space, etc.
- mattmanser 8y agoWithout any explanation of why this is ideal, this just comes across as a way of rewarding the rich 'land holders' and forcing the tax burden on the poor. What the logic behind this 'ideal'?
- ThrustVectoring 8y agoInvestment is, broadly speaking, how individuals use current production to fund future consumption. Investment taxes are a tax on future consumption over and above taxes on current consumption, creating a distortionary effect.
- leetcrew 8y agoi don't intend to argue GP's point for them, but it is important to be aware of the difference between paying a tax and actually bearing the burden of that tax. if (hypothetically) you increase some tax by 5% and all the companies raise their prices by 5%, you might end up with a situation where the companies "pay" the tax, but it entirely comes from the pockets of consumers. this is called tax incidence, and you can read more about it here: https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence the corporate tax is actually very controversial among economists. it seems like a straightforward case of "making the big corps pay", but there is very little consensus as to who ultimately foots the bill for this type of tax.
- dzink 8y agoTechnically the FAANG profits are somewhat reflected in the stock price. With their 20-50% in annual gains, holding stock in some of these allows you and retirees and other US stockholders to partake in the gains. The stock growth then rewards tax shifters vs non-tax shifters. This is essentially a wealth shift from tax global tax revenue that gets distributed by politics to global shareholders who are able and aware enough to invest in US fast-growing corporates (while possibly bubbling stock prices a bit).
- derefr 8y agoQuestion: why isn’t there an international entity that is to tax-law normalization as WIPO is to IP-law normalization, that could—like WIPO—punish offending non-members by requiring members to impose trade sanctions on them? The big players (none of which are tax havens) certainly would have an interest in building it, and in giving it power.
- eecc 8y agoRegulatory capture? Nah! lobbying? Hmm, close. Corruption? Yup, that right!
- dang 8y agoPlease don't post unsubstantive comments or use HN for ideological battle. Other users in the thread have views that I assume are similar to yours, and are posting substantively. That's the way to be. Comments like this one and https://news.ycombinator.com/item?id=17620701 https://news.ycombinator.com/item?id=17620701 are a bit like littering. I'm sure you wouldn't do that offline, so please don't do it here either.
- eecc 8y agoYeah, not sure about the littering but I could have elaborated the argument some more. But it’s late here and other will do a better job than myself
- jeffreyrogers 8y agoBecause the tax havens are small countries that don't export much so trade sanctions wouldn't have much effect.
- derefr 8y agoSorry, trade embargoes, not trade sanctions. Attempt to make their imports more expensive, regardless of who they’re importing from. As if there was a global empire attempting a trade war with them.
- WalterBright 8y agoI'd tax pollution and resource consumption, not profits.
- beerlord 8y agoLand is another good one to tax. It can't move or be hidden.
- woodpanel 8y agoYes, foreign direct investment is a poor measure in many regards and using foreign affiliates statistics instead seems very helpful. But referencing controversial Piketty doesn't help in advocating for their policy suggestions. I would have liked to see an exploration of how high-tax countries encourage those differences in "Pre-tax corporate profits (% of compensation of employees)" and how the taxing of individuals has changed in the same time. Germany for example has a progressive income tax capped at 42% yet while incomes rose over the decades, the tax exemption limits did not, effectively reducing the salary needed to reach that cap from 24-times-the-mean-wage two 2-times-the-mean-wage.
- eulerss__number 8y agofuck taxation, taxation is theft
- eulerss__number 8y agotaxation is theft, we need a pure free market
- DomreiRoam 8y agoIt seems that multinational uses price transfer to move profits from high tax country to low tax country. Would it make sense to tax trademarks, patents, goodwill from abroad to reduce this abuse?