15 ms·
Google used ‘double-Irish’ to shift $75.4B in profits out of Ireland
- comboy 6y agoJust a friendly reminder that as far as I understand it, publicly traded companies are required by law to maximize their profits (which is what's happening here). Then there are always politicians shouting about companies following that, instead of trying to do something to fix the problem. Problem which won't be fixed by companies and must be fixed by governments. edit: or rather maximize shareholders value, which basically means profits on the long run, which still means paying as little tax as you can legally
- Karunamon 6y agoThis. No company anywhere is going to pay a cent more in taxes than they're legally required to; the proper places to attack this kind of abuse is changing the laws.
- 2OEH8eoCRo0 6y agoThat's false. You're only legally required to act in the interest of shareholders. That can mean a lot of things.
- onetimemanytime 6y agoOK. John takes over Google and pays more taxes when the current scheme is legal. How is that rationalized? Why not pay even more?
- HPsquared 6y agoBuilding goodwill or other intangibles.
- andromeduck 6y agoNo such thing. Governments are inherently extractive same as any other monopoly.
- onetimemanytime 6y agoGoodwill with the government? That $5 Billion or whatever will last, what, 4 seconds in Capitol Hill? Name a US company that lost market share for not paying more taxes than required. They should invest more when it comes to good causes, yeah.
- ObserverNeutral 6y ago> Goodwill with the government? No, with the people. What you could do is a direct deposit in each American bank account in a very public way. 180M adults * 10USD = 1.8B Not a joke but also not that much for Google to build long lasting goodwill among the public In one swoop you delegitimize politicians by doing direct payments (maybe even a PR campaign with "money for nothing" as soundtrack) and win the public favor. "UBI-light" offered by Google..so many PR angles to think this thing through
- tomhoward 6y agoNot even that: directors are required to act in the interests of the company. Acting in the interests of shareholders is problematic, as different shareholders have different interests (especially minority vs majority). And by keeping the duty to act in the interests of the company, directors are not required to focus on short-term profitability and shareholder dividends; decisions can be justified as being in the long-term interests of the company, and better for the company's reputation and culture, even if they don't deliver shareholders the maximum short-term gains.
- elmalto 6y agoNo law I am aware of requires public companies to maximize profits for shareholders. I think it only applies when a company is for sale
- thatwasunusual 6y ago> publicly traded companies are required by law to maximize their profits Is that really true, though? "[...] there is no legal requirement for for-profit companies to maximize returns to shareholders. When a company is for sale, its directors are required to do all they can to maximize its value. At any other time, corporate law simply dictates that directors are supposed to help the company prosper and do nothing to benefit themselves at the company’s expense. But no law requires corporations to maximize returns to shareholders."[0] [0] https://www.washingtonpost.com/opinions/harold-meyerson-the-myth-of-maximizing-shareholder-value/2014/02/11/00cdfb14-9336-11e3-84e1-27626c5ef5fb_story.html https://www.washingtonpost.com/opinions/harold-meyerson-the-...
- Sebguer 6y agoOf course it's not true, it's just an easy excuse to abdicate any responsibility.
- MDWolinski 6y agoDon’t believe it’s legally required. Reference: https://skeptics.stackexchange.com/questions/8146/are-u-s-companies-legally-obligated-to-maximize-profits-for-shareholders https://skeptics.stackexchange.com/questions/8146/are-u-s-co...
- shillforhumanty 6y agoOn a similar note, I recently learned that theres a few politicians who benefit from insider trading but it's technically not called that. I can assume most politicians hold a few of these giants' shares(as well as others in the public market). It seems like conflict of interest can easily arise if these aren't just some wild ramblings.
- tomcam 6y agoThere is no such law.
- redis_mlc 6y ago> companies are required by law to maximize their profits No, US court rulings say that mgmt. has "wide latitude" in how the company is managed. It's up to shareholders and the board to step in if they disagree, but since they appointed mgmt., it's rare for major disagreements. Which makes sense in a capitalist country, as there is little central planning outside of certain industries like defense and banking (regulated.) (In both the US and UK, the govt. tells industry how many airplane or ship builders they want, and who has to merge. After WW2, this caused concentration in the airplane industry. My understanding is that Northrop was told to drop the F-20 (an upgrade on the F-5 and a challenger for the F-16) to focus on their bomber contract, and then still told to merge.) I'm not going to comment in detail about offshore tax structuring like Ireland except to say that it is an abuse of tax avoidance.
- tomhoward 6y ago> "maximize shareholders value, which basically means profits on the long run, which still means paying as little tax as you can legally" Nope. Directors are required to act in the interests of the company, and that can include maximising the company's reputation for ethics (which is also financially justifiable, in order to attract the best staff and customers long-term).
- ergocoder 6y agoIf I have a way to reduce tax, I'll do so as well. Nobody is against closing the loop hole. We all know what the loop hole is. Politicians should just do it. Instead, they (Dems mostly) parade around publicly shaming companies who reduces tax in a legal way.
- Sebguer 6y agoDo you believe all ethical behavior should be codified in law, or just taxes?
- the-dude 6y agoWhat is ethical about paying taxes? Genuinely curious.
- dave5104 6y agoTaxes pay for all sorts of things in society. They pay for childhood education, they build roads, they pay for services like fire departments. If you don't pay taxes, then it wouldn't really be fair for you to be sending your kids to public schools, driving on roads to get around, or calling the fire department when your house is burning down, since you haven't contributed anything to their upkeep.
- imgabe 6y agoSo the people earning $20k per year who don't pay any taxes shouldn't get to send their kids to public schools?
- nate_meurer 6y agoThat is pretty obviously not what the parent is talking about. The context here is tax avoidance, i.e., avoidance by those financially able to pay. This has nothing to do with those whom the government has exempted due to limited financial means. Policy debates aside, I don't think many people will seriously argue such people have an individual ethical responsibility to pay taxes.
- the_optimist 6y agoOf course we know that these same people advocate to raise taxes on _other_ people, who then must actually pay the taxes or go to prison. You hate to see it, but we all know this is the way it works from the private jet view.
- mnbv55 6y agoHow about the prison cell view? Or are all Americans too pussy to do anything? Someone will put a bullet in the head of one of these bastards eventually, and that will beautiful.
- insert_coin 6y agoEveryone, almost, advocates to spend other's people money, the tax the rich movement is literally that. Now, this is obviously a couple of degrees more obscene but only because of the magnitude of the numbers not because of the conduct. The conduct is sadly the norm.
- Grollicus 6y agoHow can google shift billions worth of patents from one country to another without having to pay taxes on this move? If I bought all their patents for $1 from them, I'd have to pay a huge amount based on some estimated valuation as this is seen as massively undervalued = a gift. Are there tricks like moving a whole company from one country to another? I think it's way too easy to shift paper values around the globe which makes these kinds of insane tax saving tricks way too low risk. Imagine Ireland saying "we won't let you export this as some of this has security implications". This is deeply amoral and even if in the strict sense of the law it's obviously legal that does not mean one has to let them get away with it too easily.
- leephillips 6y agoHow? The article explains exactly how. They followed the law.
- Grollicus 6y agoAh I thought they were actually moving patents but they're just cancelling an intermittent licensing agreement and then license it directly from the US. That makes it a lot more difficult to stop, yes.
- fortran77 6y agoIt was legal. They'd be remiss not to do it.
- ourmandave 6y agoIreland changed its tax law which is why Google is ending it's use of the Double Irish. It's not just Google of course. Apple apparently started it. Here's a list of other giant companies using the exact same loop hole. https://en.wikipedia.org/wiki/Double_Irish_arrangement#Multinationals_that_used_Irish_BEPS_tools https://en.wikipedia.org/wiki/Double_Irish_arrangement#Multi... Double Irish Major companies in Ireland known to employ the Double Irish BEPS tool, include: Apple Inc. original user, and known in operation since the late 1980s[19][54][55][171] Abbott Laboratories[172][173][174] Adobe Systems[175] Airbnb[176][177] Apple Inc.[19] Eli Lilly and Company[175] Facebook[138][178][179][180] Forest Laboratories[175] General Electric[178] Gilead[181] Google[32][39][178][182] IBM[183] Johnson & Johnson[178] Medtronic Inc.[184] Microsoft[175][185][186] News Corp[175] Oracle Corp.[139][175] Pfizer Inc.[175] Starbucks[178] Yahoo![187] Single malt Major companies in Ireland known to employ the single-malt BEPS tool, include: Microsoft (LinkedIn), using Malta[64] Allergan (Zeitiq), using Malta[64] Teleflex, using Malta[63] Capital allowances for intangible assets Major companies in Ireland known to employ the capital-allowances for intangible assets ("CAIA") BEPS tool, include: Apple Inc., started in 2015[104] with the leprechaun economics affair Accenture, started in 2009[94]
- jjtheblunt 6y agoDidn't you just say "Apple apparently started it." and then "Accenture, started in 2009[94]" right below it? I wonder if Accenture was doing Apple's audits, but I don't have any idea.
- colinmhayes 6y agoApple invented it in the 80's
- josefx 6y agoThose reference two different tax avoidance schemes. Apple started using the double Irish in 1980s. The Accenture point is about the capital-allowances for intangible assets scheme.
- Jon_Lowtek 6y ago
- andromeduck 6y agoHigh income taxes including Corporate ones are unenthical IMO. Just tax land value and goods/services at the point of consumption, aka VAT, if the end goals is equitable consumption, aka realized wealth, not vague notions of unrealizable wealth and influence which completely fail to account for the equivalent value in discretionary power held by politicians and beaurcrats. Corporate taxes in particular is just a way for politicians to hide the true tax wedge just like when they tax your income from you and your employer.
- gher-shyu3i 6y agoThere's another option. Look up how Islam solved this issue over 1400 years ago in a much more affordable and superior manner by means of Zakat. No income tax, no corporate tax, not VAT.
- ccvannorman 6y agoTo save people a Google: Zakat | Islamic tax | Britannica https://www.britannica.com https://www.britannica.com › ... › Banking & Business Zakat, Arabic zakāt, an obligatory tax required of Muslims, one of the five Pillars of Islam. The zakat is levied on five categories of property—food grains; fruit; camels, cattle, sheep, and goats; gold and silver; and movable goods—and is payable each year after one year's possession.
- ourmandave 6y agoBy September 2018, US–controlled corporates were 25 of Ireland's 50 largest companies, paid 80% of Irish business taxes,[126] and directly employed 25% of the Irish labour force,[127] and created 57% of Irish value-add. From here: https://en.wikipedia.org/wiki/Double_Irish_arrangement#Concentration_of_US_multinationals https://en.wikipedia.org/wiki/Double_Irish_arrangement#Conce...
- eloff 6y agoA great deal for Ireland, a terrible deal for Europe. Ultimately I think there will need to be some kind of international agreements on taxation to prevent these kinds of tax dodges. They'll just find the next loophole now that this is closed.
- albntomat0 6y agoIt’ll have to be a highly concentrated effort, as (to my understanding) taxation policy is pretty much prisoners dilemma. One state has incentive to have slightly lower taxes than all the others to get companies to incorporate there, and then it’s a race to bottom.
- 8note 6y agoThat assumes countries have to accept that the licensing fees are tax deductible. Putting some tariffs on licensing intellectual property seems like a non-prisoners dillema solution
- MrPowers 6y agoNot sure I follow. If US Multinational charges license to Italian Subsidiary, then the pricing impacts the profit allocation between the two entities. The IRS will say "the license should be really high" so the profits in the US are higher. The Italian tax authorities will say "the license should be low" so they get more tax revenue. For a complicated technology that's licensed, remember that neither taxing authority has any clue as to what it's actually worth. They don't care. They just want tax revenue. Remember to think about both taxing authorities when analyzing these transactions and imagine the ridiculous situations multinationals are put in.
- MrPowers 6y agoI normally find the Hacker News audience to be balanced on issues, but for tax policy, seems like strong opinions are held without a basic understanding of facts. In this instance don't have strong opinions if: * You have no idea what transfer pricing is * You have no idea what companies have to do to comply with transfer pricing laws (remember that these are international transactions and they need to comply with two sets of tax authorities, both with different sets of rules) * You have no idea what laws congress created related to these transactions * You have no idea that these laws have been updated over the years (if you have no idea about what changed in Section 482-7T) Comments like "companies should just pay their taxes" are like when laypeople say "companies should have websites that always work instantaneously & never have any downtime". Reality is complicated and your opinion isn't that valuable if you don't know any basic facts.
- jrockway 6y agoI'm not sure why you need to understand the facts to have an opinion. If kicking puppies was legal, you can still dislike people that kick puppies.
- justapassenger 6y agoWhat if you’re kicking a puppy that’s biting your leg? Understanding of facts is very relevant to form proper opinions. Without it you’re very easily manipulated via emotions.
- tymekpavel 6y agoI don't understand any of what you listed, but I believe corporations should pay a mandatory minimum tax. Also, I believe people can have opinions even if someone is being condescending to them.
- shadowgovt 6y agoThey can, but those opinions ought to carry very little weight with regards to policy or other people's opinions.
- ObserverNeutral 6y agoNext libertarian candidate should run on this message: "Billionaires such as Bezos already pay 0% tax! Companies such as Amazon and Google already pay a 0% tax! Let's have a 0% flat tax for everybody to even the playing field!!!" You'd get a sizable part of the BernieBros, as well as the Yang Gang if you also concede some form of UBI financed via selling/renting Federal Land (which you'd have to do anyway to pay down the debt given that you won't be collecting taxes anymore). Libertarians should really get on it and start taking advantage of the class warfare, which can be really powerful. So maybe Adam Kokesh can think about it...or Vermin Supreme or JoJo whoever will run as Libertarian
- ourmandave 6y agoFrom here: https://en.wikipedia.org/wiki/Double_Irish_arrangement#Controversial_closure_(2015) https://en.wikipedia.org/wiki/Double_Irish_arrangement#Contr... The 2014–16 EU investigation into Apple in Ireland (see below), showed that the Double Irish existed as far back as 1991. Early U.S. academic research in 1994 into U.S. multinational use of tax havens identified profit shifting accounting techniques.[7][36] U.S. congressional investigations into the tax practices of U.S. multinationals were aware of such BEPS tools for many years.[37] However, the U.S. did not try to force the closure of the Double Irish BEPS tool, instead it was the EU which forced Ireland to close the Double Irish to new schemes in October 2014.[38] Nevertheless, existing users of the Double Irish BEPS tool (e.g. Apple, Google, Facebook, Microsoft, amongst many others), were given five more years until January 2020, before the tool would be fully shut-down to all users.[29][39] tl;dr It was the EU that shut down the Double Irish. The US gave them until 2020, so they milked it as long as they could.
- williesleg 6y agoAnd they force socialist communism on the rest of us. Assholes.
- 29athrowaway 6y agoIreland is the Delaware of Europe.
- 1123581321 6y agoDelaware has a healthy corporate tax rate. Incorporations are popular there because of the extensive case law, which means few surprises. South Dakota has no corporate income tax and might be a better analogy if it worked harder to court large companies. South Dakota is popular with certain kinds of companies and individuals (libertarians, for example, who are willing to go to lengths to have South Dakota plates so they don't have to pay tax on the vehicle.)
- ObserverNeutral 6y agoLots of envious people in this thread. In the end the envy can be described as: "Larry&Sergey number is higher than my own number and the ego boost they get by looking at their number is bigger than the ego boost I get looking at my own number" These guys, they don't spend money, don't surrond themselves with luxury, they are pretty down to earth in their behavior and consumption, don't seek fame. Alphabet inc is like Mozart's Sonata n12 and Larry&Sergey are like Wolfgang Amadeus Mozart keeping the foot on the gas opposed to go and party like an animal using the fame which his opera gave it to him. People are envious of a number
- person_of_color 6y agoInteresting take. There is jealousy here.
- mnbv55 6y agoFurther evidence that Hacker News is the very embodiment of stupidity, an embarrassing clown car of losers who are extremely lucky to be born in a time where they're not just clubbed over the head as punishment for their repulsive idiocy.
- cascom 6y agoThis article is pointless - how do you even talk about this without talking about worldwide vs territorial based systems of taxation and the US’s history with them + the recently enacted TCJA
- wtf_is_up 6y agoI keep seeing things like 'Google pays 0% taxes' yet they reported an effective tax rate of 16.2% in their 2020 10-K filing.
- fmakunbound 6y agoHow feasible is it for a regular jack off like me to create similar arrangement? Would I need to create a corporation of myself and a holding company to pay me? Would it not work because how the IRS already knows what my employer pays me? Clueless of course, but kind of curious if corporate tax shenanigans could be replicated at scale for individuals.
- throw123123123 6y agoProbably the cost to set it up is high and fix, and you need a lot of revenue to justify the setup. Alternatively you have a much cheaper options: collect in crypto or cash.
- lasagnaphil 6y agoAh, the fine slogan, “Corruption for everybody!” [https://spectator.us/topic/corruption-for-everybody-slavoj-zizek-wallstreetbets/ https://spectator.us/topic/corruption-for-everybody-slavoj-z...]
- cascom 6y agowell the need for this has mostly gone away due to the 2017 TCJA. The short version is you can't do this because as a US (assuming?) individual you are subject to worldwide taxation (unlike the rest of the world (well except Eritrea)). But the wikipedia article on the double Irish is actually pretty interesting if you are interested in such things and lays out the steps: 1) A U.S. corporate (CORP) develops new software in the U.S. costing $1 million to build; 2) CORP sells it to its wholly owned Bermuda company (BER1) for $1 million (at cost, ideally); 3) BER1 revalues it to $1 billion (as an intangible asset under GAAP), and books gain in Bermuda (tax-free); 4) An Irish subsidiary, IRL1, purchases this intangible asset from BER1, for $1 billion; 5) Under the CAIA rules, IRL1 can write-off the $1 billion paid for this group intangible asset against Irish tax; 6) Additionally, BER1 gives IRL1 a $1 billion 10-year inter-group loan to buy the intangible asset, at an interest rate of circa 7%; 7) Over the next 10 years IRL1 claims tax relief on both the $1 billion purchase (under CAIA), and the inter-group loan interest; 8) During the 10 years, IRL1 charges out this asset to end-customers globally (as per step v. in the Double Irish), accumulating profits; 9) During the 10 years, CORP in line with its product cycle, has created new software and repeated step i. to iii. above; 10) At the end of the 10 years, IRL1 has shielded $1.7 billion of Irish profits against Irish tax; 11) At the end of the 10 years, BER1, who received the $1 billion purchase price, and $0.7 billion in loan interest, has paid no tax; 12) At the end of the 10 years, IRL1, repeats steps iv. to ix. above, and buys a new intangible asset from BER1 for $1 billion. https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
- ykevinator3 6y agoWhat's in it for Ireland and Bermuda?