7 ms·

The Tax Haven That's Saving Google Billions

95 points by bishnu 15y ago

stephenhamilton 15y ago
I'd like to know how much of the $60 billion tax shortfall the US government doesn't receive ends up in being spent by Google (at their discretion) on public works, education etc. I don't know enough to suggest this is (or isn't) the case, but perhaps this model would allow companies who genuinely want to look after their community to basically choose how money, that would otherwise be tax money, gets spent. I think lots of people would rather see money spent on public health and education than lots of other areas tax money gets diverted to. Of course, I'm not so naive as to think that this will take off anytime soon...
- rprasad 15y ago
  That's called a charitable deduction, and it's already part of the tax code. Google isn't using the charitable deduction; it's simply using a loophole to avoid U.S taxation on income earned from non-US sources. Whether this is bad depends on your view on taxation.
  - JoshTriplett 15y ago
    Regardless of your view on taxation, it seems pretty reasonable to only have to pay taxes in one jurisdiction (the one in which the income occurred). Differing views on taxation could argue over whether one or zero jurisdictions should get to impose taxes, but it seems pretty reasonable that no more than one ought to.
  - danssig 15y ago
    >it's simply using a loophole to avoid U.S taxation on income earned from non-US sources Income earned from non-US sources on US soil or outside of it? The thing that infuriates me about my home country is that they think I owe taxes on money I've earned while living in a totally different country. What stops, say, Russia from deciding I owe them taxes too?
cperciva 15y ago
My knowledge of international corporate tax law is practically nil, but if I understand this correctly, the money sitting in Bermuda is still subject to taxation when it gets brought back into the US; so Google isn't avoiding taxes, but is rather postponing taxes by doing this.
- nkassis 15y ago
  They can always spend it elsewhere.
- mnutt 15y ago
  My international corporate tax law knowledge is also practically nil, but I believe there is discussion in Congress about a corporate tax holiday that would allow them to bring money back to the US at a 3.5% tax rate.
- rprasad 15y ago
  It's subject to U.S. taxation only if Google ever decides to bring it back into the U.S. via a dividend. Alternatively, they can use that cash to fund foreign growth without ever facing US taxation. Postponing taxes for about 7 years is roughly the same as avoiding those taxes altogether, based on a comparison of the time value of money calculations (because future amounts of the same value are worth relatively less).
- melvinmt 15y ago
  It is not subject to taxation since the money has already been accounted for in Bermuda (where there is no corporate tax). It is effectively the same as money laundering, but then legal and on a much bigger scale.
  - rprasad 15y ago
    That's not true at all. It is subject to taxation if the cash is ever repatriated back to the U.S. That's not money laundering (which is the use of legal business activities to exchange illegaly earned income for legally earned income). It's legal because the money was technically earned by Google's foreign subsidiaries, which are legally distinct entities. As long as the money isn't repatriated to Google (U.S.), the money isn't subject to U.S. income taxation.
Skillset 15y ago
An earlier Hacker News discussion on this article can be found here: http://news.ycombinator.com/item?id=1815457 http://news.ycombinator.com/item?id=1815457
brown9-2 15y ago
These tax-avoidance schemes have great names - the "Double Irish" Arrangement and the "Dutch Sandwich": http://en.wikipedia.org/wiki/Double_Irish_Arrangement http://en.wikipedia.org/wiki/Double_Irish_Arrangement
camz 15y ago
I wrote an article on this transaction that I had posted to the HN community that breaks down a number of the points and explains how it works. http://cameronkeng.com/hn-how-do-i-pull-a-google/ http://cameronkeng.com/hn-how-do-i-pull-a-google/ A few things you should consider about international taxation is that it's complicated and only works because they have the infrastructure to sustain it. Disclaimer, I'm not saying what they're doing is right or wrong, but simply placing it into context 1. Individuals have a hard time using international tax law similarly because of CFC rules (closely-held foreign corps). If anyone owns more than 10% of a foreign company they must include or report the income as part of their current earnings. 2. The effective tax rate is only "2.something percent" of income the income google earned outside the US. 3. To have an APA (Advanced Pricing Agreement) with the IRS is incredibly expensive and time consuming because it's like getting audited in advance and then justifying it before you ever do anything. 4. You need to pay at a minimum a big 4 accounting firm 10 million to start a project of this complexity over a number of countries. 5. The dutch companies are simply a "conduit" to allow the money to ultimately reach the Caribbean island tax havens because they have no income tax and simply charge a flat tax of 15k. 6. On cperciva's note, this tax plan could be considered "post-poning income recognition" but in reality it effectively is never repatriated or brought back into the country because google is such a multinational company. They could use the money for their international business very easily or they could use their foreign cash reserves to purchase an asset in a foreign country and still retain the ownership by the US main company. I could go on for a while but this is just a the tip of the iceberg. I've practice this area of taxation before as a CPA so I could give you a number of other examples.
- bd_at_rivenhill 15y ago
  Does this get any easier if you do the original incorporation offshore?
  - camz 15y ago
    Yes possibly, if you're able to source the income offshore and keep it away from the united states. Then you'd be able remove it easier. But, as a shareholder that owns more than 10% of the company. It effectively cancels any of the tax benefits. There are some creative ways to remove yourself from the equation but it's pretty complicated. Is this Brian? lol
rayiner 15y ago
Trying to tax multi-national corporations is futile and encourages huge amounts of rent-seeking. We should just go to a low flat corporate tax rate (say 10%). To offset that we should stop taxing capital gains at a lower rate and crack down on tax avoidance by high-income individual taxpayers in the US. A corporation can run their activities from Bermuda or wherever they want, but corporate executives and shareholders aren't going to move to a shitty low-tax jurisdiction if we up their rates.
- nkassis 15y ago
  "To offset that we should stop taxing capital gains at a lower rate" I think this is not a bad idea, in fact, corporate taxes could be significantly lowered and capital gains/dividends could make up for it I believe. If not the money would usually go to reinvestment or some other sort of purpose. I think that taxing capital gains as if it was regular income would also be a fairer way to tax since a significant portion of high net worth individuals make most of their money from capital gain and pay less % taxes than upper middle class individuals.
- Bud 15y ago
  It's "futile"? Really? Is that just shorthand for saying that you oppose trying hard enough to do it successfully? I don't think it's futile at all. I think we lack the national will to do it, largely and obviously because of the folks who are in control of the relevant decisions. I'd be more sympathetic to your argument (and just fyi, I am not entirely unsympathetic as it is) if I had some confidence that adopting a 10% flat tax would actually result in corporations paying that amount. Taxing capital gains at a LOWER rate? Are you serious? Reagan/Bush/Bush trashed those rates to such an extent that it seems laughable to advocate lowering them any further. They're non-existent.
  - OstiaAntica 15y ago
    Your failure with the facts reveals that you are just an angry partisan. President Clinton cut capital gains rates further in 1997 than G.W. Bush did. Also, President Carter cut capital gains, while Bush senior made no change in capital gains rates but famously raised other taxes in 1990. Current longterm/shortterm rates range from 15/25 or 15/35, which is hardly "non-existent", especially when you consider that these rates are a double-taxation on resources that were already taxed as income.
Matt_Cutts 15y ago
This is an article from 2010 that's already been submitted to HN in the past: http://news.ycombinator.com/item?id=1815457 http://news.ycombinator.com/item?id=1815457 Personally, I find the sub-headline misleading. The subhead reads "Google uses a complicated structure to send most of its overseas profits to tax havens, keeping its corporate rate at a super-low 2.4 percent." But I believe that number refers only to Google's overseas tax rate. This more recent article http://news.yahoo.com/googles-tax-rate-still-seems-very-low-213223063.html http://news.yahoo.com/googles-tax-rate-still-seems-very-low-... says that Google's overall tax rate was 22.2% in 2009.
- illumen 15y ago
  Note, Matt_Cutts works for Google. Don't you think Google should be paying the UK tax on UK profits?
  - dsplittgerber 15y ago
    I don't agree at all. First, what exactly are "UK profits" supposed to be? Say Apple has a net margin of 20 % on every iPhone sold. It's designed in California by Americans (most surely several non-native Americans among them), manufactured in China by probably lots of Chinese workers and immigrants, shipped and flown across the world by god knows whom, etc. It's not like it's designed in Brixton, manufactured in Manchester and sold in London only. Which country is supposed to retain the tax on profit on each iPhone sold? The point of sale-country is one alternative. Is it the most logical? Is it equitable and fair (whatever that means)? Second, if your local legislator is just too stupid - or, more accurately, for a lot of reasons - unwilling to close tax loopholes, why on earth should a company be willing to waste shareholder's money by settling a claim (tax) that is not legally binding due to existing loopholes? There is a lot of hypocrisy involved in politicians blaming companies for using tax law loopholes - if they were at all serious about that, they would just write better laws. Sure, it's always playing catch-up with tax lawyers looking for "tax-efficient" structures, but most loopholes are well known among legislators, and they knowingly decide not to close them.
    - 15y ago
ppereira 15y ago
For a paper that discusses the Google example in some detail see Ed Kleinbard's "Stateless income's challenge to tax policy". http://www.sbs.ox.ac.uk/centres/tax/symposia/Documents/Kleinbard%20final%20v3.pdf http://www.sbs.ox.ac.uk/centres/tax/symposia/Documents/Klein...
curt 15y ago
This is exactly why high taxes hurt startups. How can a startup/small business compete profit wise against Google or another large company when they are paying a much lower effective rate. Since their tax burden is so much lower they can charge a much lower price, effectively pricing any startup/competition out of the market. We just need a super low corporate tax with zero loopholes that make it less expensive to just comply vs hiring hundreds of lawyers and accountants to move around money.
- mahyarm 15y ago
  You can move to a country with a lower corporate tax rate. Like Canada. Yes Canada. And you can get special tech industry tax deductions. The US has one of the higher corporate tax rates out there.
- shin_lao 15y ago
  Although you would reduce the amount of fraud with a lower tax rate, you would also decrease your income. The goal is to have the highest income possible, even if that implies fraud or optimizations. Big companies will always have an advantage regarding taxes: they can provision more easily, pay people to optimize, lobby, etc. I'm not saying you have an optimal tax rate in the USA, but the naive approach regarding this problem will probably not work. More information: http://en.wikipedia.org/wiki/Optimal_tax http://en.wikipedia.org/wiki/Optimal_tax
- namdnay 15y ago
  I don't think your argument that this hurts startups is true. Tax rates don't impact profitability, as they are calculated on profits.
deleted 15y ago
[deleted]
nazgulnarsil 15y ago
good, google creates more value than the average government program.
joshfraser 15y ago
How hard would it be to set up a system for startups, or at least mid-sized corporation to get the same tax breaks in mass? For example, could a company handle setting up all the holding companies & bank accounts around the world and make the process more affordable by doing it for hundreds of companies at once? You could share the same mailing addresses for each of the companies and the cost of keeping up w/ all the tax laws would be amortized across a much larger group of corporations.
idspispopd 15y ago
This is going to sound like a 99% rant, however this article perfectly demonstrates a scenario where tax-avoidance benefits few at the expense of the greater populace. To quote the article: "a company's obligation to its shareholders is to try to minimise its taxes and all costs, but to do so legally" Let's talk about who those share holders are: In tech companies the largest percentage of shares usually belong to the founders or the investors. Meaning that the tax minimisation is directly profiting few, and in some cases a single individual. Regular persons do not have the financial clout to either purchase shares, even in low volumes which would see so little of the avoided-tax-returned-as-profits. Similarly small companies don't have sufficient funding to set up elaborate tax minimisation schemes, effectively forcing them to bear the brunt and be less competitive. Governments deprived from tax income then turn to the population to bolster their coffers, and often to remain popular the tax rate is kept lower than required - which means cutting back on programs which benefit the greater good. We've seen some pretty ridiculous examples of how underfunded the education sector is becoming. (Somewhat hypocritical when the education sector is responsible for creating the skilled individuals that fuel these companies.) Stopping international loopholes is incredibly difficult, however there is still plenty that can be done to entice companies to not start them in the first place. Incentive rates could be introduced which allow companies (especially smaller ones) to take advantage of a lower rate in exchange for certain business restrictions that limit these sorts of activities.
cq 15y ago
The Tax Haven That's Stealing From Your Government
danssig 15y ago
Wait a second. These are earnings that Google international made. So, yes, perhaps they have weaseled out of paying taxes in the UK or various European countries but IMO they shouldn't owe the US a dime of that money. It wasn't made in the US. I find it really frustrating that people talk about discuss these things as "look at all the revenue the US lost because of this!". Sure, and look how much the mafia lost on it too! Both of these armed groups could have made more money if they just extorted foreign agents and took their money (calling it "protection money" or "tax" or whatever seems appropriate).

95 points by bishnu 15y ago

I'd like to know how much of the $60 billion tax shortfall the US government doesn't receive ends up in being spent by Google (at their discretion) on public works, education etc. I don't know enough to suggest this is (or isn't) the case, but perhaps this model would allow companies who genuinely want to look after their community to basically choose how money, that would otherwise be tax money, gets spent. I think lots of people would rather see money spent on public health and education than lots of other areas tax money gets diverted to. Of course, I'm not so naive as to think that this will take off anytime soon...

rprasad 15y ago
That's called a charitable deduction, and it's already part of the tax code. Google isn't using the charitable deduction; it's simply using a loophole to avoid U.S taxation on income earned from non-US sources. Whether this is bad depends on your view on taxation.
- JoshTriplett 15y ago
  Regardless of your view on taxation, it seems pretty reasonable to only have to pay taxes in one jurisdiction (the one in which the income occurred). Differing views on taxation could argue over whether one or zero jurisdictions should get to impose taxes, but it seems pretty reasonable that no more than one ought to.
- danssig 15y ago
  >it's simply using a loophole to avoid U.S taxation on income earned from non-US sources Income earned from non-US sources on US soil or outside of it? The thing that infuriates me about my home country is that they think I owe taxes on money I've earned while living in a totally different country. What stops, say, Russia from deciding I owe them taxes too?

cperciva 15y ago

My knowledge of international corporate tax law is practically nil, but if I understand this correctly, the money sitting in Bermuda is still subject to taxation when it gets brought back into the US; so Google isn't avoiding taxes, but is rather postponing taxes by doing this.

nkassis 15y ago
They can always spend it elsewhere.
mnutt 15y ago
My international corporate tax law knowledge is also practically nil, but I believe there is discussion in Congress about a corporate tax holiday that would allow them to bring money back to the US at a 3.5% tax rate.
rprasad 15y ago
It's subject to U.S. taxation only if Google ever decides to bring it back into the U.S. via a dividend. Alternatively, they can use that cash to fund foreign growth without ever facing US taxation. Postponing taxes for about 7 years is roughly the same as avoiding those taxes altogether, based on a comparison of the time value of money calculations (because future amounts of the same value are worth relatively less).
melvinmt 15y ago
It is not subject to taxation since the money has already been accounted for in Bermuda (where there is no corporate tax). It is effectively the same as money laundering, but then legal and on a much bigger scale.
- rprasad 15y ago
  That's not true at all. It is subject to taxation if the cash is ever repatriated back to the U.S. That's not money laundering (which is the use of legal business activities to exchange illegaly earned income for legally earned income). It's legal because the money was technically earned by Google's foreign subsidiaries, which are legally distinct entities. As long as the money isn't repatriated to Google (U.S.), the money isn't subject to U.S. income taxation.

Skillset 15y ago

An earlier Hacker News discussion on this article can be found here: http://news.ycombinator.com/item?id=1815457 http://news.ycombinator.com/item?id=1815457

brown9-2 15y ago

These tax-avoidance schemes have great names - the "Double Irish" Arrangement and the "Dutch Sandwich": http://en.wikipedia.org/wiki/Double_Irish_Arrangement http://en.wikipedia.org/wiki/Double_Irish_Arrangement

camz 15y ago

I wrote an article on this transaction that I had posted to the HN community that breaks down a number of the points and explains how it works. http://cameronkeng.com/hn-how-do-i-pull-a-google/ http://cameronkeng.com/hn-how-do-i-pull-a-google/ A few things you should consider about international taxation is that it's complicated and only works because they have the infrastructure to sustain it. Disclaimer, I'm not saying what they're doing is right or wrong, but simply placing it into context 1. Individuals have a hard time using international tax law similarly because of CFC rules (closely-held foreign corps). If anyone owns more than 10% of a foreign company they must include or report the income as part of their current earnings. 2. The effective tax rate is only "2.something percent" of income the income google earned outside the US. 3. To have an APA (Advanced Pricing Agreement) with the IRS is incredibly expensive and time consuming because it's like getting audited in advance and then justifying it before you ever do anything. 4. You need to pay at a minimum a big 4 accounting firm 10 million to start a project of this complexity over a number of countries. 5. The dutch companies are simply a "conduit" to allow the money to ultimately reach the Caribbean island tax havens because they have no income tax and simply charge a flat tax of 15k. 6. On cperciva's note, this tax plan could be considered "post-poning income recognition" but in reality it effectively is never repatriated or brought back into the country because google is such a multinational company. They could use the money for their international business very easily or they could use their foreign cash reserves to purchase an asset in a foreign country and still retain the ownership by the US main company. I could go on for a while but this is just a the tip of the iceberg. I've practice this area of taxation before as a CPA so I could give you a number of other examples.

bd_at_rivenhill 15y ago
Does this get any easier if you do the original incorporation offshore?
- camz 15y ago
  Yes possibly, if you're able to source the income offshore and keep it away from the united states. Then you'd be able remove it easier. But, as a shareholder that owns more than 10% of the company. It effectively cancels any of the tax benefits. There are some creative ways to remove yourself from the equation but it's pretty complicated. Is this Brian? lol

rayiner 15y ago

Trying to tax multi-national corporations is futile and encourages huge amounts of rent-seeking. We should just go to a low flat corporate tax rate (say 10%). To offset that we should stop taxing capital gains at a lower rate and crack down on tax avoidance by high-income individual taxpayers in the US. A corporation can run their activities from Bermuda or wherever they want, but corporate executives and shareholders aren't going to move to a shitty low-tax jurisdiction if we up their rates.

nkassis 15y ago
"To offset that we should stop taxing capital gains at a lower rate" I think this is not a bad idea, in fact, corporate taxes could be significantly lowered and capital gains/dividends could make up for it I believe. If not the money would usually go to reinvestment or some other sort of purpose. I think that taxing capital gains as if it was regular income would also be a fairer way to tax since a significant portion of high net worth individuals make most of their money from capital gain and pay less % taxes than upper middle class individuals.
Bud 15y ago
It's "futile"? Really? Is that just shorthand for saying that you oppose trying hard enough to do it successfully? I don't think it's futile at all. I think we lack the national will to do it, largely and obviously because of the folks who are in control of the relevant decisions. I'd be more sympathetic to your argument (and just fyi, I am not entirely unsympathetic as it is) if I had some confidence that adopting a 10% flat tax would actually result in corporations paying that amount. Taxing capital gains at a LOWER rate? Are you serious? Reagan/Bush/Bush trashed those rates to such an extent that it seems laughable to advocate lowering them any further. They're non-existent.
- OstiaAntica 15y ago
  Your failure with the facts reveals that you are just an angry partisan. President Clinton cut capital gains rates further in 1997 than G.W. Bush did. Also, President Carter cut capital gains, while Bush senior made no change in capital gains rates but famously raised other taxes in 1990. Current longterm/shortterm rates range from 15/25 or 15/35, which is hardly "non-existent", especially when you consider that these rates are a double-taxation on resources that were already taxed as income.

Matt_Cutts 15y ago

This is an article from 2010 that's already been submitted to HN in the past: http://news.ycombinator.com/item?id=1815457 http://news.ycombinator.com/item?id=1815457 Personally, I find the sub-headline misleading. The subhead reads "Google uses a complicated structure to send most of its overseas profits to tax havens, keeping its corporate rate at a super-low 2.4 percent." But I believe that number refers only to Google's overseas tax rate. This more recent article http://news.yahoo.com/googles-tax-rate-still-seems-very-low-213223063.html http://news.yahoo.com/googles-tax-rate-still-seems-very-low-... says that Google's overall tax rate was 22.2% in 2009.

illumen 15y ago
Note, Matt_Cutts works for Google. Don't you think Google should be paying the UK tax on UK profits?
- dsplittgerber 15y ago
  I don't agree at all. First, what exactly are "UK profits" supposed to be? Say Apple has a net margin of 20 % on every iPhone sold. It's designed in California by Americans (most surely several non-native Americans among them), manufactured in China by probably lots of Chinese workers and immigrants, shipped and flown across the world by god knows whom, etc. It's not like it's designed in Brixton, manufactured in Manchester and sold in London only. Which country is supposed to retain the tax on profit on each iPhone sold? The point of sale-country is one alternative. Is it the most logical? Is it equitable and fair (whatever that means)? Second, if your local legislator is just too stupid - or, more accurately, for a lot of reasons - unwilling to close tax loopholes, why on earth should a company be willing to waste shareholder's money by settling a claim (tax) that is not legally binding due to existing loopholes? There is a lot of hypocrisy involved in politicians blaming companies for using tax law loopholes - if they were at all serious about that, they would just write better laws. Sure, it's always playing catch-up with tax lawyers looking for "tax-efficient" structures, but most loopholes are well known among legislators, and they knowingly decide not to close them.
  - 15y ago

ppereira 15y ago

For a paper that discusses the Google example in some detail see Ed Kleinbard's "Stateless income's challenge to tax policy". http://www.sbs.ox.ac.uk/centres/tax/symposia/Documents/Kleinbard%20final%20v3.pdf http://www.sbs.ox.ac.uk/centres/tax/symposia/Documents/Klein...

curt 15y ago

This is exactly why high taxes hurt startups. How can a startup/small business compete profit wise against Google or another large company when they are paying a much lower effective rate. Since their tax burden is so much lower they can charge a much lower price, effectively pricing any startup/competition out of the market. We just need a super low corporate tax with zero loopholes that make it less expensive to just comply vs hiring hundreds of lawyers and accountants to move around money.

mahyarm 15y ago
You can move to a country with a lower corporate tax rate. Like Canada. Yes Canada. And you can get special tech industry tax deductions. The US has one of the higher corporate tax rates out there.
shin_lao 15y ago
Although you would reduce the amount of fraud with a lower tax rate, you would also decrease your income. The goal is to have the highest income possible, even if that implies fraud or optimizations. Big companies will always have an advantage regarding taxes: they can provision more easily, pay people to optimize, lobby, etc. I'm not saying you have an optimal tax rate in the USA, but the naive approach regarding this problem will probably not work. More information: http://en.wikipedia.org/wiki/Optimal_tax http://en.wikipedia.org/wiki/Optimal_tax
namdnay 15y ago
I don't think your argument that this hurts startups is true. Tax rates don't impact profitability, as they are calculated on profits.

deleted 15y ago

[deleted]

nazgulnarsil 15y ago

good, google creates more value than the average government program.

joshfraser 15y ago

How hard would it be to set up a system for startups, or at least mid-sized corporation to get the same tax breaks in mass? For example, could a company handle setting up all the holding companies & bank accounts around the world and make the process more affordable by doing it for hundreds of companies at once? You could share the same mailing addresses for each of the companies and the cost of keeping up w/ all the tax laws would be amortized across a much larger group of corporations.

idspispopd 15y ago

This is going to sound like a 99% rant, however this article perfectly demonstrates a scenario where tax-avoidance benefits few at the expense of the greater populace. To quote the article: "a company's obligation to its shareholders is to try to minimise its taxes and all costs, but to do so legally" Let's talk about who those share holders are: In tech companies the largest percentage of shares usually belong to the founders or the investors. Meaning that the tax minimisation is directly profiting few, and in some cases a single individual. Regular persons do not have the financial clout to either purchase shares, even in low volumes which would see so little of the avoided-tax-returned-as-profits. Similarly small companies don't have sufficient funding to set up elaborate tax minimisation schemes, effectively forcing them to bear the brunt and be less competitive. Governments deprived from tax income then turn to the population to bolster their coffers, and often to remain popular the tax rate is kept lower than required - which means cutting back on programs which benefit the greater good. We've seen some pretty ridiculous examples of how underfunded the education sector is becoming. (Somewhat hypocritical when the education sector is responsible for creating the skilled individuals that fuel these companies.) Stopping international loopholes is incredibly difficult, however there is still plenty that can be done to entice companies to not start them in the first place. Incentive rates could be introduced which allow companies (especially smaller ones) to take advantage of a lower rate in exchange for certain business restrictions that limit these sorts of activities.

cq 15y ago

The Tax Haven That's Stealing From Your Government

danssig 15y ago

Wait a second. These are earnings that Google international made. So, yes, perhaps they have weaseled out of paying taxes in the UK or various European countries but IMO they shouldn't owe the US a dime of that money. It wasn't made in the US. I find it really frustrating that people talk about discuss these things as "look at all the revenue the US lost because of this!". Sure, and look how much the mafia lost on it too! Both of these armed groups could have made more money if they just extorted foreign agents and took their money (calling it "protection money" or "tax" or whatever seems appropriate).