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Google Revenues Sheltered in No-Tax Bermuda Soar to $10 Billion
- jasonkolb 14y agoIt's so frustrating to see this come up again and again and see people refuse to acknowledge the reality of this. Corporations, separate taxable entities, can be created on demand, and profit and loss distributed at will across them. Given that, there's very little chance that a large company that knows what it's doing will ever pay any significant taxes. Argue about loopholes or Republicats all you want, this is fundamentally built into our system and there is NO ONE who wants to take on changing it. I guarantee you Romney and Obama BOTH know how this works and yet they play dumb in tax debates for hours, and no one calls them out on it. I think getting rid of the corporate tax makes sense because it would at least level the playing field for smaller companies, but pretending that it makes a difference for larger companies just demonstrates how uninformed the electorate is.
- rayiner 14y agoThis quote stuck in my craw: "Google said it complies with all tax rules, and its investment in various European countries helps their economies. In the U.K., “we also employ over 2,000 people, help hundreds of thousands of businesses to grow online, and invest millions supporting new tech businesses in East London,” the Mountain View, California-based company said in a statement..." Everybody contributes to the economy, not just entities like Google, and they pay a higher tax rate for the income they derive through that contribution. Bringing these issues up is asking for double credit.
- iand 14y agoThey are pointing out that they pay taxes on tangibles such as salaries, VAT and business rates. Corporation tax is based on the fungible concept of profit and really is unworkable.
- pfortuny 14y agoYeah, OK, however it is paid by all the other companies working in the UK, Europe etc... and many have not the means to register at Bermuda... I can bet they can manage pay no VAT (because this is a compensated tax, you deduce what you spend...). I may agree: corp. tax may be unworkable but saying "we are honest, we contribute to the economy" is flatly insulting to the other companies which cannot get away with it like Bermuda-based Google.
- alexkus 14y ago> Yeah, OK, however it is paid by all the other companies working in the UK, Europe etc... and many have not the means to register at Bermuda... They all have the means to register in Bermuda (or Cyprus or several other countries used to offshore money), it's relatively simple for an accountant to setup, but there's little point as the UK doesn't have any easy way to get the money back into the country from offshore without paying the required amount of corporation tax; so there's no point in sending it overseas in the first place. The US does have periodic amnesties that allow offshore money to be brought back into the US at a reduced tax rate which makes hoarding it overseas for a few years financially worthwhile. Of course, there's nothing stopping a UK company with good cashflow (which is required if you're going to be keeping lots of cash overseas in the hope of a future amnesty) from moving their headquarters to the US and doing exactly what these US companies are doing to pay little/no UK corporation tax.
- icebraining 14y agoThe small team of NPR's Planet Money has two offshore companies. It's not really hard or expensive to setup: it costs less than $800/company to create one in Belize. http://www.npr.org/blogs/money/2012/07/27/157421340/how-to-set-up-an-offshore-company http://www.npr.org/blogs/money/2012/07/27/157421340/how-to-s...
- rayiner 14y agoEveryone pays VAT, but as a matter of economics it is, like a sales tax, bourne by the consumer, not intermediate producers. Salaries are deductible everywhere I'm aware of, and "payroll taxes," although they are nominally collected from the employer, are, in the concensus of most economists, mostly if not entirely bourne by employees in the form of lower wages.
- Herring 14y agoThey are just being polite. For $2B a year I doubt they care what the public thinks. And anyway every corporation does it. Talk to your congressman.
- flyinRyan 14y agoI would, but I have to wait inline behind a portion of that $2B that's being used to make it $3B next time.
- fear91 14y agoExactly. Companies get profits proportional to the value of goods they provide to the economy. Saying that somehow $100 earned by Google is more beneficial than the $100 earned by a small dental gabinet is extremely stupid. Both companies should pay taxes on their profits and none of them can claim it does more good for its money than the other. To me, what Google tries to say is pure bullshit.
- deleted 14y ago[deleted]
- twoodfin 14y agoYou say evasion, I say avoision.
- nhangen 14y agoExactly. A public company exists to bring returns to its investors, not to the government.
- DannyBee 14y agoWell, no, actually. Public companies exist for whatever reason they put in the articles of incorporation :) They have fiduciary duties to shareholders, most of which have been seriously distorted over the past 50 years by legal decisions. It Was Not Always Like This (TM). In fact, you also don't have to go all that far back (mid-late 1800's, i believe) before not only were there no limited liability corporations, but to a time when shareholders were always responsible for paying for the illegal acts of corporations. Crazy, I know.
- flyinRyan 14y agoI'd like to see a chart of "% of revenue directed to lobbying" then vs. now.
- rayiner 14y agoPublic corporations are purely legal fictions created under the law to, ultimately, serve the public interest.
- tomrod 14y agoYou're conflating the use of the word public here. Public corporation: open to any old Joe or Jane that wants to become a shareholder. Public interest: needs of a society. Walmart, Google, etc. should not have to pay for lighthouses or sewer connections down a street, nor a legislator's fact-finding trip to Shanghai.
- kmfrk 14y agoAre Google (depending on how you define their identity) bound to do this out of fiduciary duty, or do they have some semblance of choice in this?
- rayiner 14y agoIn the U.S., there is no fiduciary duty to minimize tax liability or to maximize profits. In any case the bar for a successful shareholder suit is extremely high, and executives are given tremendous leeway in situations where conflicts of interest aren't involved. I can't imagine that you could successfully sue a CEO for a company's not taking aggressive tax positions. Achieving low tax rates is largely about keeping up with Wall Street analyst expectations. CEO's of public companies having to face a bunch of analysts every quarter to discuss quarterly earnings, including after-tax earnings, is a huge driver of this sort of behavior. CEO's are judged on how analysts view their stock, and it's a horse race. If some other company makes $0.05 more than you per share because of a lower tax rate, they are going to get credit for that.
- damoncali 14y agoThere is a wide band of freedom given to business judgement. The critic that is the capital markets is a bit more harsh, however. If your returns aren't good enough relative to other investments of similar risk because you opted to pay more in taxes, you may have a harder time attracting investments. That's the theory at least, and a pretty good one if you ask me. To ignore that is to basically ask for not only increased taxes, but increased cost of capital overall.
- pfortuny 14y agoThey could stay with the truth and claim that they are not... Bermuda-based? It seems as simple as that, from my ordinary tax-paying citizen POV.
- pfortuny 14y agoI wonder... why do they not hire abut 2.000.000 people in Bermuda? That would be very helpful to Bermuda's economy, would it not? Instead of just pumping money into it, give them some jobs.
- alexkus 14y agoThey're waiting for a US tax amnesty (last one was in 2004) to allow them to bring the money back into the US and only pay ~5% tax on it rather than 20% to 30% (depending on what has already been paid overseas) if they brought it in now. Apple has ~$74bn sitting off shore waiting for the same thing: http://news.yahoo.com/apples-phantom-taxes-hide-billions-profit-183821426--finance.html http://news.yahoo.com/apples-phantom-taxes-hide-billions-pro... The European countries are annoyed because they're not getting any of it (apart from Ireland who are getting 12.5% of a lot of this money as they're one of the countries where these tax schemes do pay corporation tax).
- pfortuny 14y agoAnd that allows them not to pay any taxes in the UK because... I just don't get it. And I don't care about Apple right now: this is a Google thread. Edit: I obviously understand "how" it is done. I do not get why that gives them the right to do so (apart from the obvious "being able to do that").
- camus 14y agobecause UK politicians allow corporations like google to do so , there is no magic , Google doesnt write UK's laws. Politicians could close loopholes yet they dont why ? that the real question.
- alexkus 14y agoHere's the simple version. A company pays corporation tax in the UK on its profit, not on its sales, just its profit. Your UK company makes sales of £500m and makes £200m profit. You offset this by paying a £200m 'license fee' (for nothing special, it's easy to conjure up) to a company you also own based in Ireland. It pays just 12.5% corporation tax on this £200m instead of 28% in the UK. That Irish company moves the money out to Bermuda in a similar way and there's no corporation tax to pay between Ireland and Bermuda. You can't go directly from the UK to Bermuda as the UK's existing tax laws prevent that. Going via Ireland is the cheapest method (see "Double Irish"). Variants to help indemnify sometimes use a firm in the Netherlands (see "Dutch Sandwich"). So, by paying a £200m license fee to another company the UK company has made no profit, so it pays no corporation tax in the UK, despite sales of £500m. Other variants include obtaining loans from the foreign companies and then paying interest on these loans. If you want to bring that money back into the UK again then the remaining 15.5% (28% UK corportation tax rate minus the 12.5% already paid in Ireland) is due, so you're no better off than having just paid the full 28% in the UK in the first place. Eventually you want to have the money somewhere else than Bermuda, and in Google's case this is back in the US, so they wait for the US Government to announce another tax amnesty and bring it back into the US from Bermuda and only pay 5% on it. Ireland wins (they get 12.5% for nothing really), the US wins (they get 5% instead of nothing) and the UK loses out (it gets 0%). My point about Apple was that Google aren't alone in doing this, nor are they the biggest beneficiaries of these types of schemes.
- VMG 14y agoMost economists agree that corporate taxes are bad anyways: http://www.npr.org/blogs/money/2012/10/18/163106924/a-tax-plan-that-economists-love-and-politicians-hate http://www.npr.org/blogs/money/2012/10/18/163106924/a-tax-pl... "The corporate income tax makes no sense whatsoever," said Robert Frank, a professor at Cornell. "We don't want to prevent Microsoft and General Motors ... from investing more and improving their product line," Baker said. "That's a good thing in my view." Our economists said if you want to tax rich people as public policy, then tax rich people — tax the people who own corporations. But taxing the corporation itself is taxing the thing that really does create jobs. In my personal opinion, the money does more good in Google's hands than in the government's hands.
- Alaskan005 14y agoIn my personal opinion, the money does more good in Google's hands than in the government's hands. Ok then: in my opinion my money is better in my hands, but I have a hard time convincing the IRS. My wife and my family agree with me too, by the way. Who is going to pay for the roads and the military and the......
- davidw 14y agoCorporations can't hold on to money forever: at some point it goes to actual people. For the sake of argument, without saying whether it's a good idea or not, you could make a revenue-neutral elimination of corporate tax by raising taxes on people.
- ed209 14y agoThat guy's money will go somewhere eventually too, into local coffee shops, craft market, plasma TV. Just because it goes somewhere, doesn't mean it goes to the right place.
- kale 14y agoI'm not an economist, so this is layman speculation, but it seems that taxing corporate money would encourage the company to re-invest it more quickly. Some have said that reducing corporate taxes (and increasing taxes on money when it actually goes to people) would provide more money to create jobs/grow the business. Wouldn't there also be a reduced incentive re-invest the money?
- clarkmoody 14y agoa) It is in the interest of all companies, shareholders, and consumers for corporations to pay the smallest amount of tax possible. Higher taxes are simply passed on to consumers in the form of higher prices or lower supply of products. b) All of this 'tax dodging' is perfectly legal. But the laws are not perfect that incentivize this sort of behavior. c) Of course the Europeans opt for some larger-government solution, all in the name of 'fairness'. I say that much injustice indeed has been done in the name of this fairness, since those with the lawmaking power are the ones who decide what's 'fair.' These outcomes usually do not promote liberty, free markets, or growth. d) I'm sick of those who spout off this 'fair share' business about taxes. Show me some figures on who is paying the taxes and who is free-riding (as far as personal income tax goes), and I will then be able to hear an argument about 'fair share.' Hint: the top few percent pay the vast majority of income taxes.
- ed209 14y agod) ok, great! We'll all use off-shore companies to get our taxes down to a few %. Then let's see how we fund the NHS, roads, infrastructure, education, welfare and everything else you use daily that you don't pay for directly.
- clarkmoody 14y agoYou seem to have missed the point: government spending is far too high across the board. You could tax the rich in America 100% and still not have enough money to run the government for more than a couple months!
- ed209 14y agoThat's not what your point d) says.
- jstalin 14y agoI just love it when politicians express indignant outrage when they're the ones who made the rules... Tax competition is a good thing. Kudos to Google and Bermuda.
- tomrod 14y agoI agree with this sentiment.
- akie 14y agoTax competition might be a good thing, but creative accounting just to dodge taxes isn't. Not in my book, at least.
- kragen 14y ago"Tax competition is a good thing"? How does that make any sense? If competition is a good thing for a particular service (say, firefighting), then you don't need to fund it with taxes, and indeed shouldn't; you can fund it by charging the consumers of the service. It's only the services for which competition-on-price is actually a bad thing (e.g. health care, stock market regulation, and indeed firefighting) where you can morally justify funding them with taxation.
- inthewoods 14y ago
- Alaskan005 14y agoWe all know that always are going to be changed and earnings will drop by quite a bit, the govs are starving for cash. They were always hungry but now it's starvation time.
- DigitalJack 14y agoThe only one at fault here are the governments that allow this. The government is the one trying to collect money, they are the ones who make the rules about collection, and they are the ones with the power to enforce said rules. If governments are allowing this, it's because they want to, not because of some accidental goof.
- flyinRyan 14y agoIt's surprisingly hard to get this right when companies can hire teams of people who's only job is to find these kinds of tax avoidance schemes.
- DigitalJack 14y agoWell, I surely don't know all of the subtleties involved. In fact, I'm quite sure nobody does. Again, I'm being US centric here, but our tax code is pretty absurd. You can download a copy here: http://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26.pdf http://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/pdf/USCODE-.... I've read in many places that the US taxcode is > 70,000 pages. Maybe that includes state taxes. This pdf is a little over 3000 pages. Still pretty complicated, and makes plenty of room for maneuvering in tax avoidance efforts.
- cryptoz 14y agoMaybe it's because I'm young and don't have experience with large-scale tax problems, but I have struggled for years and still cannot understand why companies do this. Is it truly in Google's interest to work towards the minimization of government capability wherever it is? To ensure that California roads are less taken care of? To ensure that any local public debt is increased rather than decreased? It doesn't make sense to me. Wouldn't a company want to contribute its share of taxes to the government of where it is located, so that the quality of life is better for everyone there including the employees? It seems to me that Google, especially being in California, is being...well, something close to evil by making sure they help out their local governments and people as little as legally possible. I understand that their profits are higher each quarter because of this. I understand that's what shareholders demand. But why?! Can this attitude lead to anything except terrible news? I just don't get it.
- DigitalJack 14y agoYou are free to send the government as much money as you like. How much do you send? If you are in the US, do you just send the amount that turbo tax tells you to, or do you send more? Do you take any deductions (i.e. the standard deduction, or itemizing)? By the reasoning of your post, that would make you "something close to evil."
- ed209 14y agoyes, I do send more [than I could]. I could set up my salary through some finance companies in europe that help you keep up to 85% of your salary, but I don't.
- 3825 14y agoPriorities. I would pay the lowest possible amount I can legally pay in taxes and give to things that I prioritize. For example, the ACLU, the EFF, and the NRA. You sound like someone who already gives but for everyone else's benefit, here is a link [1]. Contributions to the ACLU Foundation are tax deductible for charitable purposes. (This means talk to your accountant if you make a lot of money.) Give, won't you? [1] https://www.aclu.org/secure/support-aclu-foundation https://www.aclu.org/secure/support-aclu-foundation
- tomrod 14y agoI say good on Google. They've found a legal loophole that allows them to use their funds more efficiently.
- fear91 14y agoGoogle is reaping benefits from the infrastructure built on taxes paid by small companies and yet they fucking dare to say they do more good than them. Fucking hypocrites
- tomrod 14y agoWhat infrastructure are they using?
- fear91 14y agoFiber networks? Their employees security by funding Police and the Military? Health care for their employees and customers? What infrastructure are translators and lawyers using? They still pay normal taxes because they extract profits from a given country and are ought to pay taxes on it. One shouldn't argue whether he or she is ought to pay taxes. If it was the case, 95% of companies and entities would argue that they shouldn't pay a cent. All using their own, twisted logic. No one wants to pay taxes but avoiding them is unethical and doesn't help the society at all.
- tomrod 14y agoThey pay their access fee for fiber networks, surely. As they are paying for all utilities. Should police/military funding be used to protect corporations or citizens? Are citizens paying it with take home salary? Google could hire their own private military, likely for less than the tax burden you're implying they should pay.
- fear91 14y agoThe same argument can be made for any company.
- gills 14y ago> Fiber networks? Their employees security by funding Police and the Military? Health care for their employees and customers? Since the post complains largely about behavior in the United States, it seems a fair reminder that from this list Police and Military are paid through taxes, while the others are (for the majority) constitute private transactions for services which individuals have no inherent right to consume. > No one wants to pay taxes but avoiding them is unethical I am sure many here would be interested in how you would support this assertion.
- vincentperes 14y agoDon't be angry at Google, be angry at government. It's years that companies are using this - I would call it a government failure. What I don't understand is why - please tell me why - the EU is not doing anything to fix it? Irland got billions from EU to get to the level where they are today (they were to poorest country in europe before), don't tell me that the EU hasn't any way to press Ireland or Netherland to change their law. Again, it needs to go through the press to shake it a bit. But isn't it also the same problem in the US? Some states have very low taxes on business profits. So you can see very often companies having offices over there?
- lmg643 14y agoI find it interesting that the tech titans, who seem to overwhelmingly support high-tax politicians and policies, are also engaged in the most aggressive tax avoidance in the world. We only need to look at Europe to see how widespread tax avoidance plus high government spending creates an unsustainable path that puts the entire economy and country at risk. Seems to me the only rational path is to either support lower government spending across the board to complement the aggressive tax avoidance, or demand that leading companies pay taxes according to the state or country where the bulk of their employees are, and not based on wherever a shell company may reside.
- ChuckMcM 14y agoFrom the article: "Last week, the European Union’s executive body, the European Commission, advised member states to create blacklists of tax havens and adopt anti-abuse rules. Tax evasion and avoidance, which cost the EU 1 trillion euros ($1.3 trillion) a year, are “scandalous” and “an attack on the fundamental principle of fairness,” Algirdas Semeta, the EC’s commissioner for taxation, said at a press conference in Brussels." This is the issue. The Euro-zone is in a world of hurt and having a few hundred billion euros would "fix" that problem. So they are gearing up to change their tax laws, which is going to be a huge fight (taking money from wealthy people or corporations is always strongly resisted by those people). I see it as a side effect of the EU fiscal problem in general (the root of which is non-soverign control over fiscal policy and enforcement) and suspect it will impact Europe at least as much as the end of the cold war did, if not more. I'm not entirely comfortable predicting what those effects will be.
- itsonagain 14y agoIt's even worse than everyone thinks, this does not just go for taxes. Guess how much Larry Page has to pay for a big mac meal: $6. Does this seem fair to you???
- digeridoo 14y agoDon't be evil.
- BenoitEssiambre 14y agoCan someone explain to me why we don't lower corporate taxes across the board and raise dividend and capital gains taxes to compensate. It seems to me that the later taxes are fairer and more difficult to dodge. Plus they encourage reinvestment (eg. hiring) since money gets taxed when or if it leaves the company.
- yanw 14y agoNot sure I’m buying much of the righteous indignation going about regarding corporate taxes these days especially when politicians partake in it. If they put themselves into a situation where they have to depend on the moral choices of multinational corporations they are part of the problem. And in fact it’s not a moral issue at all but a legal one. And if the conduct is legal then it’s not Google’s problem, is it?! the focus on Google in some of this tax talk is indicative of some sort of a PR offensive against them by governments and other bodies who aren't fond of Google and are using this as a wedge issue against the company. Everyone does it and it’s been done for a while, governments allow much of it to encourage corporations to hire and invest within the local economies and now they pretend to be surprised and appalled by it. This just reeks of hypocrisy.