4 ms·

They'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%

by alexkus 14y ago

They'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 ago
And 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 ago
  because 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 ago
  Here'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.
- michaelt 14y ago
  If I have a British widget company that buys £2 million of plastic and sells £3 million of widgets, I pay out a profit of £1 million to my shareholders and that profit is subject to corporation tax. If my company buys £2 million of plastic and spends £1 million licensing a widget design from a company based in Bermuda, I haven't made a profit and I don't pay my shareholders, so I pay no profit tax. The Bermuda-based company, on the other hand, has made a profit of £1 million - and they're only taxed at whatever Bermuda's tax rate is. And if that completely separate company happens to have the same shareholders...
- alexkus 14y ago
  > I do not get why that gives them the right to do so (apart from the obvious "being able to do that"). Their duty to shareholders is to maximise profit. Google are big and ubiquitous enough that they've probably decided that the negative aspects (bad PR from these stories) is outweighed by the increased profits and, therefore, shareholder value.

by alexkus 14y ago

pfortuny 14y ago

And 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 ago
because 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 ago
Here'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.
michaelt 14y ago
If I have a British widget company that buys £2 million of plastic and sells £3 million of widgets, I pay out a profit of £1 million to my shareholders and that profit is subject to corporation tax. If my company buys £2 million of plastic and spends £1 million licensing a widget design from a company based in Bermuda, I haven't made a profit and I don't pay my shareholders, so I pay no profit tax. The Bermuda-based company, on the other hand, has made a profit of £1 million - and they're only taxed at whatever Bermuda's tax rate is. And if that completely separate company happens to have the same shareholders...
alexkus 14y ago
> I do not get why that gives them the right to do so (apart from the obvious "being able to do that"). Their duty to shareholders is to maximise profit. Google are big and ubiquitous enough that they've probably decided that the negative aspects (bad PR from these stories) is outweighed by the increased profits and, therefore, shareholder value.