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Google insider exposes ‘immoral’ tax scam

87 points by rpm4321 13y ago

aaron695 13y ago
I though companies 'are not people' so I don't see why the word immoral should be applied to such things. Can't really have it both ways.
- Nursie 13y ago
  Companies are made of people. People should know to act morally. However as companies are made of people, not people themselves, corporate personhood is very, very dodgy law. Hope that clears it up for you.
j_baker 13y ago
I seriously wonder about the credibility of this story. It seems that this is the only news source that's carrying this.
- desas 13y ago
  Googles UK exec has been questioned by a parliamentary committee after receiving this evidance, this was reported widely in the UK (I also read an article in the guardian). The Times just has more info on the leaker.
muhuk 13y ago
Honest question; how is it immoral if it is not illegal and the contracts were not misleading? Also why did he wait 7 years if he was so moral? It would kill me by then.
- ewolf 13y ago
  Not everything that is legal and non-misleading is necessarily moral.
  - muhuk 13y ago
    Right, but how do you come to an objective definition of morality? (IOW what is missing in my definition?) If morality is subjective, how can we demand/expect others to live by our rules?
- jordonwii 13y ago
  It isn't. To say it is is just silly. "Don't hate the player, hate the game."
  - rooshdi 13y ago
    But the player isn't passing the ball back.
  - shrikant 13y ago
    Why not hate both?
    - jordonwii 13y ago
      Because the players can't do anything about it. No matter how much we talk about morals, if, for example, Google were to not engage in the same tax avoidance schemes that all of its competitors do, then it'd be costing itself billions of dollars. Which is a reasonably substantial competitive disadvantage. That's money that can't go into R&D, maintenance, etc., whereas the companies that compete with Google do. And for what? A positive PR image?
- Sven7 13y ago
  From personal experience, you don't realize until you are neck deep in it. And then you have a nontrivial choice to make...
- obviouslygreen 13y ago
  Ethics and morality are exactly the same as legality. Technically, I can lie to you. I just did, and it's legal, as I did not cause you harm in any tangible way. It's legal but not moral. Many things are like that, and most are far less black and white or obvious. This is a difference you need to be very conscious and careful of if you intend to work... anywhere, ever. Most of the companies you're likely to deal with -- whether it's in an employment situation or in a consumer transaction -- are so large that your interaction with them will be governed by policies, not by morality, and policies are set based on what's legal, practical, and profitable.
cromwellian 13y ago
Internationally, the laws need to be changed. All the major players are using Ireland, Bahamas, Cayman Islanda, et al, as avoidance schemes. The firms try to take advantage of every legal loophole, even if in morally grey areas, because their competitors are also all doing so. Really, the major OECD players need to get together and figure out a way to stop the tax loophole arbitrage. Although the tax havens have no incentive to do so.
- AnthonyMouse 13y ago
  >Really, the major OECD players need to get together and figure out a way to stop the tax loophole arbitrage. It's really a domestic political problem. The source of the problem is that you're attempting to tax something called "profit" in the context of an international corporation. Profit means revenues minus costs. The problem then becomes obvious: The corporation's executives will strive to report more of the international operation's costs in the subsidiary in the higher tax jurisdiction, and to report more of its revenues in the lower tax jurisdiction. So, you say, make them report things accurately. But what does that even mean? If a company produces a product for internal use in one country and exports it to another, what is the "accurate" price to be reported as revenue to one subsidiary and cost to another? Is it the price that the item would cost at retail, or the price that it would cost if purchased in volume, or the cost of the raw materials used to produce it, or what? No matter which you choose, companies will arrange their affairs so that it benefits them. If the price is set at the actual cost of production then subsidiaries in high tax jurisdictions will be found selling everything they produce through subsidiaries in lower tax jurisdictions and eliminating all of their profits that way (minimize taxable revenues). If the transfer price is allowed to include a nontrivial amount of profit then subsidiaries in high tax jurisdictions will be found buying everything they use at a premium through their foreign sister companies in lower tax jurisdictions and eliminating all their profits that way (maximize deductions). The problem is that the entire concept of allocating profits by jurisdiction in an international supply chain owned entirely by a single entity is just totally unworkable. The profit belongs to the entire supply chain; in arms length negotiations the allocation of profit to each component would be determined by negotiating skill. And no matter what value you place on a transaction, corporations can rearrange their affairs to take advantage of that valuation, and it will be profitable for them to do so even if it costs $95,000,000 to save $100,000,000 in taxes. The solution is to stop trying to allocate profits and just tax something else. Which is why it's a domestic political problem: People don't want to hear that. They want to imagine that corporations can pay their taxes for them and, as if by magic, this will get everyone else out of having to pay for the government services they want provided. It's totally possible to tax international corporations, but you can't do it by trying to tax corporate profits. If you want to tax a corporation that makes use of government services and your jurisdiction's people when it produces value, tax real property or labor. If you want to tax them when they make money selling to your population, tax sales. If you want to tax investors, tax investment income. Corporations aren't humans. If you ever did manage to extract tax revenue based on corporate profits, it would inevitably come out of the pockets of one of those groups in any event. Taxes have to be paid by somebody.
NolF 13y ago
The moral argument is a weak one at best. Companies have a responsibility to their shareholders to maximise profit. I there is a $500 deductions for drycleaning without receipts, people are going to claim all $500. It's the same concept at a large organisation.
- ISL 13y ago
  Some people may claim all $500, but not everyone will.
- aaron695 13y ago
  > $500 deductions for drycleaning without receipts, people are going to claim all $500. This is illegal if you didn't have any drycleaning. You can go to prison(In theory) if caught.
cynicalkane 13y ago
Not paying your fair share isn't contrary to the spirit of tax law because there is no discernible spirit of the tax law. If the tax law says if you do Foo with shell company Bar through subsidiary Baz, then you get more money, legislators wrote that there for some reason because they wanted to encourage or discourage some behavior. I think it is neither reasonable nor moral to live in a society where corporations are "morally" required to second-guess the intentions of the writers of 10,000s of pages of tax law. Judge Learned Hand was the most important judge never to sit on the Supreme Court. Here's what he has to say: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes... Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
- Nrsolis 13y ago
  It doesn't appear that this is what was happening here. They did the deals in London and then claimed that they were done in Ireland for tax purposes. Essentially, they expected that no one would ever check whether a tax nexus was established in the UK. The fact that the UK didn't have any ability to check if this was true doesn't mean a law wasn't broken.
  - cynicalkane 13y ago
    A paywall mysteriously went up so I can't go re-read the article. But IIRC the article accused Google of avoidance, not evasion. Avoidance is legal and evasion is not. So the article seems to be saying that closing deals in Ireland to avoid taxes is legal, or at least likely to be legal.
    - DanBC 13y ago
      This is england. We have strict libel / slander / defamation laws. Saying that Google is avoiding tax is fine. Saying that Google is evading tax is not fine unless I can prove that they are. Note that "tax avoidance" used to mean normal "tax planning" - using purely legal means to reduce your tax bill. Now it feels a bit different. Now it feels a bit sleazy, a bit of a grey area, a bit borderline. When people say "tax avoidance" it feels as if the steps taken are right on the borderline, or are loopholes that just haven't been closed yet.
pavanky 13y ago
How is this news now ? Isn't this pretty much what every corporation does to reduce the tax load ?
- kmfrk 13y ago
  It's a somewhat hot topic in the UK at the moment.
- sigzero 13y ago
  No, the details are a little bit different on this one.
- frossie 13y ago
  This is news now because there is a UK parliamentary committee hearing (analogous though not identical to a US congressional hearing) into corporate tax avoidance schemes, and Google is being accused of having misled the parliamentary committee in previous testimony before it: http://www.guardian.co.uk/technology/2013/may/16/google-denies-disguise-operates-tax http://www.guardian.co.uk/technology/2013/may/16/google-deni... I obviously have no knowledge of the specific matter, but in general it is a bad thing if MPs start accusing you of having lied to them, and it is not unusual for whistleblowers to come forward when stuff like that starts to hit the news.
  - j_baker 13y ago
    That's certainly not the way it works in the US. Our politicians routinely lambast people to score easy political points.
Steko 13y ago
Brittin told the PAC last year that “nobody” in Google’s UK office was selling advertising on its website. When he asked to give further evidence last week, he admitted “a lot of the aspects of selling” did take place in London but the deals were “closed” by staff of Google’s Irish subsidiary. The distinction is crucial because if deals were finalised by London-based staff, Google could be deemed to have made profits on the contracts which would be taxable in Britain, rather than low-tax Ireland. “It uses a concocted scheme to avoid tax. It’s a smoke-screen to distort where the substance of its economic activity is really taking place,” Jones told The Sunday Times. He said he attended meetings where Google’s London sales staff closed deals, including winning contracts from eBay, the online auction site, Kelkoo, a price comparison website, and Lloyds TSB. He showed The Sunday Times contracts, invoices and correspondence between Google and its customers in Britain. One 2004 contract had the address of Google’s London headquarters next to the heading. Clients would be sold deals by Google staff in London, who were in charge of sending out contracts and receiving signed documents back from clients. In addition, British clients paid money into British bank accounts for Google services.
D9u 13y ago
We are sorry this service is unavailable as it is currently receiving a high level of traffic please try again later. I wish I could read the article myself. (without reading the article) One could say that Google is doing its part to avoid financing the war machine.
- lukethegeek 13y ago
  A FORMER Google executive has blown the whistle on a massive and “immoral” tax avoidance scheme that has “cheated” British taxpayers out of hundreds of millions of pounds over the past decade. Barney Jones, 34, who worked for the internet search giant between 2002 and 2006, has lifted the lid on an elaborate structure which diverts British profits through Ireland to the Bermuda tax haven. Although Google’s London sales staff would negotiate and sign contracts with British customers, and cash was paid into a UK bank account, deals were technically booked through its Dublin office to minimise its liabilities here. Jones, a devout Christian and father of four, is ready to hand over a cache of more than 100,000 emails and documents to HM Revenue & Customs (HMRC), detailing the “concocted scheme”. He has already provided testimony to the Commons public accounts committee (PAC) which led to the combative questioning.. [paywall]
  - D9u 13y ago
    Thanks! Looks like I was way off the mark with my preceding comment.
marhumph 13y ago
Barney Jones is a devout Christian, you best listen to this man.
- quackerhacker 13y ago
  Yeah, I burst out in laughter when I read that and had to do a second glance at the picture of him with the comb over and subtle smile. LMFAO! It's bias journalism. Let me portray the evil company and the saint of a christian, sounds like a scorned employee.
- EliRivers 13y ago
  That's an odd thing to mention. In the UK, being a "devout Christian" is definitely an odd thing, if not outright vaguely suspicious.
quackerhacker 13y ago
"a devout Christian and father of four," is this suppose to portray an image of NOW that he is no longer with Google and after working there "between 2002 and 2006," he wants to "do the right thing." PA CHA! He's obviously doing it with his own intentions, whatever they may be. He worked there that long and now that he's no longer with them, just wants to be get PR. Given my background in regards to Google (it's not positive), I'm not a fanboy of this "good," employee and am NOT AT ALL in favor of Google.
- hosay123 13y ago
  Perhaps the conviction of seeing it plastered all over the UK headlines in the past few weeks was too much for him? I'm not sure what being Christian has to do with it, why you're reacting to that, or why the journo even bothered mentioning it
throwaway420 13y ago
I am normally enraged by a number of Google's business practices and am extremely hostile and critical of them when it comes to their evil and horrible customer service practices, among others, but this is about the stupidest criticism of Google that I've ever heard. This isn't even actually a criticism - EVERY individual and company works to minimize their own tax burden as much as they can. Google is not evil for not wanting to give even more of their cash to any government. If Barney Jones wanted to report on what he viewed as illegal activity, why would he wait nearly a decade to come out about this? This is incredibly bizarre and stupid.
molex333 13y ago
This is very old news (at least a year or two). This is such common practice that there is a nickname for it. It is called the double Irish http://en.m.wikipedia.org/wiki/Double_Irish_arrangement http://en.m.wikipedia.org/wiki/Double_Irish_arrangement
- ISL 13y ago
  What's new is that the British government has decided to care. See [1], search news for 'google tax', etc. Edit: The Irish take is interesting [2]. The Cypriot crisis and Apple's decision to take out a huge loan rather than on-shore some offshore cash both provide further spice to the present arrangement. [1] http://www.guardian.co.uk/technology/2013/may/18/eric-schmidt-google-tax http://www.guardian.co.uk/technology/2013/may/18/eric-schmid... [2] http://www.independent.ie/opinion/analysis/no-wonder-the-neighbours-are-upset-over-our-cosy-tax-policies-29276553.html http://www.independent.ie/opinion/analysis/no-wonder-the-nei...
  - deleted 13y ago
    [deleted]
- markvdb 13y ago
  You might want to have a look at: * Taxodus, http://taxodus.net http://taxodus.net (tax avoidance game) * Tax Free Tour, http://youtu.be/d4o13isDdfY http://youtu.be/d4o13isDdfY (tax avoidance documentary by VPRO, a Dutch public broadcasting organisation)
- desas 13y ago
  This is different. The double Irish is legal for sales taking place in Ireland. The news article is alleging that the UK Google salespeople are making sales in the UK, in which case UK tax is due.
lwute 13y ago
What is massive and immoral are the huge criminal organizations that spy on people, curtail their freedoms and extort money from them in any possible way to divert it to themselves. Then, they reuse part of the money to mislead the people, convincing them that they are caring for their interests and that not paying the protection money is immoral and wrong. They call themselves "governments".
simonsarris 13y ago
I generally agree with Ben Franklin here, that taxes are not theft, rather the opposite, failure to pay taxes due is theft from the rest of society. He hated the "all taxation is theft" libertarians of his own day: "The Remissness of our People in Paying Taxes is highly blameable; the Unwillingness to pay them is still more so. I see, in some Resolutions of Town Meetings, a Remonstrance against giving Congress a Power to take, as they call it, the People's Money out of their Pockets, tho' only to pay the Interest and Principal of Debts duly contracted. They seem to mistake the Point. Money, justly due from the People, is their Creditors' Money, and no longer the Money of the People, who, if they withold it, should be compell'd to pay by some Law. "All Property, indeed, except the Savage's temporary Cabin, his Bow, his Matchcoat, and other little Acquisitions, absolutely necessary for his Subsistence, seems to me to be the Creature of public Convention. Hence the Public has the Right of Regulating Descents, and all other Conveyances of Property, and even of limiting the Quantity and the Uses of it. All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it. That being said I think it's a problem that needs to be fixed in the culture and governance of a people, not in Google itself, since attempting to assign any civic duty to a multinational is probably laughable. Singling out Google probably doesn't do too much good, except maybe to make people think of "favorite company X"'s role in society.
- seivan 13y ago
  Taxes are theft, you can twist it anyway you want. Say that to workers who have to pay 40-50% of their tax & mandatory pension saving only to see it being swiped out by the government on the next recession.
  - eksith 13y ago
    No. Taxes are a service fee paid as agreed to in your social contract (which you signed by participating in said society). If you disagree with this contract, you're free to move elsewhere that is a. Devoid of taxes (good luck) or b. Devoid of society. Society functions by and large by public services which, whether you like it or not, need money; not magic. Every functional society has had tax collection in some form or another as a result. There are communities that don't charge taxes for things, and they're heavily de-regulated as a result. They also heavily favor self-reliance and don't feature luxuries such as Police or Firefighters.
lwute 13y ago
What is massive and immoral are the huge criminal organizations that spy on people, curtail their freedoms and extort money from them in any possible way to divert it to themselves. Then, they reuse part of the money to mislead the people, convincing them that they are caring for their interests and that not paying the protection money is immoral and wrong. They call themselves "governments".
lukethegeek 13y ago
Part of that article is behind a paywall.. :(
sjtgraham 13y ago
I'm quite tired of the populist rhetoric of "morality" vis-à-vis tax that the UK media and politicos seemingly wheel out every other day. The bottom line is that taxation is a legal issue, not a moral issue. Lord Clyde said in Ayrshire Pullman Motor Services v Inland Revenue "No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue". That is the law of the land to this day. There is a moral obligation to obey the law, but not to pay a penny more in tax than the law demands. If there is a problem with the law then legislate to ameliorate the issue, but please spare me this talk of "morality".
tn13 13y ago
One of the stupidest criticism I have read. Tax evasion and Tax planning are two different things. And "morality" and "taxation" can not be spelled in same sentence.
smogzer 13y ago
It's immoral that governments take poeples money and use it for intents orthogonal to those original people intents, e.g. war, subsidies to monopolies such as the oil industry, corruption, etc. Google on the other hand provides a great services for free and acessible to everyone. I would prefer my taxes to go to google; and if they would become government they would be much more efficient than any government out there. By the way google if you want a toy country to try stuff, try Portugal. This goverment could use some help and they are some nice people who support the private initiative.
DanBC 13y ago
The whistle blower left Google in 2006. The whistle blower claims to have many thousands of emails to hand over. What the heck Google? How did he get to keep these emails? > Barney Jones, 34, who worked for the internet search giant between 2002 and 2006, [...] > [...] is ready to hand over a cache of more than 100,000 emails and documents to HM Revenue & Customs (HMRC), detailing the “concocted scheme”.
- greenyoda 13y ago
  How hard is it to make a copy or a screenshot of an e-mail and smuggle it out on a thumb drive?
  - DanBC 13y ago
    When you work for the accounts department of a security conscious company, which is chock-a-block full of smart computer-competent people, it should be pretty darn hard to smuggle out email. Especially 100,000 emails.
    - oijaf888 13y ago
      Assuming google uses gmail internally it would be as hard as connecting via imap and then copying your thunderbird files to a flash drive or taking home your laptop and copying them then.
deleted 13y ago
[deleted]
cjdrake 13y ago
Using the word "immoral" in this context is just silly. Google is a corporation, and legally avoiding taxes is the fiduciary responsibility of any corporation to its shareholders. Corporate taxes are ridiculous to begin with, because the cost is paid by either employees or shareholders. Only people can pay taxes.
bifrost 13y ago
I think the key here is -> "It is able to record the revenues in Ireland because the UK company is deemed to drum up new business, with sales staff in Dublin executing all deals." If the business was initiated in the UK, but executed in France, guess who'd get the tax money -> France. This doesn't seem particularly swarthy, and frankly doesn't really warrant an article or any sort of hubbub unless you're interested in being a Google hater. I'm fine with being a Google hater, I don't use Google search/ads/gmail/etc because I don't like their privacy practices/etc... Anyways, what sort of services are we talking about here? If we're talking about Google ad network deals, you buy ads and they get displayed all over the world, you do not pay taxes everywhere the ads were shown.
- DanBC 13y ago
  If someone in England buys a product, in England, from someone in England, and uses English money, and that product is an ad and that ad is shown to people in England, then it seems reasonable that English taxes should be paid, even if the company uses a bizarre scheme to hand off the very last part of the chain to complete the deal in Ireland. Google is welcome to move their office to Ireland if Google wants to use the Irish tax scheme.
  - bifrost 13y ago
    Thats the thing; they bought this product from Ireland not from England and they in fact do have an office in Ireland. Just because someone chatted with someone else in England about it doesn't make it an "english sale".
    - DanBC 13y ago
      > Just because someone chatted with someone else in England about it doesn't make it an "english sale". If almost all of the work was done in England then it's an English sale. The fact that Google contrives a bizarre situation where their English sales (between English staff and English customers delivered in England, not Ireland) have a tiny bit of work done in Ireland should be irrelevant. I'm not sure how you can call it an Irish sale when the money changing hands is Sterling not Euro, between banks in England not Ireland, and arranged by staff and customers in England not Ireland.
patrickdavey 13y ago
If there's one book I'd recommend on the subject of Tax Havens, Tax Avoidance, Tax Evasion it's this: "Treasure Islands, Tax Havens and the men who stole the world" by Nicholas Shaxson http://treasureislands.org/ http://treasureislands.org/ Really, an eye opening fascinating read.
Steko 13y ago
Ask HN: Do the pro-Google voting rings get paid extra to flag these articles on Saturdays or do you donate this time? edit: http://imgur.com/wvB8lgH http://imgur.com/wvB8lgH
- DanBC 13y ago
  There are a number of reasons why this article is dropping down the pages, and "pro-Google flaggers" is only one of them. 1) Automated flame detection drops the submission down the page 2) Political discussion gets flagged. Quite a lot of this thread is about US taxes. 3) Lack of upvotes. It only got about 70 upvotes.
  - Steko 13y ago
    It's certainly not #3: with 3 hours and 70 votes it would easily be ahead of #4 in the screenshot (4 hours and 66 votes). Instead it's #27. #2 I don't see why you would flag the topic and not the political comments. Moreover we see plenty of topics where comments go political that don't get egregiously flagged down. #1, I'll plead ignorance on any automated flame detection but I'm very skeptical that's what we're seeing. I'll stick with Occam's razor: time and again the articles this happens to are either critical of google, or favorable to MS or Apple.
    - Steko 13y ago
      It's certainly not #3: with 3 hours and 70 votes it would easily be ahead of #4 in the screenshot (4 hours and 66 votes). Instead it's #27. #2 I don't see why you would flag the topic and not the political comments. Moreover we see plenty of topics where comments go political that don't get egregiously flagged down. #1, I'll plead ignorance on any automated flame detection but I'm very skeptical that's what we're seeing. I'll stick with Occam's razor: time and again the articles this happens to are either critical of google, or favorable to MS or Apple. Examples: https://news.ycombinator.com/item?id=5716010 https://news.ycombinator.com/item?id=5716010 https://news.ycombinator.com/item?id=5715231 https://news.ycombinator.com/item?id=5715231
lazyjones 13y ago
While I also consider these tax avoidance schemes immoral (and borderline illegal, but who am I to judge ...), I have to disagree with the notion that everyone (everyone else, because noone's getting the multinationals to behave anyway) should be paying their taxes in a straightforward manner and avoid all the little tricks for the Greater Good. I believe I have 2 good reasons: 1) in a democracy, people are ultimately responsible for laws and therefore for such loopholes. It is their responsibility to close them if they consider them wrong, not to avoid them out of sheer goodwill - they only put themselves at a disadvantage and reward those who benefit from loopholes (because these crooks will be richer in relation). 2) If only a handful of multinations exploit these loopholes, they will not be fixed. Those corporations can afford to invest millions in lobbying and bribery to keep their tax privileges. So there is only one appropriate reaction: everyone must try to benefit from these tax loopholes until it hurts governments so much that they are forced to act.
kbar13 13y ago
cool paywall
a3n 13y ago
I wonder, do corporations see themselves as essentially other countries? And if they do, does that maybe explain the urge to minimize as much as possible, even down to zero, the payment of taxes to an enemy/competitor?
brianobush 13y ago
As a shareholder, I think taking advantage of tax loopholes is the company's job. However, If I was British, I might see this in a totally different light.
MarkMc 13y ago
The profit that Google makes on UK revenue should not be taxed by the United Kingdom - it should be taxed by the United States. Google's profit is due almost entirely to its fantastic computer algorithm, which was developed in the US. Tax should be based on the jurisdiction where the value was added, not where the sale took place. Another way to look at it would be to imagine that Google headquarters auctioned off the rights to run Google UK to the highest bidder. Google headquarters would have such a strong bargaining position that the successful UK bidder would end up with very low profit margins. But what annoys me are the loopholes that allow Google to transfer profit from the place where the value was created (the United States) to some other low-tax country.

87 points by rpm4321 13y ago

I though companies 'are not people' so I don't see why the word immoral should be applied to such things. Can't really have it both ways.

Nursie 13y ago
Companies are made of people. People should know to act morally. However as companies are made of people, not people themselves, corporate personhood is very, very dodgy law. Hope that clears it up for you.

j_baker 13y ago

I seriously wonder about the credibility of this story. It seems that this is the only news source that's carrying this.

desas 13y ago
Googles UK exec has been questioned by a parliamentary committee after receiving this evidance, this was reported widely in the UK (I also read an article in the guardian). The Times just has more info on the leaker.

muhuk 13y ago

Honest question; how is it immoral if it is not illegal and the contracts were not misleading? Also why did he wait 7 years if he was so moral? It would kill me by then.

ewolf 13y ago
Not everything that is legal and non-misleading is necessarily moral.
- muhuk 13y ago
  Right, but how do you come to an objective definition of morality? (IOW what is missing in my definition?) If morality is subjective, how can we demand/expect others to live by our rules?
jordonwii 13y ago
It isn't. To say it is is just silly. "Don't hate the player, hate the game."
- rooshdi 13y ago
  But the player isn't passing the ball back.
- shrikant 13y ago
  Why not hate both?
  - jordonwii 13y ago
    Because the players can't do anything about it. No matter how much we talk about morals, if, for example, Google were to not engage in the same tax avoidance schemes that all of its competitors do, then it'd be costing itself billions of dollars. Which is a reasonably substantial competitive disadvantage. That's money that can't go into R&D, maintenance, etc., whereas the companies that compete with Google do. And for what? A positive PR image?
Sven7 13y ago
From personal experience, you don't realize until you are neck deep in it. And then you have a nontrivial choice to make...
obviouslygreen 13y ago
Ethics and morality are exactly the same as legality. Technically, I can lie to you. I just did, and it's legal, as I did not cause you harm in any tangible way. It's legal but not moral. Many things are like that, and most are far less black and white or obvious. This is a difference you need to be very conscious and careful of if you intend to work... anywhere, ever. Most of the companies you're likely to deal with -- whether it's in an employment situation or in a consumer transaction -- are so large that your interaction with them will be governed by policies, not by morality, and policies are set based on what's legal, practical, and profitable.

cromwellian 13y ago

Internationally, the laws need to be changed. All the major players are using Ireland, Bahamas, Cayman Islanda, et al, as avoidance schemes. The firms try to take advantage of every legal loophole, even if in morally grey areas, because their competitors are also all doing so. Really, the major OECD players need to get together and figure out a way to stop the tax loophole arbitrage. Although the tax havens have no incentive to do so.

AnthonyMouse 13y ago
>Really, the major OECD players need to get together and figure out a way to stop the tax loophole arbitrage. It's really a domestic political problem. The source of the problem is that you're attempting to tax something called "profit" in the context of an international corporation. Profit means revenues minus costs. The problem then becomes obvious: The corporation's executives will strive to report more of the international operation's costs in the subsidiary in the higher tax jurisdiction, and to report more of its revenues in the lower tax jurisdiction. So, you say, make them report things accurately. But what does that even mean? If a company produces a product for internal use in one country and exports it to another, what is the "accurate" price to be reported as revenue to one subsidiary and cost to another? Is it the price that the item would cost at retail, or the price that it would cost if purchased in volume, or the cost of the raw materials used to produce it, or what? No matter which you choose, companies will arrange their affairs so that it benefits them. If the price is set at the actual cost of production then subsidiaries in high tax jurisdictions will be found selling everything they produce through subsidiaries in lower tax jurisdictions and eliminating all of their profits that way (minimize taxable revenues). If the transfer price is allowed to include a nontrivial amount of profit then subsidiaries in high tax jurisdictions will be found buying everything they use at a premium through their foreign sister companies in lower tax jurisdictions and eliminating all their profits that way (maximize deductions). The problem is that the entire concept of allocating profits by jurisdiction in an international supply chain owned entirely by a single entity is just totally unworkable. The profit belongs to the entire supply chain; in arms length negotiations the allocation of profit to each component would be determined by negotiating skill. And no matter what value you place on a transaction, corporations can rearrange their affairs to take advantage of that valuation, and it will be profitable for them to do so even if it costs $95,000,000 to save $100,000,000 in taxes. The solution is to stop trying to allocate profits and just tax something else. Which is why it's a domestic political problem: People don't want to hear that. They want to imagine that corporations can pay their taxes for them and, as if by magic, this will get everyone else out of having to pay for the government services they want provided. It's totally possible to tax international corporations, but you can't do it by trying to tax corporate profits. If you want to tax a corporation that makes use of government services and your jurisdiction's people when it produces value, tax real property or labor. If you want to tax them when they make money selling to your population, tax sales. If you want to tax investors, tax investment income. Corporations aren't humans. If you ever did manage to extract tax revenue based on corporate profits, it would inevitably come out of the pockets of one of those groups in any event. Taxes have to be paid by somebody.

NolF 13y ago

The moral argument is a weak one at best. Companies have a responsibility to their shareholders to maximise profit. I there is a $500 deductions for drycleaning without receipts, people are going to claim all $500. It's the same concept at a large organisation.

ISL 13y ago
Some people may claim all $500, but not everyone will.
aaron695 13y ago
> $500 deductions for drycleaning without receipts, people are going to claim all $500. This is illegal if you didn't have any drycleaning. You can go to prison(In theory) if caught.

cynicalkane 13y ago

Not paying your fair share isn't contrary to the spirit of tax law because there is no discernible spirit of the tax law. If the tax law says if you do Foo with shell company Bar through subsidiary Baz, then you get more money, legislators wrote that there for some reason because they wanted to encourage or discourage some behavior. I think it is neither reasonable nor moral to live in a society where corporations are "morally" required to second-guess the intentions of the writers of 10,000s of pages of tax law. Judge Learned Hand was the most important judge never to sit on the Supreme Court. Here's what he has to say: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes... Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

Nrsolis 13y ago
It doesn't appear that this is what was happening here. They did the deals in London and then claimed that they were done in Ireland for tax purposes. Essentially, they expected that no one would ever check whether a tax nexus was established in the UK. The fact that the UK didn't have any ability to check if this was true doesn't mean a law wasn't broken.
- cynicalkane 13y ago
  A paywall mysteriously went up so I can't go re-read the article. But IIRC the article accused Google of avoidance, not evasion. Avoidance is legal and evasion is not. So the article seems to be saying that closing deals in Ireland to avoid taxes is legal, or at least likely to be legal.
  - DanBC 13y ago
    This is england. We have strict libel / slander / defamation laws. Saying that Google is avoiding tax is fine. Saying that Google is evading tax is not fine unless I can prove that they are. Note that "tax avoidance" used to mean normal "tax planning" - using purely legal means to reduce your tax bill. Now it feels a bit different. Now it feels a bit sleazy, a bit of a grey area, a bit borderline. When people say "tax avoidance" it feels as if the steps taken are right on the borderline, or are loopholes that just haven't been closed yet.

pavanky 13y ago

How is this news now ? Isn't this pretty much what every corporation does to reduce the tax load ?

kmfrk 13y ago
It's a somewhat hot topic in the UK at the moment.
sigzero 13y ago
No, the details are a little bit different on this one.
frossie 13y ago
This is news now because there is a UK parliamentary committee hearing (analogous though not identical to a US congressional hearing) into corporate tax avoidance schemes, and Google is being accused of having misled the parliamentary committee in previous testimony before it: http://www.guardian.co.uk/technology/2013/may/16/google-denies-disguise-operates-tax http://www.guardian.co.uk/technology/2013/may/16/google-deni... I obviously have no knowledge of the specific matter, but in general it is a bad thing if MPs start accusing you of having lied to them, and it is not unusual for whistleblowers to come forward when stuff like that starts to hit the news.
- j_baker 13y ago
  That's certainly not the way it works in the US. Our politicians routinely lambast people to score easy political points.

Steko 13y ago

Brittin told the PAC last year that “nobody” in Google’s UK office was selling advertising on its website. When he asked to give further evidence last week, he admitted “a lot of the aspects of selling” did take place in London but the deals were “closed” by staff of Google’s Irish subsidiary. The distinction is crucial because if deals were finalised by London-based staff, Google could be deemed to have made profits on the contracts which would be taxable in Britain, rather than low-tax Ireland. “It uses a concocted scheme to avoid tax. It’s a smoke-screen to distort where the substance of its economic activity is really taking place,” Jones told The Sunday Times. He said he attended meetings where Google’s London sales staff closed deals, including winning contracts from eBay, the online auction site, Kelkoo, a price comparison website, and Lloyds TSB. He showed The Sunday Times contracts, invoices and correspondence between Google and its customers in Britain. One 2004 contract had the address of Google’s London headquarters next to the heading. Clients would be sold deals by Google staff in London, who were in charge of sending out contracts and receiving signed documents back from clients. In addition, British clients paid money into British bank accounts for Google services.

D9u 13y ago

We are sorry this service is unavailable as it is currently receiving a high level of traffic please try again later. I wish I could read the article myself. (without reading the article) One could say that Google is doing its part to avoid financing the war machine.

lukethegeek 13y ago
A FORMER Google executive has blown the whistle on a massive and “immoral” tax avoidance scheme that has “cheated” British taxpayers out of hundreds of millions of pounds over the past decade. Barney Jones, 34, who worked for the internet search giant between 2002 and 2006, has lifted the lid on an elaborate structure which diverts British profits through Ireland to the Bermuda tax haven. Although Google’s London sales staff would negotiate and sign contracts with British customers, and cash was paid into a UK bank account, deals were technically booked through its Dublin office to minimise its liabilities here. Jones, a devout Christian and father of four, is ready to hand over a cache of more than 100,000 emails and documents to HM Revenue & Customs (HMRC), detailing the “concocted scheme”. He has already provided testimony to the Commons public accounts committee (PAC) which led to the combative questioning.. [paywall]
- D9u 13y ago
  Thanks! Looks like I was way off the mark with my preceding comment.

marhumph 13y ago

Barney Jones is a devout Christian, you best listen to this man.

quackerhacker 13y ago
Yeah, I burst out in laughter when I read that and had to do a second glance at the picture of him with the comb over and subtle smile. LMFAO! It's bias journalism. Let me portray the evil company and the saint of a christian, sounds like a scorned employee.
EliRivers 13y ago
That's an odd thing to mention. In the UK, being a "devout Christian" is definitely an odd thing, if not outright vaguely suspicious.

quackerhacker 13y ago

"a devout Christian and father of four," is this suppose to portray an image of NOW that he is no longer with Google and after working there "between 2002 and 2006," he wants to "do the right thing." PA CHA! He's obviously doing it with his own intentions, whatever they may be. He worked there that long and now that he's no longer with them, just wants to be get PR. Given my background in regards to Google (it's not positive), I'm not a fanboy of this "good," employee and am NOT AT ALL in favor of Google.

hosay123 13y ago
Perhaps the conviction of seeing it plastered all over the UK headlines in the past few weeks was too much for him? I'm not sure what being Christian has to do with it, why you're reacting to that, or why the journo even bothered mentioning it

throwaway420 13y ago

I am normally enraged by a number of Google's business practices and am extremely hostile and critical of them when it comes to their evil and horrible customer service practices, among others, but this is about the stupidest criticism of Google that I've ever heard. This isn't even actually a criticism - EVERY individual and company works to minimize their own tax burden as much as they can. Google is not evil for not wanting to give even more of their cash to any government. If Barney Jones wanted to report on what he viewed as illegal activity, why would he wait nearly a decade to come out about this? This is incredibly bizarre and stupid.

molex333 13y ago

This is very old news (at least a year or two). This is such common practice that there is a nickname for it. It is called the double Irish http://en.m.wikipedia.org/wiki/Double_Irish_arrangement http://en.m.wikipedia.org/wiki/Double_Irish_arrangement

ISL 13y ago
What's new is that the British government has decided to care. See [1], search news for 'google tax', etc. Edit: The Irish take is interesting [2]. The Cypriot crisis and Apple's decision to take out a huge loan rather than on-shore some offshore cash both provide further spice to the present arrangement. [1] http://www.guardian.co.uk/technology/2013/may/18/eric-schmidt-google-tax http://www.guardian.co.uk/technology/2013/may/18/eric-schmid... [2] http://www.independent.ie/opinion/analysis/no-wonder-the-neighbours-are-upset-over-our-cosy-tax-policies-29276553.html http://www.independent.ie/opinion/analysis/no-wonder-the-nei...
- deleted 13y ago
  [deleted]
markvdb 13y ago
You might want to have a look at: * Taxodus, http://taxodus.net http://taxodus.net (tax avoidance game) * Tax Free Tour, http://youtu.be/d4o13isDdfY http://youtu.be/d4o13isDdfY (tax avoidance documentary by VPRO, a Dutch public broadcasting organisation)
desas 13y ago
This is different. The double Irish is legal for sales taking place in Ireland. The news article is alleging that the UK Google salespeople are making sales in the UK, in which case UK tax is due.

lwute 13y ago

What is massive and immoral are the huge criminal organizations that spy on people, curtail their freedoms and extort money from them in any possible way to divert it to themselves. Then, they reuse part of the money to mislead the people, convincing them that they are caring for their interests and that not paying the protection money is immoral and wrong. They call themselves "governments".

simonsarris 13y ago

I generally agree with Ben Franklin here, that taxes are not theft, rather the opposite, failure to pay taxes due is theft from the rest of society. He hated the "all taxation is theft" libertarians of his own day: "The Remissness of our People in Paying Taxes is highly blameable; the Unwillingness to pay them is still more so. I see, in some Resolutions of Town Meetings, a Remonstrance against giving Congress a Power to take, as they call it, the People's Money out of their Pockets, tho' only to pay the Interest and Principal of Debts duly contracted. They seem to mistake the Point. Money, justly due from the People, is their Creditors' Money, and no longer the Money of the People, who, if they withold it, should be compell'd to pay by some Law. "All Property, indeed, except the Savage's temporary Cabin, his Bow, his Matchcoat, and other little Acquisitions, absolutely necessary for his Subsistence, seems to me to be the Creature of public Convention. Hence the Public has the Right of Regulating Descents, and all other Conveyances of Property, and even of limiting the Quantity and the Uses of it. All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it. That being said I think it's a problem that needs to be fixed in the culture and governance of a people, not in Google itself, since attempting to assign any civic duty to a multinational is probably laughable. Singling out Google probably doesn't do too much good, except maybe to make people think of "favorite company X"'s role in society.

seivan 13y ago
Taxes are theft, you can twist it anyway you want. Say that to workers who have to pay 40-50% of their tax & mandatory pension saving only to see it being swiped out by the government on the next recession.
- eksith 13y ago
  No. Taxes are a service fee paid as agreed to in your social contract (which you signed by participating in said society). If you disagree with this contract, you're free to move elsewhere that is a. Devoid of taxes (good luck) or b. Devoid of society. Society functions by and large by public services which, whether you like it or not, need money; not magic. Every functional society has had tax collection in some form or another as a result. There are communities that don't charge taxes for things, and they're heavily de-regulated as a result. They also heavily favor self-reliance and don't feature luxuries such as Police or Firefighters.

lwute 13y ago

lukethegeek 13y ago

Part of that article is behind a paywall.. :(

sjtgraham 13y ago

I'm quite tired of the populist rhetoric of "morality" vis-à-vis tax that the UK media and politicos seemingly wheel out every other day. The bottom line is that taxation is a legal issue, not a moral issue. Lord Clyde said in Ayrshire Pullman Motor Services v Inland Revenue "No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue". That is the law of the land to this day. There is a moral obligation to obey the law, but not to pay a penny more in tax than the law demands. If there is a problem with the law then legislate to ameliorate the issue, but please spare me this talk of "morality".

tn13 13y ago

One of the stupidest criticism I have read. Tax evasion and Tax planning are two different things. And "morality" and "taxation" can not be spelled in same sentence.

smogzer 13y ago

It's immoral that governments take poeples money and use it for intents orthogonal to those original people intents, e.g. war, subsidies to monopolies such as the oil industry, corruption, etc. Google on the other hand provides a great services for free and acessible to everyone. I would prefer my taxes to go to google; and if they would become government they would be much more efficient than any government out there. By the way google if you want a toy country to try stuff, try Portugal. This goverment could use some help and they are some nice people who support the private initiative.

DanBC 13y ago

The whistle blower left Google in 2006. The whistle blower claims to have many thousands of emails to hand over. What the heck Google? How did he get to keep these emails? > Barney Jones, 34, who worked for the internet search giant between 2002 and 2006, [...] > [...] is ready to hand over a cache of more than 100,000 emails and documents to HM Revenue & Customs (HMRC), detailing the “concocted scheme”.

greenyoda 13y ago
How hard is it to make a copy or a screenshot of an e-mail and smuggle it out on a thumb drive?
- DanBC 13y ago
  When you work for the accounts department of a security conscious company, which is chock-a-block full of smart computer-competent people, it should be pretty darn hard to smuggle out email. Especially 100,000 emails.
  - oijaf888 13y ago
    Assuming google uses gmail internally it would be as hard as connecting via imap and then copying your thunderbird files to a flash drive or taking home your laptop and copying them then.

deleted 13y ago

[deleted]

cjdrake 13y ago

Using the word "immoral" in this context is just silly. Google is a corporation, and legally avoiding taxes is the fiduciary responsibility of any corporation to its shareholders. Corporate taxes are ridiculous to begin with, because the cost is paid by either employees or shareholders. Only people can pay taxes.

bifrost 13y ago

I think the key here is -> "It is able to record the revenues in Ireland because the UK company is deemed to drum up new business, with sales staff in Dublin executing all deals." If the business was initiated in the UK, but executed in France, guess who'd get the tax money -> France. This doesn't seem particularly swarthy, and frankly doesn't really warrant an article or any sort of hubbub unless you're interested in being a Google hater. I'm fine with being a Google hater, I don't use Google search/ads/gmail/etc because I don't like their privacy practices/etc... Anyways, what sort of services are we talking about here? If we're talking about Google ad network deals, you buy ads and they get displayed all over the world, you do not pay taxes everywhere the ads were shown.

DanBC 13y ago
If someone in England buys a product, in England, from someone in England, and uses English money, and that product is an ad and that ad is shown to people in England, then it seems reasonable that English taxes should be paid, even if the company uses a bizarre scheme to hand off the very last part of the chain to complete the deal in Ireland. Google is welcome to move their office to Ireland if Google wants to use the Irish tax scheme.
- bifrost 13y ago
  Thats the thing; they bought this product from Ireland not from England and they in fact do have an office in Ireland. Just because someone chatted with someone else in England about it doesn't make it an "english sale".
  - DanBC 13y ago
    > Just because someone chatted with someone else in England about it doesn't make it an "english sale". If almost all of the work was done in England then it's an English sale. The fact that Google contrives a bizarre situation where their English sales (between English staff and English customers delivered in England, not Ireland) have a tiny bit of work done in Ireland should be irrelevant. I'm not sure how you can call it an Irish sale when the money changing hands is Sterling not Euro, between banks in England not Ireland, and arranged by staff and customers in England not Ireland.

patrickdavey 13y ago

If there's one book I'd recommend on the subject of Tax Havens, Tax Avoidance, Tax Evasion it's this: "Treasure Islands, Tax Havens and the men who stole the world" by Nicholas Shaxson http://treasureislands.org/ http://treasureislands.org/ Really, an eye opening fascinating read.

Steko 13y ago

Ask HN: Do the pro-Google voting rings get paid extra to flag these articles on Saturdays or do you donate this time? edit: http://imgur.com/wvB8lgH http://imgur.com/wvB8lgH

DanBC 13y ago
There are a number of reasons why this article is dropping down the pages, and "pro-Google flaggers" is only one of them. 1) Automated flame detection drops the submission down the page 2) Political discussion gets flagged. Quite a lot of this thread is about US taxes. 3) Lack of upvotes. It only got about 70 upvotes.
- Steko 13y ago
  It's certainly not #3: with 3 hours and 70 votes it would easily be ahead of #4 in the screenshot (4 hours and 66 votes). Instead it's #27. #2 I don't see why you would flag the topic and not the political comments. Moreover we see plenty of topics where comments go political that don't get egregiously flagged down. #1, I'll plead ignorance on any automated flame detection but I'm very skeptical that's what we're seeing. I'll stick with Occam's razor: time and again the articles this happens to are either critical of google, or favorable to MS or Apple.
  - Steko 13y ago
    It's certainly not #3: with 3 hours and 70 votes it would easily be ahead of #4 in the screenshot (4 hours and 66 votes). Instead it's #27. #2 I don't see why you would flag the topic and not the political comments. Moreover we see plenty of topics where comments go political that don't get egregiously flagged down. #1, I'll plead ignorance on any automated flame detection but I'm very skeptical that's what we're seeing. I'll stick with Occam's razor: time and again the articles this happens to are either critical of google, or favorable to MS or Apple. Examples: https://news.ycombinator.com/item?id=5716010 https://news.ycombinator.com/item?id=5716010 https://news.ycombinator.com/item?id=5715231 https://news.ycombinator.com/item?id=5715231

lazyjones 13y ago

While I also consider these tax avoidance schemes immoral (and borderline illegal, but who am I to judge ...), I have to disagree with the notion that everyone (everyone else, because noone's getting the multinationals to behave anyway) should be paying their taxes in a straightforward manner and avoid all the little tricks for the Greater Good. I believe I have 2 good reasons: 1) in a democracy, people are ultimately responsible for laws and therefore for such loopholes. It is their responsibility to close them if they consider them wrong, not to avoid them out of sheer goodwill - they only put themselves at a disadvantage and reward those who benefit from loopholes (because these crooks will be richer in relation). 2) If only a handful of multinations exploit these loopholes, they will not be fixed. Those corporations can afford to invest millions in lobbying and bribery to keep their tax privileges. So there is only one appropriate reaction: everyone must try to benefit from these tax loopholes until it hurts governments so much that they are forced to act.

kbar13 13y ago

cool paywall

a3n 13y ago

I wonder, do corporations see themselves as essentially other countries? And if they do, does that maybe explain the urge to minimize as much as possible, even down to zero, the payment of taxes to an enemy/competitor?

brianobush 13y ago

As a shareholder, I think taking advantage of tax loopholes is the company's job. However, If I was British, I might see this in a totally different light.

MarkMc 13y ago

The profit that Google makes on UK revenue should not be taxed by the United Kingdom - it should be taxed by the United States. Google's profit is due almost entirely to its fantastic computer algorithm, which was developed in the US. Tax should be based on the jurisdiction where the value was added, not where the sale took place. Another way to look at it would be to imagine that Google headquarters auctioned off the rights to run Google UK to the highest bidder. Google headquarters would have such a strong bargaining position that the successful UK bidder would end up with very low profit margins. But what annoys me are the loopholes that allow Google to transfer profit from the place where the value was created (the United States) to some other low-tax country.