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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

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.
    - Nrsolis 13y ago
      Correct. Tax avoidance has evolved into a shell game of jurisdiction shopping and regulatory arbitrage. In the USA, states got so fed up with companies assigning their trademark and copyrights to DE subsidiaries they could make tax-free royalty payments to that they started doing combined reporting to nullify the effect of those constructions. Even though companies had no offices, employees, or business in DE, they nonetheless were claiming that their very valuable IP was situated there. The net effect is that it's easy to deduct royalty payments in a high tax state and have them appear in DE, a low-tax state. Not to be undone by combined reporting, they've (companies) now expanded this approach to offshore destinations to keep the benefits of transfer pricing. GOOG does it. AAPL does it. MSFT does it. http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?pagewanted=all&_r=0 http://www.nytimes.com/2012/04/29/business/apples-tax-strate...
  - deleted 13y ago
    [deleted]
- yanw 13y ago
  Wasn't this a profile piece about the so called "whistleblower" whose "evidence" Google already was confronted with by PM this week?
deleted 13y ago
[deleted]
DanBC 13y ago
EDIT: People keep saying that it's fine if they're obeying the law. There's a chance that they might not be obeying the law. While they're not evading tax (not using clearly illegal means) they're not just tax planning. Indeed, the schemes used by these companies are pushing a language change. Tax avoidance used to mean normal tax planning. The tactics of Google, Amazon, Vodafone, Starbucks, etc etc etc mean that "Tax avoidance" now means complex schemes which are probably legal, but that might not be. The schemes are complex, and require believing odd things to be true. For example, Starbucks makes no profit in the UK[1], something that people will find baffling if they've ever bought a £4 coffee. Any one of the big four accountancy firms has more staff that the HMRC. There's big money to be made in avoiding tax. When firms are caught they negotiate deals to repay some, but not nearly all tax.[2] But the final slap in the face is that underfunded, understaffed HMRC gets "help" from the big four accountancy firms. What's the catch? What could possibly go wrong with allowing the poacher to play at gamekeeper? They lend staff to HMRC to draft tax law; they then use their knowledge of those laws (that they helped to create) to exploit loopholes.[3] People really don't mind if you plan your taxes to reduce the bill. But they do get angry when they see people "taking the piss", especially when the country is going through austerity measures and when the NHS is being crunched. All these companies make use of UK infrastructure (police; education; health; roads, etc etc) - they should pay their tax. [1] (http://www.independent.co.uk/news/uk/home-news/starbucks-is-right-not-to-pay-uk-tax-because-it-makes-no-profit-says-coffee-chains-tax-advisor-8589459.html http://www.independent.co.uk/news/uk/home-news/starbucks-is-...) [2] (http://www.guardian.co.uk/politics/2011/dec/20/inland-revenue-sweetheart-tax-deals http://www.guardian.co.uk/politics/2011/dec/20/inland-revenu...) [3a] (http://www.ion.icaew.com/TaxFaculty/26745 http://www.ion.icaew.com/TaxFaculty/26745) [3b] (http://www.guardian.co.uk/business/2013/apr/26/accountancy-firms-knowledge-treasury-avoid-tax http://www.guardian.co.uk/business/2013/apr/26/accountancy-f...)
- cynicalkane 13y ago
  The only winning move is not to play here. Economists and policy wonks across the world, of all political persuasions, are constantly suggesting better ways to tax than corporate income. Corporate taxes are lower, more even, and less of an issue outside the U.S. and U.K., but over here "corporate profits" is a dirty word and so you win votes by taxing them, the seeming logic being that if you tax a behavior that makes the behavior less evil.
kenko 13y ago
"Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." Aside from this being false (not everyone arranges his affairs so that his taxes shall be as low as possible), Hand's observation is rather strikingly like another, more famous about equality before the law: "The law in its infinite majesty forbids the rich as well as the poor to sleep under bridges, to beg in the streets and to steal bread". It's true that the law itself is pretty nuts, but things would be a lot better if people (natural as well as merely legal) didn't regard taxes as a punitive burden to be lessened by any means. Functioning and funded governments are good!
Nursie 13y ago
>> 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. But the law doesn't say that. It says if you don't have any profits then you don't pay tax, so the company sets up another company in another place and charges the initial company all of its money for "branding services". This was very clearly not the intent of the law, it's a dodge and the people doing it know it's a dodge.

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.
  - Nrsolis 13y ago
    Correct. Tax avoidance has evolved into a shell game of jurisdiction shopping and regulatory arbitrage. In the USA, states got so fed up with companies assigning their trademark and copyrights to DE subsidiaries they could make tax-free royalty payments to that they started doing combined reporting to nullify the effect of those constructions. Even though companies had no offices, employees, or business in DE, they nonetheless were claiming that their very valuable IP was situated there. The net effect is that it's easy to deduct royalty payments in a high tax state and have them appear in DE, a low-tax state. Not to be undone by combined reporting, they've (companies) now expanded this approach to offshore destinations to keep the benefits of transfer pricing. GOOG does it. AAPL does it. MSFT does it. http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?pagewanted=all&_r=0 http://www.nytimes.com/2012/04/29/business/apples-tax-strate...
- deleted 13y ago
  [deleted]
yanw 13y ago
Wasn't this a profile piece about the so called "whistleblower" whose "evidence" Google already was confronted with by PM this week?

deleted 13y ago

[deleted]

DanBC 13y ago

EDIT: People keep saying that it's fine if they're obeying the law. There's a chance that they might not be obeying the law. While they're not evading tax (not using clearly illegal means) they're not just tax planning. Indeed, the schemes used by these companies are pushing a language change. Tax avoidance used to mean normal tax planning. The tactics of Google, Amazon, Vodafone, Starbucks, etc etc etc mean that "Tax avoidance" now means complex schemes which are probably legal, but that might not be. The schemes are complex, and require believing odd things to be true. For example, Starbucks makes no profit in the UK[1], something that people will find baffling if they've ever bought a £4 coffee. Any one of the big four accountancy firms has more staff that the HMRC. There's big money to be made in avoiding tax. When firms are caught they negotiate deals to repay some, but not nearly all tax.[2] But the final slap in the face is that underfunded, understaffed HMRC gets "help" from the big four accountancy firms. What's the catch? What could possibly go wrong with allowing the poacher to play at gamekeeper? They lend staff to HMRC to draft tax law; they then use their knowledge of those laws (that they helped to create) to exploit loopholes.[3] People really don't mind if you plan your taxes to reduce the bill. But they do get angry when they see people "taking the piss", especially when the country is going through austerity measures and when the NHS is being crunched. All these companies make use of UK infrastructure (police; education; health; roads, etc etc) - they should pay their tax. [1] (http://www.independent.co.uk/news/uk/home-news/starbucks-is-right-not-to-pay-uk-tax-because-it-makes-no-profit-says-coffee-chains-tax-advisor-8589459.html http://www.independent.co.uk/news/uk/home-news/starbucks-is-...) [2] (http://www.guardian.co.uk/politics/2011/dec/20/inland-revenue-sweetheart-tax-deals http://www.guardian.co.uk/politics/2011/dec/20/inland-revenu...) [3a] (http://www.ion.icaew.com/TaxFaculty/26745 http://www.ion.icaew.com/TaxFaculty/26745) [3b] (http://www.guardian.co.uk/business/2013/apr/26/accountancy-firms-knowledge-treasury-avoid-tax http://www.guardian.co.uk/business/2013/apr/26/accountancy-f...)

cynicalkane 13y ago
The only winning move is not to play here. Economists and policy wonks across the world, of all political persuasions, are constantly suggesting better ways to tax than corporate income. Corporate taxes are lower, more even, and less of an issue outside the U.S. and U.K., but over here "corporate profits" is a dirty word and so you win votes by taxing them, the seeming logic being that if you tax a behavior that makes the behavior less evil.

kenko 13y ago

"Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." Aside from this being false (not everyone arranges his affairs so that his taxes shall be as low as possible), Hand's observation is rather strikingly like another, more famous about equality before the law: "The law in its infinite majesty forbids the rich as well as the poor to sleep under bridges, to beg in the streets and to steal bread". It's true that the law itself is pretty nuts, but things would be a lot better if people (natural as well as merely legal) didn't regard taxes as a punitive burden to be lessened by any means. Functioning and funded governments are good!

Nursie 13y ago

>> 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. But the law doesn't say that. It says if you don't have any profits then you don't pay tax, so the company sets up another company in another place and charges the initial company all of its money for "branding services". This was very clearly not the intent of the law, it's a dodge and the people doing it know it's a dodge.