Google used a tax loophole to shelter $19.2B
engadget.com
engadget.com
The fact is all companies do this... it's well-known every industry is doing the same. Walmart, Exxon and Pfizer are just a few companies that tax-dodge just as much as Google. It's estimated $700 billion in taxes are dodged so singling out Google's $19 billion seems strange.
https://americansfortaxfairness.org/corporate-tax-chartbook-...
1. The letter of the law and the Right Thing aren't always the same thing (jury nullification, MLK)
2. You disagree with what the government spends tax money on
3. You think AI progress is a form of "doing good"
I agree with 1, sometimes agree with 2, but 3 just doesn't follow for me.
1. I stated that morality isn't absolute 2. I provided a contradictory moral framework to the parent poster, leading to a different conclusion
The fact that you, me, and the parent poster all disagree about points 1-3 seem to hint that morality isn't absolute, no?
(Note I have not outlined my personal beliefs in my post, just posited one possible line of reasoning.)
I would clarify that our view of morality is relative, but I think all of us believe in some sort of baseline sense of morality that we feel is wrong (or right) in any context, and for any person.
We may disagree on the details and priority, but I believe most people share a common sense of morality.
And I didn't mean to imply that my comment was a criticism of your personal beliefs, but that the syllogism didn't follow for me. But I do see your point as far as the contrasting of the opening statement and the moral framework don't need to share a logical consistency.
I suspect most people (non sociopaths) base their morality on emotion, and some things are really hardwired, like disliking injustice (3rd party punishment is a really interesting topic on that).
But the "details and priorities" vary so much in the real world... I've met people who believe strongly in affirmative action type policies, and those who believe strongly against them. I think both think the other side is being unfair, so if what I guessed above is true, then the underlying "morality" you defined would be the desire for "fairness"?
As for how someone could come up with those "details and priorities", perhaps they would rather fund NASA than fight homelessness: they would rather invest in the high-end because the technology breakthroughs could have orders of magnitude more impact on poverty than simply redistributing money. I've witnessed many an argument over whether or not it was more "moral" to put money into "wasteful" endeavors like science funding when people are still struggling to get by even in America, not to mention the world at large.
I want to say thank you for engaging me in this, as to be honest, many hate these conversations or it devolves quickly, but I'm hoping this doesn't :)
I tend to think that the morality we discuss is fairly common even if it's a mix of what we intrinsically feel and what we observe.
One case I can point to is C.S. Lewis' Abolition of Man, in his description and the the Tao. You can see that for the most part, throughout recorded history there's a common sense of right and wrong.
So I guess all of that to say, I try not to base my morality on emotion, especially in cases where my emotions line up with my morality (those tend to be the blind spots).
I think that morality is a wide spectrum rainbow that we all truly desire to hit, and that most "sin" comes from focusing on the wrong parts or the right parts at the wrong time.
But regarding some of your points, I guess some things in my view, like affirmative action policies don't count directly to morality (though maybe indirectly), at least in my opinion.
I guess I focus morality towards those things we all see over the millennia, and ethics tend to be more temporal, though still critical.
Anyways, this one is always tough to get deep into without establishing first principles :)
And if they were working on changing the law, or explicitly appealing to justice, that might carry some water. Simply flouting the law for private profit is hard to tie back to a sense of morality
> You disagree with what the government spends tax money on
Your moral remedy for this is to vote, not to steal
Google/corporations as whole regularly do spend their money on lobbying/political pursuits. This is rather often criticized however.
>Your moral remedy for this is to vote, not to steal
Are you conflating Google avoiding taxes as theft? If so, why is there a governmental right to corporate earnings, especially considering tax shelters are using legal loopholes?
Further, how is it morally correct for me to donate money to a government that I fundamentally disagree with, as by giving them money I am atleast financially supporting their acts?
Larger corporations don't have much choice, they have to do it just to keep from getting run over by politicians.
Did you mean "instead of doing what's decided by competing lobbyists"? I completely agree that lobbying should not exist, but in a system where it does, trying to get by without doing it yourself might be disastrous if you're going up against those who have no such qualms.
The fact that people can disagree with that might hint that morality is a bit more complex than absolute.. unless we talk to philosophy departments which like to push absolute morality, which seems to me like a scheme to create never ending debate ;)
I could see an argument that robin hood was a moral figure in his time. I could see the morality in a contentious objector who goes to the front line to shoot at the sky, or in Schindler purposefully minting defective rounds, or in the sit-ins and civil disobedience of the 60s. And I can also see morality in protesting an abortion clinic, even though I don't personally agree with those protestors.
But this is of course difficult to grapple with at least on a larger level because it can create a lot of chaos when we're all off forcing our own moral choices on others.
Whether your moral obligation lies above or below the legal minimum depends on your viewpoint.
There is no moral obligation to pay more than your legally required amount of tax. The presumption would be that no moral obligation exists until one is proven, for precisely the reason you mentioned (it depends on your viewpoint, so we cannot begin with any one set of norms), so if you would kindly propose one, I will disprove it.
Edit: I wasn't saying there's a moral obligation to pay more than the legal obligation. I was saying there's not necessarily a moral obligation to pay even the legal obligation. They're orthogonal issues.
You implied that there is a moral obligation to pay at least the legal minimum, and I'm saying that's not a moral obligation but a legal obligation.
Edit further: imagine living in a regime with 90% income taxes, and which takes that money and uses it to do terrible things. You have a legal obligation to pay those taxes, but I'd argue at least that you don't have a moral obligation to pay, and perhaps that you actually have a moral obligation not to pay. Therefore the legal minimum tax payment is not a moral obligation but a legal obligation.
I don't actually believe that this assumption is generally true (nonpayment of taxes can be a form of civil disobedience; Henry David Thoreau did this in opposition to the Mexican-American War), but let's say that we believe in the principle that "any entity has a civic duty to follow the law, and if it is unjust, to protest it and endeavor to change it rather than simply disobeying it." In that case, yes, the moral obligation changes, because it is based on following the law.
> You implied that there is a moral obligation to pay at least the legal minimum, and I'm saying that's not a moral obligation but a legal obligation.
I don't believe I implied that. I just said there's no moral obligation to pay more than the legal minimum. That is true even if there is no moral obligation to pay taxes at all.
> Edit further: imagine living in a regime with 90% income taxes, and which takes that money and uses it to do terrible things. You have a legal obligation to pay those taxes, but I'd argue at least that you don't have a moral obligation to pay, and perhaps that you actually have a moral obligation not to pay. Therefore the legal minimum tax payment is not a moral obligation but a legal obligation.
OK, so even in this situation, there is no moral obligation to pay any more than the minimum legally required tax. I fail to see where we disagree.
Is someone taking a mortgage exemption being immoral?
My opinion is that moral tax obligations are so far below legal obligations that almost any effort to minimise taxes is perfectly fine. But you still have to pay your legal minimum if you don't want to go to prison.
I see no evidence of (A), and if my comment has been construed as an aphoristic gag order, I would like to answer (B) by clarifying that it only means there's not much to complain about when a company abides by the tax regulation.
But I don't think we can equivocate the action of not only breaking into a system (weak or not) and stealing something from others, from the government (or any actor) leaving money on the table due to their inefficiencies, or lack of foresight.
But if we're going for false equivalencies, you could also say that government's using the act of force to take money is also equally wrong, which is the typical libertarian argument.
I'm not a big fan of either argument, as they all fall apart as soon as you get into the details.
They have little or no unchecked burden on public infrastructure, basically all of their activities generate value out of thin air. If the tax code your representatives approved allows them to legally retain money, it would be stupid and thankless for them to pay more through taxes.
The nation state concept was arbitrarily rolled out worldwide over the last few centuries and their passive revenue ideas are just as arbitrary
People largely debate the fairness of the tax amongst all participants in the system instead of the system itself, this is understandable because they are numerous and powerless whereas the multinational class is the exact opposite
But these still have no effect on the intrinsically amoral nature of government revenue ideas
The nation state concept got itself into its own mess
Literally the first three words.
But wait, without an operational advanced society companies like Google and others cannot exist. If Google doesn't pay taxes someone else has to.
Loopholes don't just exist, they are created for the express purpose by lobbying, corporate capture and entrenched interests who are are adept at getting their way. Tax consultants like Deloitte and others are often writing the laws and then advising corporates how to work around them. Everyone knows how this works.
Since this kind of evasion does not benefit the average user, american society or anyone apart from Google it follows the only people who will defend them are the Google ecosystem, yet this thread is full of defenders. Why would anyone point to other companies doing the same thing as a defense, surely as average americans this should concern us even more, that it's a trend.
It's this social management by corporate interests that has completely derailed online discussions and makes everything toxic. Think about it, why would anyone come to HN to defend tax evasion by Google and unless readers can push back, self serving vested interests, the immature and trolls will destroy online discussion.
Loopholes and bugs are differences between intent and effect.
On the other hand, there are certainly cases where a loophole is obviously not the intent of the legislators, and regardless of the legality of exploiting it, one could justly view exploiting it as immoral.
For example, sticking with the analogy of computer bugs, a multiplayer videogame that has an obviously unintended glitch, which lets you cheat against your fellow players.
Do you think shareholders would stand for a company paying $19.2B more in taxes than they should? That would be absurdly negligent on the part of everyone leading the company.
Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government?
Don't indict corporations for following the tax code, change the laws.
I've done it. I also let the shopkeepers make "mistaken" change when I visited Nepal. Sometimes I tip $5 even when I buy less than $25 worth of food at a restaurant. Maybe I'm a moron, but I think of money as a tool and when I can afford it I am happy to help others accomplish their goals. In the case of taxes many of the government's goals are aligned with mine so I'm even happier to contribute.
Do you think $500 extra to the federal government will do as much good as you directing that $500 to specific individuals or families that could really use it?
Sure, don't indict them, just please, please recognize them for exactly what they are: soulless, inhuman, profit maximizers that will take every inch afforded to them by the law (and sometimes more). You gotta watch them like a hawk and don't believe their statements to the press.
Let me know when you invest your savings in a company that returns lower profits because they refuse to pay lower taxes, even if they legally could.
And let me know when you find a tax deduction that could save you money, but you decide to not take the deduction and pay more taxes.
My takeaway from that comment was, to expect that behavior and ensure legislators write and enact laws that establish effective corporate governance.
This isn’t a “statement of the obvious”, it’s a somewhat popular misinterpretation of the fiduciary duty owed by a corporation to that corporation’s shareholders.
Do you feel the same way about every person that takes an income deduction?
So closing the loophole will force companies to raise wages and invest in R&D, instead of keeping it in offshore accounts or giving to the government.
Isn't there? I thought shareholders has a legal remedy if they believed companies weren't maximising return?
I wouldn't have done in the past before Google hired lobbyists, but if they're sending people to Washington to "help" draft laws then pretending that they are not culpable is simply dishonest.
> Do you think shareholders would stand for a company paying $19.2B more in taxes than they should?
What do you mean, 'should'? They 'should' pay the amount that is expected of them - the amount proportional to their profits. Each corporation should pay what is expected of them in full. This would produce is vastly more stable economy which would then let those corporations earn more money. It would benefit the shareholders of every corporation to have a stronger and stabler US consumer base than to have a crippled middle class like they create by not paying their taxes.
Yes, of course Google should have paid that $19.2B.
> Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government?
Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes.
I read it as something like 'are required to by law.'
> Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes.
I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that?
I would have said 'have to' to be required by law. 'Should' implies a moral code, a desire to do right and good. In this case, Google absolutely 'should' pay those taxes.
> I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that?
If you have more money than necessary, and you know that others don't, and you know that a good portion of your taxes goes to helping others, the rational thing to do could be to help out and not attempt to claim every tax break and benefit you could. I'm not saying that's always right, I'm saying it can be rational for people to do it.
Paying as little taxes as possible to avoid jail is absolutely not the rational move for people or corporations. This is a classic tragedy of the commons: if people and companies paid taxes as due, we would all be better off for it. The rational move is to fully pay all expected taxes, not use offshore secret hideouts to avoid improving your own country.
Your list of conditions for rationally paying more taxes hinges on so many assumptions that it's a moot point. You might as well say it's rational to burn money in a fire.
If you have more than you need, and you know that others don't, and you know that the government is not efficient enough to use it properly, and you know that corporations will keep it instead of paying higher wages to workers, and you know that non profits will eat the majority of it in overhead before it helps people, and you know that decreasing the amount of money in circulation will cause the value of all money to increase, you should rationally set fire to your extra cash.
You don't pay taxes so that governments can spend money. Governments can spend as much money as they like - they print the damn stuff.
The economy would function precisely as it does now if every dollar paid in tax were burned and every dollar spent by the government were printed.
Taxes paid to extinguish money. It is supposed to be deflationary - a transfer of wealth to everybody else spending money in the economy.
Even discounting local and state governments, which use tax dollars to fund themselves and can't print money like you describe, even the federal government doesn't work like that.
Sure, it's just that some might prefer charities.
> The rational move is to fully pay all expected taxes
The difficulty is in defining "expected." If the tax authorities give your return the green light, in what sense did they "expect" more? If your definition of expectation isn't about the letter of the law but the spirit, then whose spirit (amongst the many lawyers, accountants, and executives) should be followed? This doesn't even touch the issue of fiduciary responsibility, covered elsewhere in the thread.
It messes up government planning and spending by cheating them out of money that they were expecting based on the profits from the company.
It's clear cut.
> Sure, it's just that some might prefer charities.
Charities don't build roads or other infrastructure, or test food for safety concerns, or build other large scale useful works that life people out of poverty at scale.
>It's clear cut.
See, that's the thing; it's obviously not clear cut to other people.
There's a very reasonable (IMO) position that a taxpayer is merely obligated to comply with the law, but is not similarly obligated to structure their affairs in such a way as to maximize the government's take.
Also, charities don't bomb the living shit out of strangers around the world.
Of course it is, and then both individuals and companies have the option to make voluntary payments as charitable contributions or to support local institutions--as many universities to to their municipalities.
You can see it in the statistics on life expectancy, infant mortality, and average height.
In this particular case, it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails to tax overseas income of corporations.
In many cases, tax law says or (implies) "you pay $X to us, but you get credit for tax paid to other countries".
That's one way for loopholes to exist. Another way is for companies to pay/lobby politicians to write loopholes into tax laws.
> Laws have loopholes like code has bugs.
Sure. And software also has backdoors placed there intentionally by developers.
If a company misinterprets tax code, they will eventually have to pay the price for it.
And I feel like "loophole" doesn't do justice to the authority the US gov't has.
If Congress can't get their act together enough to write clear tax law, then they should go back and fix it. Don't blame the company for imperfect and imprecise language - they didn't write it.
They did change the law, and this workaround will stop working around 2020
Of course they have made an effort to fix this -- the recently passed tax reform bill makes this a thing of the past by dropping the tax rate for foreign profits to 0%.
Engaging in sham business activity for the specific purpose of tax avoidance is not legal. Many of these tax schemes could be declared invalid at the discretion of the IRS (or other governments - the EU already has in some cases).
These companies are not complying with tax law. They are cheating and paying bribes or doing favors to get away with it, and everyone knows it.
Yes, there are many judgement calls, and as with all judgement calls, there may be differences of opinion. But you can bet that they all believe that they can make a strong case that they are within the law.
Congress might write a law with some expectations.
A well paid accountant and lawyer team might interpret the law differently.
The company employing the team is trying to obey the law, so this isn't illegal tax evasion. But it is tax avoidance, and the use of loopholes may be found to be illegal by the courts, or the law might change to make it illegal.
"Loophole" is just short hand for "unexpected use of law that hasn't been tested by the courts".
The amount of legal gymnastics going on in court cases and things like this... It never ceases to amaze me. It all seems so inefficient.
You are allowed to use any loophole: if there is a tax break for doing x and you normally do y then you are allowed to do x to save tax.
You are not allowed to lie: If you didn't do y after all you should not pretend you did.
The U.S. has threatened to put us on the list of tax havens, and we've made some moves to fix things, but apparently we are dragging our heels. According to this source [1] we talk the good talk, and behind the scenes do our very best to slow down as many of these new procedures as possible. Supposedly this is in the name of "Ensuring proper implementation".
The new government is going to abolish the tax on dividends. I don't know the details, but it's a controversial move. The opposition parties are really against it.
I guess a small country needs to make some moves to stay relevant.
[1] https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwa...
People don't like judgment so they say we're keeping with the law. Yes, they are, but by abusing tax loopholes.
Corporations have come up with a lot of banned phrases; and encouraged phrasing to hide the true nature and psychological, social, and material impact of their actions.
Where does it say in the tax code to go set up Bermuda corporations and launder revenue earned in various territories through Ireland and Netherlands to avoid taxation in those territories?
Laws are buggy like code and using loopholes is just hacking the law.
Loopholes are the side effect crappily written laws. And in many cases, loopholes are unearthed by an army of high-paid law firms. Unintentionally created, but very intentionally exploited.
As these loopholes are closed(again, because they're unintentional), these mega corporations are moving around their money from tax haven to tax haven; they're actively exploiting these loopholes in various countries.
It is depriving these countries of very real income. Ya know to pay for the roads, emergency systems, mental health clinics, etc. of ordinary people.
So, sure, it's legal in the same way the many multitudes of immoral things of history were legal.
Being Dutch, I am ashamed that our government does not do anything to change the laws which allow for this to happen.
Those countries are the most hurt by the use of tax havens. Many people in poor countries depend on tax dollars to survive.
https://www.theguardian.com/commentisfree/2013/may/14/tax-ha...
It's a disgusting practice, that many on this forum seem to have no problem defending. Astounding.
Suffice to say, this is not a company "doing the right thing", as their code of conduct suggests they should.
And bear in mind, this is not a loophole in our tax code, it is a loophole in international tax handling between multiple countries, and the primary result of this is that all of those billions get stashed in Bermuda instead of coming back to the US where it can enrich society.
You are either okay with companies avoiding paying taxes they do not legally have to pay, or you are not; it doesn't matter if it's an oil company or a tech company or a car company.
I think those who argue that google and other companies should "do the right thing" are a bit naive; these companies operate under vastly complicated taxation schemes and while at the extreme end it might be somewhat obvious to us that it's not really on the up-and-up, it's extremely difficult to decide which revenues should be recognized in which locales.
The issue is not corporations taking advantage of it, the issue is that we have a system where an actor is obligated to optimize for certain variables within the rules of a network of systems, but the network of systems is not coordinated in a way that prevents "abuse" as everyone would like to define it, but strictly speaking, haven't.
That is a myth. Directors and officers have no such legal responsibility. Equity is a residual claim.
They literally do not.
Or, put another way, it would have been illegal for them to have paid that tax.
Directors have a responsibility to the corporation, they have no fiduciary responsibility to shareholders.
No shareholder would win a case against a corporation for 'paying too much tax' any more than they would win a case against a corporation for paying the directors or the CEO too much money.
This myth needs to die already.
Instead they're hoarding the money offshore in what looks like a figurative dragon in a cave hoarding shiny things. To my knowledge, hiding cash under your mattress has never been a wise investment strategy.
[1] Note: Plenty of other companies do this too. Apple, Microsoft, etc. all have played tax games, even just in the tech industry. Though I find the level of disparity between Google's public statements about how it thinks things should be, and the statements of employees who seem to think they improve humanity by working there, and the actual realities of Google's business operations bordering on the comical.
[Citation needed]
That it is legal does not make it good.
Honestly, I cant understand all these comments essentially saying if you can get away with things you should do it. From the standards I was brought up with it seems there is a serious lack of moral compass in the world.
I suspect that, had Clinton been elected, many of these companies would have bit the bullet.
Analogy to put this in perspective: at your daughter' school, there's a collection for a new electronic whiteboard. Everyone pays their share. Except due to an old / obscure rule families below poverty line are exempt. One rich parent figured out how to hide all their income and qualify.
There are different ethical standards for corporations & individuals. Companies get to navigate these quite cleverly.
1. The collection would have to be a large percentage of all wealth, not a fixed and small sum.
2. A caveat being your child might not even use the whiteboard, and not paying means you get kicked out of school.
3. By 'hiding', you mean something legal.
e.g. Why not say "new tax code applies to any company doing >$1B worth of business in 2018, >$500M in 2019, and all companies in 2020?"
Just curious if there's well-thought out reasons that this doesn't work.
[1] https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwa...
Generally the EU gives member states the right to grandfather certain arrangements because it would be hard to restructure everything in a few months. Most countries use a 3 or 4 year grandfathering period. The same thing applies to the old IP regime (IP income is 80% exempt from corporate tax) that exists in Luxembourg.
Google will just rearrange their affairs, like Apple has, to avoid taxation. It doesn't really matter -- there always tends to be another way.
What seems like an acceptable rate of taxation to pay for person A seems outrageous for B, and both rates would probably seem outrageous anyway to both those people if they have to pay those abroad (e.g. not in the home country of the main shareholders)
Let's just stick to the letter of the law -- things are complicated enough as is.
Edit: and for those who haven't noticed, member states introduce some of these "loopholes" on purpose in order to attract incoming investment. For example: there is a reason the Netherlands does not levy withholding taxes on 1) royalties and 2) outgoing dividends. They do this so people and companies would book some profit there so they can then tax it.
The law is also not a set of boolean logic statements. The "spirit" is just a way of acknowledging that language is imprecise at best, and often laws are poorly written to begin with.
Massive brazen tax fraud.
Apple even bragged about the $100m bribe in their press release calling it an "endowment fund".
https://www.apple.com/newsroom/2017/08/apples-next-us-data-c...
Absolute hogwash. So minimizing your taxes is somehow going against the "spirit" of tax law? What should the spirit of tax law be? Pay as much taxes as possible?
I would love to see what deductions this blogger takes and see if he complies with the "spirit" of tax law. Typical socialist/communist viewpoint that anything that a rich company does is somehow immoral.
It's likely that he takes exactly one, the standard deduction, as most people do.
Innovation should be the only acceptable tax haven.
There seems to be a lot of people in the world who get "enraged" that companies are greedy (and they are), but never care if governments are greedy. Why is it okay for governments to be greedy?
At least when Google failed, they go bully up. When government failed, they get rewarded with more money and resources.
This isn't true in the US; if the people are unhappy with the government they vote the leaders out of office.
> What would the government do with your money?
Fund things like education, pure research, the police, the fire department, and parks perhaps?
I work for Google and am happy we have a lot of money, but I don't understand the negativity towards what the government does.
> When government failed, they get rewarded with more money and resources.
This seems to happen at companies too? I have heard of people doing things not because they're the right thing to do but because it helps with promotion.
Hmm, good question.
They’d definitely never fund open source software https://prototypefund.de/en/, they’d never build new seawalls and more to protect against rising sea levels https://www.schleswig-holstein.de/DE/Landesregierung/V/_star..., they’d of course not invest more into schools and universities http://www.uni-kiel.de/pressemeldungen/index.php?pmid=2016-2..., nor into streets, canals, bridges and other infrastructure https://www.bmvi.de/SharedDocs/DE/Artikel/G/verkehrsinvestit... http://dipbt.bundestag.de/dip21/btd/18/127/1812764.pdf And they surely never would use it to pay off government debt https://www.reuters.com/article/us-germany-economy/german-ov...
Yeah, the government never releases any information on where the money is spent, and wastes it all https://www.bundeshaushalt-info.de/#/2016/soll/ausgaben/einz...
Luckily, Google is much better, they invest it all into society with no profit motive of their own, and always give us full reports where every cent goes.
(Just in case, /s)