There are no such things as tax loopholes. There is compliance with the law as Congress has written with all of their agendas, and there is noncompliance.
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.
> 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.
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.
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.
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.
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?
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?
Isn't there? I thought shareholders has a legal remedy if they believed companies weren't maximising return?
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.
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".
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%.
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.
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.