Google shifted $23 bln to tax haven Bermuda in 2017 | Hacker News Reader

Google shifted $23 bln to tax haven Bermuda in 2017

reuters.com

67 pointsbitcharmer8 comments

Submitted yesterday (https://news.ycombinator.com/item?id=18828050), and the day before (https://news.ycombinator.com/item?id=18816984).

A lot of people - myself included - feel pretty uncomfortable when we read these stories. But we have to remember that (1) directors are under a fiduciary duty to maximize return to shareholders, (2) use of tax havens is legal. The 2 facts together means directors can be sued by shareholders if they don’t use tax havens. So the route to change, would be to legally end use of tax havens - through the ballot box. I would support that, it doesn’t seem fair. But I’d also point out that one line of thinking is that when the EU started getting real about stopping corporate tax havens, the oligarch class got together and fermented Brexit. Damned if you do, damned if you don’t. We’ve got some big problems!

Directors do not have a fiduciary responsibility to maximize returns to shareholders. They do have a fiduciary responsibility to act in the best interests of the company (and therefore the shareholders), but not a specific duty to maximize after-tax profits.

They can be sued for anything, just like anyone, but there is a large body of corporate case law supporting the use of business judgment to achieve goals other than short-term maximization and typically have E&O coverage as well to provide some coverage for nuisance lawsuits and cases other than personal misconduct or conflicts of interest. So, sue away, but you almost surely won’t win if the board pursued a lawful strategy other than the one you as a shareholder prefered.

Can you differentiate acting in the best interest of the company to maximaing return to shareholders, when that is the very raison d'être of a company?

[In most states] Companies may be formed for any lawful purpose; maximizing returns to shareholders does not need to be the primary purpose (nor necessarily a purpose at all, the extreme example of which are charities). IOW, it could be the raison d'être of a particular company, but is not necessarily so.

Read the Hobby Lobby case as a start.

Quote from Justice Alito in that opinion: While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. . . If for-profit corporations may pursue such worthy objectives, there is no apparent reason why they may not further religious objectives as well.

Tell that to the shareholders of Google! We’re not talking about a company set up to manage a water feature in a town square here!

Directors are under a fiduciary duty to make decisions they feel are best for the company and its shareholders. That's does not mean they have to do every legal thing to make more money. There are several things that may make money in the short term that are not in Google's overall interest in the long term. Imagine if they suddenly added 1000% more ads to Gmail, for example. The monetary gain would not be worth losing the users and their good will.

Now, I would hope that use of tax havens, selling user data, etc fall into that same category, but clearly the math is different when we are talking about billions of dollars.

Another thing to remember: that amount will not be spent in the Bermuda. It will either be re-invested, or brought to the USA to become profit that will be taxed the same way it would have been taxed in 2017. This is only delaying the decision about what to do with the money (without using a tax heaven, this is only allowed for a very restricted set of cases).

Reply on news.ycombinator.com