Google to end 'Double Irish, Dutch' tax scheme: filing
reuters.com
reuters.com
This is fantastic news because laws were changed and that worked.
The criticism towards Google, Apple etc. for minimizing their tax burdens has always been misplaced. Corporations are supposed to maximize profits. And governments are supposed to collect taxes in effective ways.
It's always been a derelection of duty of governments when these loopholes exist in the first place. So it's great news that with enough publicity, democratically elected lawmakers felt the pressure from voters to fix this.
In other words, this is democracy working -- which is always nice to see.
It's a valid criticism if you don't think that "Corporations are supposed to maximize profits" should be true. When anything can be justified because it maximizes profits it becomes very, very easy to be a technically law abiding unethical company which is a net negative on society.
> It's a valid criticism if you don't think that "Corporations are supposed to maximize profits" should be true. When anything can be justified because it maximizes profits it becomes very, very easy to be a technically law abiding unethical company which is a net negative on society.
Isn't this why society comes together to form a government and pass laws to prevent these sorts of behaviours?
Not every corporation will be looking to maximize profits, but they're generally all looking to maximize something typically at the expense of something else. From a selfish perspective, externalising your costs is a good thing.
No, people form (limited) government to prevent abuse from government.
The idea that a company could abuse you in any substantial way (other than fraud, violating contract terms) must have seemed like an edge case (only the East India Company would have been large enough to present such a threat circa 1775).
So, maybe your claim would work if you consider companies to be a form of government, which is an entirely defensible position.
Have you ever been in a group of friends and played a board game where everyone was playing casually to have a good time, except for that one guy? MtG fans call this type of player Spike [1]. Other gaming circles refer to these players as munchkins and they’ve been immortalized in the card game Munchkin [2]. I think most people have played with someone like this before. Their obsession with winning at all costs ruins the game for everyone else.
This is what big corporations are like! They put mom & pop out of business. They drive down wages and destroy the environment. They play one government against the other in order to minimize their taxes while maximizing their subsidies. They are the Spikes of society. We try to fight them with legislation but our laws are always one step behind.
If Google is making an announcement like this, you can be sure they’ve found something else that works even better for them. You can’t expect them to give anything away without a fight.
Human beings also self-organise and incorporate into groups, which may individually have their own distinct aims. I'm not sure what guilt and empathy have to do with organisations of people though.
"Good faith" is also pretty meaningless, as it doesn't really describe any specific behaviour or motivation. What happens when two individuals (or groups) come into conflict trying to optimise their own outcomes "in good faith"?
> They play one government against the other in order to minimize their taxes while maximizing their subsidies. They are the Spikes of society. We try to fight them with legislation but our laws are always one step behind.
I, as an individual, choose to use a low tax savings scheme to minimize my tax burden. I also make sure to claim every tax credit (or subsidy) that I'm entitled to. Am I a 'spike' in society?
Have you been using “Double Irish” accounting? Do you keep your money offshore and lobby the government for favourable laws that let you repatriate the money while avoiding billions in taxes?
No, probably not. You’re doing what normal people do as part of the game. You probably don’t have your own accounting department with a payroll in the millions whose entire mission is to scour the tax codes of every country in the world, looking for loopholes like this.
A “Spike” is someone who will stop at nothing to win. They bring in the most obscure rules and take maximum advantage of every possibility, convenience be damned. You just sound like a sensible person who makes the best of the laws as they were designed for people like you.
Debatable - capitalism took 7 billion people out of extreme poverty, eradicated diseases, improved literacy, decreased child mortality, and increase life expectancy. All thanks to companies maximizing profits while abiding by the democratically enacted laws.
You do want clear rules. An extreme case of vagueness would be: pay whatever taxes you want, but we will criticize and punish you until we think you've paid enough. That would be neither efficient nor fair.
In video game terms, maybe there should be a convention of not taking advantage of exploits, but it's often unclear what's the intention of a tax rule, so fixing the exploit is better.
There is nothing inherently ethical or unethical about paying more or less taxes. You should pay the taxes you owe, but the law is what tells you how much you owe. Here, for example, the United States believes it should collect taxes on profits a U.S. company makes on sales in Europe. While that is itself dubiously moral, that's the law. But how can it then be immoral to take advantage of Irish tax laws--which Ireland deliberately adopted to encourage companies to move IP and skilled workers to Ireland--that is also legal under U.S. law?
Without contextual detail, paying more than the minimum taxes required by law is not necessarily the moral choice.
Dont expect better from other people if you cant fight for your own ideas.
Ireland was motivated to stimulate their economy with these tax policies, which allowed exploitation of these loopholes in the first place. Finally they are closing, but with ever increasing regulatory capture, new loopholes will likely be found.
Governments have to rely on external expert advice, and at its best, that is what lobbying is. Google and co gave bad advice and that's what I'll hold them responsible for.
That's not generally true, and if it is it's not an excuse for anyone. Why are only corporations supposed to maximize profits? why are individuals not allowed the same kind of treatment to maximize their own profits? I never heard anyone say "hey, let's give everyone the right to a double irish burger".
Until our political system changes such that large amounts of money don’t exert such an undue influence on law and policy (which has been shown by a bunch of studies) isn’t that a bit of a chicken-and -egg scenario?
The problems was to rules that let him do it, not that he was doing it.
This sort of rhetoric does not help. Tax law is very logical, and these "loopholes" are often quite intentional and have a rational basis. Here, for example, the "double Irish" takes advantage of Irish tax provisions that encourage companies to relocate not only IP, but skilled workers to Ireland: https://en.wikipedia.org/wiki/Corporation_tax_in_the_Republi...
> Ireland's corporate BEPS tools emphasise job creation (either of Irish employees or of foreign employees to Ireland). To use Irish BEPS tools, and their ETRs of 0–2.5%, the multinational must meet conditions on the intellectual property ("IP") they will be using as part of their Irish BEPS tool. This is outlined in the Irish Finance Acts particular to each scheme, but in summary, the multinational must:
> Prove they are carrying out a "relevant trade" on the IP in Ireland (i.e. Ireland is not just an "empty shell" through which IP passes en route to another tax haven);
> Prove the level of Irish employment doing the "relevant activities" on the IP is consistent with the Irish tax relief being claimed (the ratio has never been disclosed);
> Show that the average wages of the Irish employees are consistent with such a "relevant trade" (i.e. must be "high-value" jobs earning +€60,000–€90,000 per annum);
There is no basis in reality for this entire construction. No OECD rules based arm's length, no proper transfer pricing, to defend this siphoning off billions of profits to offshore shells.
I think the last 60 years has proven Milton Friedman was inarguably wrong. Both with the idea that trickle down economics is a valid fiscal policy and that it is always in a corporations best interests to prioritize maximizing profits.
The fact we’ve just gotten to a place where we consider it a fact of life is concerning.
The last 60 years have proven exactly the opposite. Almost every Western country that flirted with socialism in the 1960s and 1970s has move back towards free markets and deregulation. Canada's government spending as a percentage of GDP has dropped from over 50% in the early 1990s to about the same as the U.S. today. Sweden's has dropped from over 65% to under 50% since 1995. The EU has become a powerful pro-markets, pro-deregulation force. The sort of practices Friedman criticized, such as the government deciding how much airlines could charge for tickets, were routinely accepted even in the United States 60 years ago, but today are unthinkable even in Denmark or Germany.
At the same time, countries in the third world have liberalized their economies, including China and Vietnam. Today, 95% of Vietnamese and 76% of Chinese agree that "most people are better off in a free market economy, even though some people are richer and some people are poorer." https://www.vox.com/2015/5/3/8539365/vietnam-capitalism-pew
Simultaneously, we have seen the greatest burst of prosperity in the developing world in recorded history. Since my family moved to the United States from Bangladesh in 1989, per-capita GDP (adjusted for purchasing power) has tripled. The infant mortality rate has been cut by 75%. Life expectancy has increased by 15 years. This is a story that has played out all over the developing world, thanks to free markets and the investment and economic growth they enable.
You'd have to be blind to deny that Milton Friedman was generally right (if not about all things, certainly about general principles).
[1] https://inequality.org/facts/global-inequality/
[2] https://en.m.wikipedia.org/wiki/Effects_of_economic_inequali...
Globally, the share of the top 1% has been rising since 2007 and is now close to the level in the year 2000 (45% versus 47%). But the share of the top 5% has shown little change, staying steady at 70–71%, and inequality lower down the distribution has declined. The share of the bottom 90% has risen from 11% in the year 2000 to 18% in mid-2019 according to our estimates.
So, essentially the top 1% is richer at the expense of the rest of the top 5%, not of everyone else. Billionaires eating millionaires, so to speak, not the poor.
https://www.credit-suisse.com/about-us/en/reports-research/g...
Inequality rose: The top 1% share of market income rose from 9.6% in 1979 to a peak of 20.7% in 2007
The environment suffered: The average global temperature has increased by 0.8 degrees.
More worrying than these particular figures is the alignment of incentives that causes the trend. I like what capitalism has achieved in the short term, I worry about the long term where companies have traditionally maximised profit by externalising costs.
Environmental issues are a byproduct of human development, not of any specific economic system. It is not clear to me how these issues would have been any better under socialist/communist regimes. If anything, the Soviet record on environment and workers health is abysmal.
real progress has been happening elsewhere.
Using the 1970s as a baseline also dramatically skews the numbers. 1970 was a local minimum in terms of the percentage of the population that is immigrants (under 5%). Today it’s almost 15%. Even in a healthy economy, new immigrants aren’t going to be doing as well as the native born right off the bat. A growing immigrant share of the population is going to cause median wages to seem stagnant even if they’re going up within each demographic.
2. While healthcare costs have increased, rising productivity gains have been almost exclusively caused by neoliberal policies and the effects of regulatory capture. See https://www.epi.org/publication/causes-of-wage-stagnation/
Do you have any back-of-the-envelope estimate of how much of that represents late-arriving dividends from massive, top-down, non-market government spending on infrastructure (the interstate, the Internet), the Cold War, and the space race?
All of them that moved away from capitalism toward socialism, creating the modern mixed economy, in the early 20th Century (i.e., every single country in the West) is still there, and most of them have moved farther from capitalism than they had by the opening of WWII.
Sure, some of them that moved farther along that path than the average in the group have taken a couple of steps back, and in none of the countries has the change been unidirectional, there's always been a certain degree of back and forth policy, but the long-term trend isn't back toward capitalism.
Defined as such, the United States, and most of Europe, is further back towards "capitalism" than they were in the 1960s. In 1960, government agencies dictated what routes airlines could fly, what prices they could charge, etc. The same was true of trucking, telecom, energy, etc. Almost all of that was eliminated in the 1980s and 1990s. State-owned enterprises were privatized, utilities were deregulated, etc. The EU has consistently kept moving in that direction. Even where the government intervenes, it adopts more market-oriented approaches. In the 1930s, governments promoted universal phone service through imposing mandates on sanctioned monopolies (or state owned telecom companies). Today, countries like Sweden rely on measures like giving individuals tax breaks to build fiber. In the US, we replaced “government cheese” with SNAP debit cards.
Obviously taxation creates deadweight losses too, but that’s different, and better than direct government control over production. That’s why Milton Friedman advocated a negative income tax. He sought to replace traditional social programs—and the bureaucrats that administer them—with cash payments to the needy: https://www.nytimes.com/2006/11/23/business/23scene.html
Even from the perspective of public spending for the welfare state, in the U.K. for example public expenditures as a percentage of GDP are below the levels from the late 1950s: https://www.economicshelp.org/wp-content/uploads/2014/12/gov.... And the whole economy is much more liberal than it was back then--British Telecom is a private company, etc.
I strongly disagree. There is nothing wrong with expecting people to behave ethically. Hiding behind "maximizing profits" because "corporation" is nothing but a weak excuse for greedy people.
“Responsibility” and “respect” are vague ideas with no objective measure of what is allowed or not allowed. If society agrees we must stop something, the only way to do this is with specific, written law. Not shifting, vague moral platitudes.
Over-regulation is just another way to say “poorly constructed law.” We need to write better laws (or change the process for writing them if they are consistently mis-representing our intentions), not less laws.
It really hasn't.
They'll find another loophole, and exploit that.
I have some pretty basic, perfectly legal and not unethical optimizations applied to my tax foot print, but I had to hire an accountant to make it happen because I couldn't figure it out on my own. (How do I know it's legal and ethical? I checked with the tax man and they said as much.)
My opinion is much the same as yours, government should work to make taxes fair and clear, and do away with loopholes. But I also feel a large part of the unfairness is that you have to spend a bunch of money on accountants and lawyers to sort things out for you in the first place. I'd like to see at least some basic fiscal planning services provided for everyone, maybe that could help level the playing field a bit. But tax planning is such a taboo subject for some reason, even though it's perfectly legal and acceptable.
I dunno, maybe I'm just rambling.
>It's always been a derelection of duty of governments when these loopholes exist in the first place.
Who do you think is keeping the loopholes open?
When money has such a huge influence in politics and 'democracy'...
You're doing a complete inversion of responsiblity.
There MUST be bounds on the imperative to maximize profits! Otherwise the corporation is obligated to overthrow the government and enslave all life in the universe. Even if they must do it legally, they can legally find ways to collude and overthrow the existing legal system.
Usually these things actually occur due to a race to the bottom, both in corporations - if they don't take the profits now, someone else will - and jurisdictions: regulatory arbitrage and competition occurs, and can make everyone worse off. For example, if one country gives tax incentives, then they all might be forced to; or if one country doesn't regulate pollution, then other countries may be forced to become lax. They're both collective action problems, and some kind of international agreement is generally needed to avoid the worst outcomes.
The EU is probably going to bring a variant of CCTB into effect eventually to avoid this kind of thing between EU economies. It won't be good for Ireland in the short term, but I think it's a better long-term approach, if it's done fairly.
> Nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or operation of the competence of the European Union in relation to taxation.
Ireland holds a veto (as do all other EU countries) on any proposed Common Consolidated Corporate Tax Base, so the chances of a CCCTB as commonly envisaged being enacted is exactly zero.
The conversation is ongoing though, and it will continue for as long as transactions move to online - i.e. for the foreseeable.
The only question is finding an appropriate quid pro quo to change the status quo.
Not at all costs. Maximizing shareholder value doesn't require maximizing profits if there is a better option that leaves the company healthier in the long term. Not being a cancer on society is a valid approach.
Isn't it more like international relations working? US citizens didn't vote to end Ireland's tax loopholes, instead multiple countries pressured another country to level the playing field.
Yeah, no. They played the game, but as megacorps, they have an outsized voice in lobbying for those rules.
That is the root of the problem - money in politics that is "invested" to get a return by bending the rules in their favor.
Um... the major reason that Google is not doing this any more isn't because Ireland changed their law, it's because Trump removed the tax on overseas profits they were avoiding from the US tax code.
IE, they don't pay taxes on those profits anyway when the money comes in to the US, so no need to hide the cash with loopholes in international law.
In fact, Google probably has more money overall this way because they can spend less for accounting.
Calling this a success is silly.
"The legislation passed in Ireland in 2015 ends the use of the tax scheme for new tax plans. However, companies with established structures can continue to benefit from the old system until 2020."
https://www.investopedia.com/terms/d/double-irish-with-a-dut...
The EU ordered them to collect taxes from Apple after it came out that Apple ran an optimized double Irish with special exceptions (private rulings) granted by the Irish tax office. This law change is the result of them getting caught violating European trade agreements that predate the EU itself.
You have an unusual definition of “legally obligated” if you feel they were 100% following the law doing this. Sure, it used to be legal in Ireland, but intentionally moving IP to claim revenue in a different tax jurisdiction than where the money was earned was a legal grey area at best.
You can’t have a fair discussion of the ethics of this scenario without considering the “tax havens” themselves. Shouldn’t a sovereign country like Ireland have the right to enact laws that benefit its economy? For small jurisdictions like the caymans, what looks like a “tax haven” to outsiders is actually a huge boon to their economy and objectively good for their citizens.
That goes without saying. What does need to be said is that anti-Google implications should not be taken from this statement.
1. The prior and new behavior is neither good nor bad.
2. That only Google does this is, and should be singled out, is a bit of pitchfork-ism (to be fair, from the article, not your comment). Lots of companies do this and lots of companies will need to stop doing it.
https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey....
That depends from which point of view you're looking at it. Technically according to the law? All good. Ethically? Different people will have different opinions, but many would agree that it's bad behaviour. You're a law abiding leech on society, but you're still a leech.
Google (and the scores of others doing this) are smart, clever, and correct for taking advantage of loopholes like this. If it is in fact legal but unethical, it's easily addressed by Congress. Expecting companies to self-regulate their tax burden is foolish. Google, Apple and the rest are not "public benefit companies" with the declared benefit of maximizing their tax burden.
'Leech' as well is quite a strong word, most unjustified IMHO.
ps. It's not Google/Apple/etc themselves that find these loopholes; it's outsourced specialists.
"How Apple Sidesteps Billions in Taxes" 'Funneling Earnings to Low-Tax Regions' New York Times, April 29, 2012, Charles Duhigg and David Kocieniewski
https://www.pulitzer.org/files/2013/explanatory-reporting/04...
"You can't stop us from dodging taxes so don't even try" is what they want us to believe, because if we believe it then they can dodge taxes every year without inconvenience.
To date, they have suffered no serious financial or reputational consequences for tax evasion, so there's no reason to think they won't continue to avoid taxes as part of their overall financial strategy.
No, I do not.
The correct move is to push harder, not roll over.
[0] https://www.forbes.com/sites/isabeltogoh/2019/09/16/apple-an...
I side with you regarding tax debates for large companies. However what is a "legal loophole"? There is no loophole. What Google did is not illegal.
A loophole is legal, that's the point. It's a way around the intent of the law legally.
A loophole is by definition legal, otherwise it would be fraud.
That's why it's called a 'loophole' - when the letter of the law is followed, but the intent is subverted (or what people imagine what the intent should have been).
Sure. Now try to funnel your consulting income through Irish corp. Tax man will quickly explain what is legal what is not.
I could imagine the US following through: the idea that rich megacorps should pay taxes is not particularly unpopular. And if you can't tax profit, then you have to tax something else...
You can poke around this page to see the different companies (at least around taxes for Ads): https://support.google.com/google-ads/answer/2375370?hl=en
Ex: Australia is "Google Australia Pty Limited". Japan is "Google Japan G.K.".
The closing of the Double Irish tax evasion scheme is indeed largely useless, as Ireland ensured that there’s a good replacement. They don’t want to lose the jobs that come with these tax evasion schemes.
Tax evasion is illegal, tax avoidance is not
https://www.ey.com/gl/en/services/tax/international-tax/aler...
Google saying: we have done nothing illegal
Yeah, that's not the point. The point is that normal people can't afford to dodge taxes like google (and others) so they are not happy about it.
If your assumption is all of 98,771 Google employees are dodging their income taxes on the extra money Google "saves" from Double Irish Dutch Sandwich, you could not be farther from the truth.
Someday the money "saved" from this "dirty evil" scheme has come-out in the form of * Stock buy back * Dividend * Employee Salaries/Bonus * R&D Investment * Merger and Acquisition * New Hires
All of the above are taxed anyway.
We are talking about extra "Corporate" tax whatever that means. Google "Milton Friedman and Corporate Taxes" he has a much better explanation than me.
It's definitely working gangbusters, so lets double down on everything. There is a lot of room below zero.
If google wanted to hack the financial system and improve it, they could , using their giant international cash reserves. Same with apple. Yet they both decided to go with the status quo
Seems like the central EU government has grown stronger against the autonomy of member states as they have been challenging Republic of Ireland's role in this for some time? And/Or the US tax regime is favorable enough now? Which is nice that you can wait it out. Easier to offset a 20% US corporate tax than a 35% one.
Special Considerations
Due largely to international pressure and the publicity surrounding the use of the double Irish with a Dutch sandwich, the Irish finance minister passed measures to close the loopholes in the 2015 budget. The legislation effectively ends the use of the tax scheme for new tax plans. However, companies with established structures can continue to benefit from the old system until 2020.
You're right, I meant The EU Commission flexing its autonomy over the member states using its own courts, governing abilities, and physical location. If only there was a word for that.
EU isn't acting that different, one ruling at a time.
When you tax a corporation that gets passed on to its employees and its customers, who already pay those taxes.
Wonder where is all that tax money going to? Just curious?
When you tax a corporation it comes from shareholders.
Prices should be set at the profit-maximizing price. Taxes have nothing to do with it.
Employee compensation is decided by the market.
Revenue Cost Gross Rate Tax Profit
1000 700 300 20 60 240
1020 700 320 25 80 240
1000 680 320 25 80 240