Google used ‘double-Irish’ to shift $75.4B in profits out of Ireland
irishtimes.com
irishtimes.com
Nobody is against closing the loop hole. We all know what the loop hole is.
Politicians should just do it.
Instead, they (Dems mostly) parade around publicly shaming companies who reduces tax in a legal way.
To me it's not all bluster. But I agree here in the loopholes are hard to close with entrenchment. The paid for definitely rests on way more sound math than republican 'job growth -> gdp' magic.
There is quite a lot but just a few things I quickly googled:
- calculate 21% tax on country-by-country basis, eliminate tax-free 10% foreign point of return - make it harder to invert by acquiring/merging foreign companies to offshore profit - eliminate tax benefits for “Foreign Derived Intangible Income” (e.g. shift IP abroad i think apple does this?). I think this one also moves those incentives stateside which would be good
https://www.cnbc.com/2021/03/31/biden-infrastructure-plan-to...
https://www.whitehouse.gov/briefing-room/statements-releases...
And they really don't like huge corporations paying taxes.
One interesting thing too is the timeline of super majority - while there was 60 for a bit - wasn't as long as implied or as simple given the geriatrics being out of commission.
If we ever get a super majority again - or get rid of filibuster - I personally want to see DC statehood as #1 priority, maybe PR and Guam too.
https://scontent.fapa1-1.fna.fbcdn.net/v/t31.18172-8/324260_...
Read the whole article, they did.
> Instead, they (Dems mostly) parade around publicly shaming companies who reduces tax in a legal way.
I'm not aware if google specifically has done this, but the associated problem here is that typically massive companies pay lobbyists to get the government to create (and keep) these loopholes.
If you plan to introduce a change in your code, if you have automated tests, they will tell you what exactly might break if you go through.
If you plan to introduce a new law, lobby groups will cry depending on how hard they are hit. You can then change your law (or go through with it).
So what happens once elected is essentially that interest groups (ideally multiple), amongst other companies, industry associations, unions, pension funds, government representatives, ... see the elected representatives, quite literally teach them, in a biased way, even write legislation for them (this means hiring a team of sometimes hundreds of lawyers and putting them at their disposal), and the general idea is because multiple interest groups participate you get a somewhat reasonable negotiated outcome.
You don't want oil industry legislation to be written by Greenpeace. You also don't want it written by ExxonMobil. So what to do? Lock whoever they send to represent them in a room, have someone to check for guns at the door, and have them fight it out.
Of course, none of these interest groups are playing fair. That can (and generally does) lead to very biased laws. However, when it comes to contentious issues, the interest groups that win are actually popular citizen-based interest groups (e.g. in climate change legislation it's clearly not one-sided, at least attempting a compromise between multiple parties, when it comes to police power, clearly someone's providing counterweights to police requests, and so on)
So the general idea of democracy is: we have many idiots, not just one, to hopefully get at least "average" intelligence and decision making, then we have them listen to anybody who wants attention and then collectively take a decision. They make too many mistakes or stop listening? We replace them. Does it give ideal outcomes? No. Is it a million times better than forcing one interest group's opinion 100%? Yes. Does a mountain of money really help in making yourself heard better? Yes.
It's better than an idiot who knows nothing about anything taking control of everything, which is what most alternative systems boil down to.
You can prosecute someone for maliciously exploiting your computing system, even though technically "they're just using the rules you wrote", because there will never not be such rules that allow for exploitation.
The way a general anti-avoidance rule works is it says you can't do things that are just to avoid paying tax.
The tricky part, obviously, is figuring out how a jury can decide if it was really just to avoid paying tax.
The UK's approach is a Double Reasonableness test. The jurors are asked to consider not merely what they, personally might think would be reasonable, but anything any conceivable reasonable person might think is reasonable. So maybe you can't personally imagine why anybody would want multiple sports cars, but you can imagine somebody else who might think it's reasonable to buy them, so the person who avoided tax by purchasing sixty sports cars passes the Double Reasonableness test.
On the other hand, you may be unable to conceive of any person who could think that it was reasonable to open over 4000 bank accounts and then deposit £99999 into each account, if not for the fact that it avoided a tax on larger deposits and so that fails the Double Reasonableness test.
[These examples are hypotheticals, feel free to go dig up actual schemes which have passed or failed the test]
This provides appropriate latitude. And even if your strategy fails the Double Reasonableness test, you don't go to jail or anything, you just don't avoid taxes, you owe taxes exactly as if your behaviour didn't result in a favourable tax outcome. Which, if you really didn't do it just to avoid taxes as you've claimed, should surely be fine...
The other trick which was introduced at the same time imposes a duty on tax avoidance lawyers. If you help people plan to avoid taxes, that's cool but you have to explain how your scheme works to the taxman. You likely charge for your help, that's legal, and you keep that money even if the scheme doesn't actually work (that's legal and it's just smart business) but your duty ensures that the taxman already knows about the scheme before it's used, and can decide if they want government to legislate to close it next year, if they want to go to court to claim it doesn't work (because of GAAR), or if they just let it carry on.
About this law, what it really creates is an insane amount of insecurity. When other people get to decide whether what you do is reasonable or not, the only question that matters is who gets to make the decision.
And you should not have to waste precious time explanting anything to a bureocrat. Maybe Faang companies get to have that luxury
Why is HN always full of people advocating that companies should be above the law?
You harm someone in self-defence and a judge of jury decides whether what you did was reasonable. We just have a stack of case law that says 'in the past, X was found reasonable".
On the other hand, when Boeing killed hundreds of people, no one was even charged. If any individual commits the acts corporates do regularly, they'd be in jail in no time.
I've seen folks claim that HN has a significant population of investors and founders. There's probably a fair share of people who aspire to belong to that group, too. It's probably a concentration of the greater pattern of Americans seeing themselves as temporarily embarrassed billionaires.
May be I am not reading it correctly. It is perfectly legal and within the law so no one is advocating they are above the law.
On an added note, in these times of looming climate crisis, a carbon tax or something associated with companies using/polluting "free" resources (air/water/petroleum products) seems like a good idea
I really think if you need complicated (and entirely subjective!) thought experiments like this to apply the law, your law is far too complex and unfair and should probably be scrapped.
The law is hardly perfect as it is. Will never be. Just because there are more holes. It's not the reason to not close the most obvious/impactful one.
That said, I'd rather have the government disappear and be replaced by companies providing insurance, protection and lawmaking - than these companies to start paying taxes.
Dems are at least doing something besides electing a billionaire who dropped the corporate tax to the lowest it's been since the 1930's.
Would your rather they deceive than saying nothing?
Then, Dems will actually tax salaried employees who earn more 400k a year.
Now this doesn't impact average American, sure. But they could have been upfront about taxing salaried employees.
Another example is exactly this news. They are shaming yelling at the companies for not paying more tax.
Yet they don't codify the tax law to get companies to pay more tax.
Based on their yelling, they could have just added "no double Irish practice" into the tax law. No? There are many similar laws that handle extreme complex situation like "no money laundering", "no market manipulation". It's not perfect, but we still manage to handle them.
At best, Dems are misleading the public. My guess is that they can't close that loophole without negative impact on other areas. But Dems never explain this at all. They try hard to say companies are evil. Yet they are the ones with power who do nothing.
This is like you starting a new job, and nobody codifies your responsibility, and you are constantly yelled at for not fulfilling your obligation.
Sure, Dems is the lesser of the two evils when comparing to Republicans. But let's not act like they are not deceptive here.
Please do enlighten the rest of us here, on how to reduce our taxes down to single-digit percentages, or millions/billions in absolute.
Do we want to close the loophole or extend the loophole to everyone?
I'm confused now.
I almost always spend the best of my ability to reduce tax.
If this loop hole applied to me, I would have done it as well.
Not sure why it is disingenuous.
Why can't we either close it or extend it to everybody? Dems led governments for years during Obama's era. What's with the yelling and no action?
Nobody? Including those who benefit from it, you mean?
I haven't seen much of people supporting the "let's not close the loophole" movement.
I'm sure my 0.5 year old baby is neither for nor against this loophole. I asked but I didn't get the answer.
Come on, man.
Am I unethical to choose standard deduction because it reduces my tax more than choosing itemized deduction? No? Yes? Maybe?
If you can call up a senator and say "You had better increase standard deduction to $X for married couples in Montana with three kids and a small business, or I'll have to rethink my campaign contribution," and you happen to be married in Montana with three kids and a small business, I'd say it's clearly unethical.
I think companies like Google fall in the latter category.
But it doesn't seem to help much.
For example, many Dems shout "tax billionaires" for years. This rallies a lot of people. "Yeah!!! Let's tax them more" we all chant.
Then, when Dems is elected, they are raising tax on salaried employees who earn more than 400k a year. (Not sure if they has gone through with it yet)
I didn't know I was categorised as a billionnaire.
Politics isn't about precise language. They just mean wealthy people. I thought they were pretty up-front about that.
It's of course easier to charge more taxes for moderately wealthy employees who don't have a clever tax setup and may need to.
Really rich people with clever tax setups will just move out and you'll get no more revenue.
Billionaires don't pay income tax, that's why Dems are raising the corporate tax rate too. They're also looking at increasing estate tax and capital gains tax, and those almost exclusively effect the ultra rich
Some people more likely have an obscene amount of envy to those who are more successful.
I grew up broke and understand how fortunate I am. I'm completely fine with paying a few percent more marginal tax rate. I have thousands of disposable income a month like most of us here. I doubt I would even notice.
Why would you ever think 400k is obscene or crazy amount of money? Companies that those developers work for, earn 10 times as much per developer. I wish every developer could be payed as much or more if possible. Do you find it shameful when other people find value in what developers do and are ready to pay them a lot of money for that value? I'm sure your company will gladly pay you less if you feel overpaid.
Specifically, collecting a reasonable amount of taxes is key to the function of governments as they're set up.
It would be unethical to sell somebody a car that secretly has no motor, but ethics isn't the only reason cars need motors.
If taxes were about financing the government there would just be one tax called the-cost-of-government-tax and that's it. There would be no need to tax everything you do, and at different rates and on some days but not others, but when the moon is full on tuesday you pay double except if you lived on 72nd street during 2008...
Taxes are about control, about influence, and about corruption. The loopholes are there becasue someone put them there, they are not hidden. The tax-code is so complex because someone made it that complex, someone doesn't want it to be easy.
No they didn’t. Most governments are mostly funded by taxes.
(The rest of your post doesn’t support this thesis, but instead the thesis that funding government. operations isn’t the exclusive purpose of taxes, which I don’t think anyone would dispute, and which is orthogonal to whether governments are mainly funded by taxes.)
Last year, the US collected $3.42 trillion in taxes, but spent $6.55 trillion for a record deficit of $3.13 trillion. This year is projected to break that record.
https://www.thebalance.com/fy-2020-federal-budget-summary-of...
No, most countries finance themselves primarily by taxes; they typically also use debt financing, especially (in relative terms) countercyclically in economic downturns.
> Last year, the US collected $3.42 trillion in taxes, but spent $6.55 trillion for a record deficit of $3.13 trillion.
So, even the best single example you could come up with is...financed primarily by taxes, even in the one year you tried to pull as a counterexample?
Since you mentioned the debt ceiling, that’s another concept that doesn’t make any sense (except as yet another thing more politics can be piled on to). It’s like first the congress votes on the size of the budget, and then separately on the size of the door that it has to fit through.
Or don’t you use roads, police, education, services, etc..,
On the other hand, by paying our taxes, we Americans maintain thousands of nuclear weapons, and the largest and most elaborate military on the planet. So ... not all of what we pay for is "good".
How are taxes _not_ a thicket of ethical issues?
However, I think a really ambiguous question is whether we should actually care about _corporate_ taxes over questions like treating capital gains income on the same footing as wage income. One expects that when corporations don't pay taxes, their shareholders eventually reap those savings as capital gains income ... so isn't it eventually taxed?
I'm assuming here that only large multinationals engage in this sort of scheme; if there were a whole economy among rich individuals who always push their transactions through Bermudan-Irish shell companies, then perhaps it might never get taxed at any rate?
What's ethical about playing in a poker tournament and paying the entry fee? Just curious.
If you are getting rich in this country, taxes are paying for what enabled you to get rich in the first place: the human capital.
If you don't pay taxes, then it wouldn't really be fair for you to be sending your kids to public schools, driving on roads to get around, or calling the fire department when your house is burning down, since you haven't contributed anything to their upkeep.
The structure and implementation of corporate taxes in the USA strikes me as needlessly complicated and corrupt, and I think corporate influence over the tax code is deeply unethical in many ways. At the same time, I wouldn't tell any individual or company that they're ethically obligated to forgo tax relief that's legally available to them. These two things are not in contradiction.
It is problematic in that corporations have a lot more resources to bring to bear than the average person does.
I don't find it unethical though. People have a right to express their concerns to the government and advocate for their interests, even if those people group themselves together into a legal entity such as a corporation.
It would be more unethical to single out certain groups of people and say "everyone else is allowed to talk to the government and advocate for their interests, but you are not".
Edit to add:
It's the government's job to listen to everybody's concerns and balance the interests of different groups against each other. If we're unhappy with the job they're doing, we should elect a different government that will do a better job, not just silence groups we don't like. They are not passive elements in this who are just helplessly acted on by outside forces.
In practice, this is exactly the problem with revolving-door politics and regulatory capture.
> we should elect a different government that will do a better job
Agreed, and I would add that one of the most important functions of journalism like the OP is to inform the voters about these situations.
Is all lobbying unethical?
- Correctional officers unions lobbying for harsh drug laws to ensure a steady supply of prison inmates.
- AccuWeather lobbying congress to prohibit NOAA and NWS from providing weather data to the public, so that AccuWeather can charge money for it.
- Intuit lobbying to prevent states and the IRS from providing free tax filing facilities.
When the question becomes, "what do we do about it", I'm well out of my depth, but I think the fight is worth having, and the practical effect of corporate lobbying is certainly a worthy subject for journalism like the OP.
Mutatis mutandis for, eg, roads so that employees can get to work, etc.
“Double taxation” refers to taxation post distribution not prior (source: I was a corporate tax accountant).
Finally, “evasion” is illegal. “Avoidance” is a legal tax strategy.
The point that the parent is making is that there's a legal obligation to pay taxes, but it's not an ethical one - the government says what you owe, and you pay that. It's muddied by companies lobbying to set the laws, but I would have to agree paying taxes the laws say you owe is not an ethical question.
What's the government doing by just collecting its citizens hard earned money? It should also invest in companies and other ventures and make its own money. It also has natural resources (oil, natural gas, etc.) at its disposal. Only if those are not enough can it ask its citizens to pitch in.
Laws are derived by the people and encode their ethical permissibility within them.
Otherwise, why is it worth discussing?
I pay taxes because the alternative is fines and eventually jail. That's theft, that's coercion.
The less taxes you pay the more power to you - and I'd appreciate if you shared how.
Retroactive taxes should apply here, what was written in the law was wrong with the actual intent of the lawmaker, we shouldnt encourage this stupid cat and mouse games, just pay your taxes.
A trash company makes money but collecting trash, a car company makes money by providing cars to people, a law firm makes money by providing legal representation to people.
You're acting like society and its infrastructure is a teat which different companies milk and other people out of their own generosity fill up, so its only fair that they give something back to the society, when this is now how it works.
This infrastructure isn't created so that the CEOs can get rich, it is created so that they can run companies which provide value to the people (and not so that they can pay taxes which, as claimed, is the only utility a company has).
The only way a corporation can protect its property from the whims of the majority is with the help of lobbyist. In fact, US is one of the few countries where the corporations are allowed to formally influence the politicians (and just see how much people who just want to take it all from them in the name of 'fair share' hate this).
In other countries, this system is informal, so in Mexico, the corporations simply have to influence the politicians in an opaque way.
There's at least one major party in the US that wouldn't see it as particularly ethical for companies to pay more than what the law requires. One Presidential candidate for that party, when challenged on using every loophole allowed to him, quipped he does it "because I'm smart."
Then he was elected President, and his administration oversaw the spending of tax dollars Congress authorized it.
And I tend to agree. Would be great if we could just rely on companies to pay as much tax as they can to 'contribute', but why leave it to the honor system? Close the loopholes and codify it. It's the only sustainable, efficient way.
I'm sure you don't intentionally over pay your tax either.
If you want more tax, just codify it.
My point is: if you want them to not use loophole, then codify it.
This is like your company doesn't write what your job's responsibility is.
From here:
https://en.wikipedia.org/wiki/Double_Irish_arrangement#Conce...
Ultimately I think there will need to be some kind of international agreements on taxation to prevent these kinds of tax dodges. They'll just find the next loophole now that this is closed.
Tax loopholes typically refer to ambiguous rules. In this case, the IRS was excruciatingly detailed on how to price related party intellectual property transfers. I always laugh about how congress / citizens get angry at when taxpayers follow their laws.
Yes, I agree the laws are ridiculous, but no more ridiculous than the standard deduction the mortgage interest deduction and a myriad of other arbitrary tax laws.
Putting some tariffs on licensing intellectual property seems like a non-prisoners dillema solution
For a complicated technology that's licensed, remember that neither taxing authority has any clue as to what it's actually worth. They don't care. They just want tax revenue. Remember to think about both taxing authorities when analyzing these transactions and imagine the ridiculous situations multinationals are put in.
No, a "loophole" that stays is place for years and allows enormous tax evasion is not a glitch. A legitimate "bug" in a legal system can be fixed in weeks.
Legislators work together with lobbyists to create these loopholes when needed. These are not glitches, they are the legal equivalent of backdoors.
No, companies will not simply "just find another one". There's a clear political intention behind creating new loopholes or not doing so.
Or did companies decide to stay in Ireland now that they have to pay taxes? Maybe the pandemic has made it difficult for them to move.
Clueless of course, but kind of curious if corporate tax shenanigans could be replicated at scale for individuals.
The short version is you can't do this because as a US (assuming?) individual you are subject to worldwide taxation (unlike the rest of the world (well except Eritrea)).
But the wikipedia article on the double Irish is actually pretty interesting if you are interested in such things and lays out the steps:
1) A U.S. corporate (CORP) develops new software in the U.S. costing $1 million to build;
2) CORP sells it to its wholly owned Bermuda company (BER1) for $1 million (at cost, ideally);
3) BER1 revalues it to $1 billion (as an intangible asset under GAAP), and books gain in Bermuda (tax-free);
4) An Irish subsidiary, IRL1, purchases this intangible asset from BER1, for $1 billion;
5) Under the CAIA rules, IRL1 can write-off the $1 billion paid for this group intangible asset against Irish tax;
6) Additionally, BER1 gives IRL1 a $1 billion 10-year inter-group loan to buy the intangible asset, at an interest rate of circa 7%;
7) Over the next 10 years IRL1 claims tax relief on both the $1 billion purchase (under CAIA), and the inter-group loan interest;
8) During the 10 years, IRL1 charges out this asset to end-customers globally (as per step v. in the Double Irish), accumulating profits;
9) During the 10 years, CORP in line with its product cycle, has created new software and repeated step i. to iii. above;
10) At the end of the 10 years, IRL1 has shielded $1.7 billion of Irish profits against Irish tax;
11) At the end of the 10 years, BER1, who received the $1 billion purchase price, and $0.7 billion in loan interest, has paid no tax;
12) At the end of the 10 years, IRL1, repeats steps iv. to ix. above, and buys a new intangible asset from BER1 for $1 billion.
[https://spectator.us/topic/corruption-for-everybody-slavoj-z...]
Alternatively you have a much cheaper options: collect in crypto or cash.
https://en.wikipedia.org/wiki/Double_Irish_arrangement#Contr...
The 2014–16 EU investigation into Apple in Ireland (see below), showed that the Double Irish existed as far back as 1991.
Early U.S. academic research in 1994 into U.S. multinational use of tax havens identified profit shifting accounting techniques.[7][36] U.S. congressional investigations into the tax practices of U.S. multinationals were aware of such BEPS tools for many years.[37]
However, the U.S. did not try to force the closure of the Double Irish BEPS tool, instead it was the EU which forced Ireland to close the Double Irish to new schemes in October 2014.[38]
Nevertheless, existing users of the Double Irish BEPS tool (e.g. Apple, Google, Facebook, Microsoft, amongst many others), were given five more years until January 2020, before the tool would be fully shut-down to all users.[29][39]
tl;dr It was the EU that shut down the Double Irish. The US gave them until 2020, so they milked it as long as they could.
In this instance don't have strong opinions if:
* You have no idea what transfer pricing is
* You have no idea what companies have to do to comply with transfer pricing laws (remember that these are international transactions and they need to comply with two sets of tax authorities, both with different sets of rules)
* You have no idea what laws congress created related to these transactions
* You have no idea that these laws have been updated over the years (if you have no idea about what changed in Section 482-7T)
Comments like "companies should just pay their taxes" are like when laypeople say "companies should have websites that always work instantaneously & never have any downtime". Reality is complicated and your opinion isn't that valuable if you don't know any basic facts.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
I know it's frustrating when others are wrong on the internet, but the portion of the internet that isn't wrong has measure zero—a fact we all have to make peace with, or else we end up making things worse.
I don't understand the analogy. Websites that 'always work instantaneously and never have any downtime' is technically infeasible, though you can get closer by pumping more money into the web side of your business. No company deliberately injects downtime into their website, but they do think it may not be the biggest priority, and hence there will be more downtime.
On the other hand, you need to actively look for loopholes, and get access to tax lawyers and accountants in order to do something like a 'double-Irish'. That's not a failure to pump money into your accountancy division in the same way downtime is a failure to pump money into your web division. In fact, it's exactly the opposite - doing a 'double-Irish' would seem to require more money to be pumped into the tax law part of your business.
The equivalent in your analogy would actually be exactly the opposite - if Google hired something like 'downtime lawyers' who would find the optimal way to inject downtime into their website. If Google sought out downtime, and actively pursued downtime.
Pump more money into the web side of your business and you get less downtime. Pump more money into the tax lawyer side of your business and you avoid more taxes. The analogy is bankrupt.
Reality is complicated, but even more complicated than reality is the tasks Google has set its tax lawyers to concoct to avoid paying taxes. I'm sure you yourself have a great many opinions, moral or otherwise, on subjects you don't know the technical intricacies of, but you hold those opinions because of a principle that applies to the base facts of those subjects.
Along the lines of another commenter, I don't need to understand the current debate in moral epistemology and animal rights in order to have good reason to think kicking puppies is immoral, and I need even less knowledge to know that I don't want to see puppy kicking in society. I can dislike puppy-kicking, even if it turns out that puppy kicking is legal, or even moral - and I have a feeling you would too.
What is the alternative? Multinational companies have to file tax returns in tons of different jurisdictions. Tax authorities are heavily biased and don't agree how transactions should be priced (they always want more tax revenue). Tax authorities often fight over the same profits and double tax.
Listen, I'm not saying that "these poor corporations have it so tough". But complying with tax laws for multinationals is ridiculously complex. And these tax structures are needed to lower the compliance burden.
The compliance burden can be huge for smaller companies. I've seen negotiations for small amounts of profit between tax authorities draw on for years. It's can be a massive cost for smaller multinationals.
Do I think there should be something better, yes. But that feeling goes for the entire tax code. I think the US tax code is garbage. Some other countries are even worse.
It is only complex because it has been setup that way. If they setup a simple structure they would pay more. So they don't.
Vaguely Relevant Comic: https://www.commitstrip.com/en/2020/05/26/experts/
Just heard the other day from AOC that the new COVID relief bill had such a ridiculous clause that no one even stepped up to claim they put it in, so they just removed it without any resistance. The whole bill authoring model is currently broken, representatives receive ridiculously little time to review what to vote for and massive bills are basically take it or leave it.
For the specific tax law that taxpayers have leveraged that the IRS now doesn't like, I'm pretty sure it came from an IRS nerd. The Residual Profit Split Method. That one could only have come from a new grad.
Individual members may not, but they probably have legislative staffers that do, and the staff (majority and minority) of the tax committees, who prepare and distribute analyses of all tax bills, definitely have the skills to read, understand, and explain the implications of tax bills.
Members of Congress may not care, but they definitely have access to a competent understanding of proposed tax laws.
You don't have to understand any of the OP's post to have a reasonable opinion on this topic - corporations should pay their fair share of taxes.
It's a bit like having a strongly-held opinion on garbage collection without knowing the definition of "mark-and-sweep" or "generational GC" (or, perhaps more significantly, lacking knowledge of the concept of memory leaks and use-after-free).
Tax law is very messy and detail-heavy, and absolutely full of tradeoff-based choices. It's very rare that a clear moral best-approach presents itself if one knows how we got where we are today.
Understanding of facts is very relevant to form proper opinions. Without it you’re very easily manipulated via emotions.
Taxation on international IP licensing is regulated in complex web of bilateral "no double taxation" contracts between nations and the whole Bermuda thing worked because ireland accepted "taxed elsewhere" but elsewhere was a tax haven with 0%. It is probably not a coincidence that trumps "tax cuts" create a tax rate that is slightly lower then the corporate tax rate in ireland. So it is better to move profits from the EU market towards the USA instead of taxing them in the EU. However the multinationals have likely already found a new way again to avoid both.
The article is right that the multinationals can't move money from these offshore accounts into the USA without getting taxed and they can't move them back into the EU without getting taxed either, but there still were, are and will be opportunities to use those tropical island shell company treasure chests with no or minimal taxation. Like for example for investing into companies and assets worldwide. As far as i know many multinationals only transferred a small part of their existing offshore money to the USA and used most of that to buy back stocks and pay dividends. The article doesn't mention how much money had been "repatriated" to the USA from these accounts.
It is correct that the whole idea of offshore shells holding intellectual properties for international licensing thing is done and over thanks to reforms in the EU killing the double-irish tax avoidance scheme and the USA introducing GILTI as a general measure against US companies sending oversea profits to a tax havens instead of the parent company. So the "intellectual property assets" are moving back to the USA. However i think the IP licenses also got a lot cheaper now that they are taxed, but i have no details on that. The european parts of the conglomerate will probably invest in some new data centers or a robotics company, lowering their taxable profits, instead of moving these profits to the USA.
I know that Google moved €19.9B towards Bermudas in 2017, €21.8B in 2018 and €63B in 2019, the last year of the 0% tax scheme. (note: these numbers are different then the articles) Google EU did not grow 200% in 2019, they put off investments and stored the profits while they could avoid taxes. I would love to see some numbers that tell how much revenue they made per region of the world and how much taxes they paid in those regions and how much cash they move between tax regions to abuse the complex international web of tax laws.
One side note: I do not know how much was initially invested to set up these global operations, if that investment money "leaving" even had any economic effect on the US market back then, if the investors got something, like shares of the privately traded international subsidiaries, and if the "repatriation" of money has an economic effect now. It is also completely unclear how big of a cut the US treasury got from all of that. As in: did the USA collect significantly more taxes in 2020 then in 2019 thanks to the "tax cuts" incentivizing moving money from oversea subsidiaries into the USA?
So yes, the claim is substantially incorrect because it argues that the USA could get a lot more taxes IF multi-national companies would send all their global profits to the USA. While that is technically the truth, it is also nonsensical, they won't ever do that. Being outraged about that is a misunderstanding on how multinational mega-corporations function.
And one last thing: only a hardcore american nationalists can truly believe that whenever someone in europa, india, south-east-asia or elsewhere uses the google pay app for a transaction in their own currency the american government is somehow entitled to get a cut because they collect taxes on the licensing fees of the google branding. How do they sayeth? No taxation without representation! (throws android phone into harbor)
Sure; the paperwork all gets done that convinces a tax official that transfer prices make sense in some way, but the fact remains that global companies pay a lower tax by choosing specific transfer prices despite not having any visible external changes (employing people in the same countries as they always have, doing business where they always did), and that's what annoys most people.
> Comments like "companies should just pay their taxes" are like when laypeople say "companies should have websites that always work instantaneously & never have any downtime". Reality is complicated and your opinion isn't that valuable if you don't know any basic facts.
Yes, the politicians are the ones to blame, and they seem to be taking their sweet time to fix the issues. That doesn't mean it's unrealistic to say "companies should just pay their taxes". It's more like saying "health care should just be available to people that need it" which is a truism that nonetheless isn't achieved in the U.S. to a large extent, but isn't the direct fault of individual actors in the health care system.
From what I can tell, most people have an adversarial relationship with tax authorities, and therefore assume any more beneficial advantage is a "loophole" like something that would even surprise the tax authorities, when a reality is that many people and organizations have a collaborative relationship with tax authorities.
Transfer pricing requires pre-emptive approval from the tax authorities involved. You are basically telling them how you won't pay taxes and they sign off on it, specifically the nature of the transaction and coming to an agreement on how it complies. Greater disdain from the general population can come from understanding how expensive that can be to collaborate with the tax authority, but I don't think that changes anything. It doesn't give a better argument with any nuance.
My tax opinion isn't based on a country passively deserving anything from the mere existence of a transaction, tax authorities aren't operating that way either and neither are the legislatures. My understanding of the tax topics seems to be more compatible and effective than what I hear from most people, just like the lawyers and CFOs of these fortune 500 companies.
But I assume you're trying to head off the usual spate of anger at Google (or whatever company) for taking advantage of these loopholes to legally avoid paying tax. I think that's in general a good idea, though these loopholes are in part shaped by the lobbying that Google (and others) take part in, so I don't think this anger is 100% misplaced.
At the end of the day, though, if you believe companies should be paying more tax, expressing anger at the companies themselves is pointless; call up your elected government representative and give them your thoughts instead.
Nah, it is not pointless. It affects the companies' public image.
And when we are talking about a company that built its empire marketing itself as a Do Not Be Evil collective, the anger at swindling us is not misplaced.
Politicians do deserve the ire, but so do the swindlers.
> Comments like "companies should just pay their taxes"
*HOWEVER* it's very cheeky to selectively demand better opinions while also taking a side.
edit: tax avoidance* (this changes nothing about the intent of my question, but is literally incorrect)
You hate to see it, but we all know this is the way it works from the private jet view.
If I bought all their patents for $1 from them, I'd have to pay a huge amount based on some estimated valuation as this is seen as massively undervalued = a gift.
Are there tricks like moving a whole company from one country to another?
I think it's way too easy to shift paper values around the globe which makes these kinds of insane tax saving tricks way too low risk.
Imagine Ireland saying "we won't let you export this as some of this has security implications".
This is deeply amoral and even if in the strict sense of the law it's obviously legal that does not mean one has to let them get away with it too easily.
South Dakota has no corporate income tax and might be a better analogy if it worked harder to court large companies. South Dakota is popular with certain kinds of companies and individuals (libertarians, for example, who are willing to go to lengths to have South Dakota plates so they don't have to pay tax on the vehicle.)
It's not just Google of course. Apple apparently started it.
Here's a list of other giant companies using the exact same loop hole.
https://en.wikipedia.org/wiki/Double_Irish_arrangement#Multi...
Double Irish
Major companies in Ireland known to employ the Double Irish BEPS tool, include:
Apple Inc. original user, and known in operation since the late 1980s[19][54][55][171]
Abbott Laboratories[172][173][174]
Adobe Systems[175]
Airbnb[176][177]
Apple Inc.[19]
Eli Lilly and Company[175]
Facebook[138][178][179][180]
Forest Laboratories[175]
General Electric[178]
Gilead[181]
Google[32][39][178][182]
IBM[183]
Johnson & Johnson[178]
Medtronic Inc.[184]
Microsoft[175][185][186]
News Corp[175]
Oracle Corp.[139][175]
Pfizer Inc.[175]
Starbucks[178]
Yahoo![187]
Single malt
Major companies in Ireland known to employ the single-malt BEPS tool, include:
Microsoft (LinkedIn), using Malta[64]
Allergan (Zeitiq), using Malta[64]
Teleflex, using Malta[63]
Capital allowances for intangible assets
Major companies in Ireland known to employ the capital-allowances for intangible assets ("CAIA") BEPS tool, include:
Apple Inc., started in 2015[104] with the leprechaun economics affair
Accenture, started in 2009[94]
"Apple apparently started it."
"Accenture, started in 2009[94]"
https://www.euroweeklynews.com/2021/01/13/google-funnelled-e...
"Billionaires such as Bezos already pay 0% tax! Companies such as Amazon and Google already pay a 0% tax! Let's have a 0% flat tax for everybody to even the playing field!!!"
You'd get a sizable part of the BernieBros, as well as the Yang Gang if you also concede some form of UBI financed via selling/renting Federal Land (which you'd have to do anyway to pay down the debt given that you won't be collecting taxes anymore).
Libertarians should really get on it and start taking advantage of the class warfare, which can be really powerful.
So maybe Adam Kokesh can think about it...or Vermin Supreme or JoJo whoever will run as Libertarian
In the end the envy can be described as:
"Larry&Sergey number is higher than my own number and the ego boost they get by looking at their number is bigger than the ego boost I get looking at my own number"
These guys, they don't spend money, don't surrond themselves with luxury, they are pretty down to earth in their behavior and consumption, don't seek fame.
Alphabet inc is like Mozart's Sonata n12 and Larry&Sergey are like Wolfgang Amadeus Mozart keeping the foot on the gas opposed to go and party like an animal using the fame which his opera gave it to him.
People are envious of a number
Corporate taxes in particular is just a way for politicians to hide the true tax wedge just like when they tax your income from you and your employer.
› ... › Banking & Business Zakat, Arabic zakāt, an obligatory tax required of Muslims, one of the five Pillars of Islam. The zakat is levied on five categories of property—food grains; fruit; camels, cattle, sheep, and goats; gold and silver; and movable goods—and is payable each year after one year's possession.
Then there are always politicians shouting about companies following that, instead of trying to do something to fix the problem. Problem which won't be fixed by companies and must be fixed by governments.
edit: or rather maximize shareholders value, which basically means profits on the long run, which still means paying as little tax as you can legally
Is that really true, though?
"[...] there is no legal requirement for for-profit companies to maximize returns to shareholders. When a company is for sale, its directors are required to do all they can to maximize its value. At any other time, corporate law simply dictates that directors are supposed to help the company prosper and do nothing to benefit themselves at the company’s expense. But no law requires corporations to maximize returns to shareholders."[0]
[0] https://www.washingtonpost.com/opinions/harold-meyerson-the-...
Acting in the interests of shareholders is problematic, as different shareholders have different interests (especially minority vs majority).
And by keeping the duty to act in the interests of the company, directors are not required to focus on short-term profitability and shareholder dividends; decisions can be justified as being in the long-term interests of the company, and better for the company's reputation and culture, even if they don't deliver shareholders the maximum short-term gains.
Name a US company that lost market share for not paying more taxes than required.
They should invest more when it comes to good causes, yeah.
No, with the people. What you could do is a direct deposit in each American bank account in a very public way.
180M adults * 10USD = 1.8B
Not a joke but also not that much for Google to build long lasting goodwill among the public
In one swoop you delegitimize politicians by doing direct payments (maybe even a PR campaign with "money for nothing" as soundtrack) and win the public favor.
"UBI-light" offered by Google..so many PR angles to think this thing through
Reference: https://skeptics.stackexchange.com/questions/8146/are-u-s-co...
Nope. Directors are required to act in the interests of the company, and that can include maximising the company's reputation for ethics (which is also financially justifiable, in order to attract the best staff and customers long-term).
No, US court rulings say that mgmt. has "wide latitude" in how the company is managed. It's up to shareholders and the board to step in if they disagree, but since they appointed mgmt., it's rare for major disagreements.
Which makes sense in a capitalist country, as there is little central planning outside of certain industries like defense and banking (regulated.)
(In both the US and UK, the govt. tells industry how many airplane or ship builders they want, and who has to merge. After WW2, this caused concentration in the airplane industry. My understanding is that Northrop was told to drop the F-20 (an upgrade on the F-5 and a challenger for the F-16) to focus on their bomber contract, and then still told to merge.)
I'm not going to comment in detail about offshore tax structuring like Ireland except to say that it is an abuse of tax avoidance.