I can see why you would try it on, the sums involved have to be huge, but it is fundamentally immoral to operate like that.
All these loopholes are perfectly legal and companies actually need to exploit them to remain competitive.If they didn't then any competitor could decide to do this and could earn 30% less and still make a bigger profit.
It would of course have been great if the representatives had been self-aware enough to agree that they might not be taxed effectively in a global market and that they would be willing to co-operate with aligning global tax incentives in a way that leaves it a level playing field for all competitors; but that's probably a bit much to ask ;)
I don't disagree with what you're saying otherwise.
Example: A company, acting "morally" as you define, pays more tax than it is required to under the law. In so doing, it incurs a loss so severe that it must cut staff in order to remain viable. Among those employees cut are some of the more vulnerable - those with low savings, poor health, or babies on the way.
Has the company acted morally?
Consider another issue: Should the same company pay more than its legal obligations in every jurisdiction to which it is subject? How should it allocate its extra giving? What if, in some of those jurisdictions, there's a good chance the extra money will simply go into private pockets via graft and corruption, instead of serving the public good? (There are such jurisdictions in the EU, yes?)
These issues are not as clear-cut as you suggest. It's far better for the tax law to best reflect the morality of the citizenry, and then fully excuse the citizenry (including business entities) from seeking to legally minimize those taxes.
Usually not an issue in this case, since corporation tax covers profits. If anything, corporation taxes encourage greater employment.
Amazon are not profitable as far as I read their sheet.
In the US a corporation's legal responsibilities are to it's shareholders ... it might be fundamentally immoral but it would be unethical to operate the company against the interests of the shareholders too.
It's the laws that need to be changed rather than blaming the companies for being good at accounting.
Absolutely agree the laws need to be changed. I, personally, would be looking to stop the 'convenient' reporting of losses in markets that are actually highly profitable but not tax efficient. There's an interesting comment on the Starbucks press release that coves it quite nicely -
"How can Starbucks tell Companies House and HMRC that its UK business is loss-making but tell analysts in SEC-regulated calls that the UK business is profit-making, without either making misleading financial statements or filing false accounts?"
I agree - it's possible that Starbucks UK is not pofitable, and that the parent company is, or vice versa. But reporting the same thing in different ways to different audiences seems fishy to me!
Aren't they just transfer pricing their profits out of the UK to Switzerland and the US?
If a person did it, we'd call it immoral. When it's a group of persons doing it, we'd call it immoral. But when it's one group of persons doing it -- the employees -- in the name of another group -- the owners -- it's suddenly unethical not to do it? I don't get that.
I guess it'd be unethical for the employees to act one way when they know the owners want them to act another way. But if the owners willingly let the company act immorally, then they are themselves acting immorally. Which is, of course, the case.
It is a fundamental shift in finance theory that occurred about 25-30 years ago. Many people will argue that management should put the shareholders above all else. I think there is a somewhat muted, but real discussion happening in a lot of places that the currently accepted system may not be the best one, but for now, management has a fiduciary responsibility to shareholders.
The crazy thing is that people "blame evil corporations" while having almost 100% of their retirement invested in the corporations they dispise without even realizing it.
Unless you have no savings, you are likely a shareholder in a number of companies which are using transfer pricing to save on taxes.
You are much more likely an investor in a unit fund that itself holds shares. As a result you have no say over anything, and pretty much no alternative but to join one of these schemes.
You could say you don't want to be invested by not investing in mutual funds/ETFs etc.
But, almost every American with savings does invest and is the direct beneficiary of transfer pricing.
You and others could decide to allocate a portion of your capital gains back to the UK government as a gift, but I think that is "very, very unlikely".
[Also] One strategy could be to only choose small cap names, then you are unlikely to hear of any of the "evil" things the corporations you own are doing... Obviously that would create problems with risk in your portfolio.
Would we? It's pretty rare that I hear of someone being accused of immorality for taking every tax deduction allowed by law. If people want to complain about tax deductions, they usually say that the law is bad, not the people who follow it as written.
I think countries should arrange their tax rates and accounting rules so that there's little incentive to avoid taxes by moving money around, but I don't think it's in any way immoral to pay as little tax as the law requires. Governments are not charities and do not run on donations.
You don't strike me as having a libertarian bent, but that's essentially the argument used to justify taxes as immoral:
If I steal from my neighbor and distribute the proceeds to the community, including my neighbor and myself, it's theft – immoral.
But if the whole community gets together and vote to steal from my neighbor, and his neighbor, and everyone's neighbor, and split up the proceeds – that's suddenly moral?
Point is, not all arguments generalize from "a person doing it to" to a group doing the same thing collectively.
I think this attitude is at the heart of the problem.
Even in a jurisdiction where I might see some benefit from the taxes, I'd probably see more benefit from that same amount of money in my pocket. It's perfectly rational to want to minimize one's tax obligation, especially to foreign governments.
http://hbr.org/2010/04/the-myth-of-shareholder-capitalism/ar...
"Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time. Shareholders seem to get this. They’ve tried to unseat directors through lawsuits just 24 times in large corporations over the past 20 years; they’ve succeeded only eight times. In short, directors are to a great extent autonomous."
The companies in question are availing themselves of the laws available to them to get discounts on their tax obligation, just as an individual might claim their children as tax exemptions, and use charity contributions as write-offs.
As you indicated elsewhere, morals and law do not necessarily align, and you are trying to attach morality to a legal obligation here. That companies do the same thing as everybody else does shouldn't be counted against them, especially as it is legal.
I do think though, that US law dictates that they must work for shareholder value.
It's hard to see how we wouldn't end up here if they aren't actually breaking any laws on their way to this destination.
Earlier HN discussion: http://news.ycombinator.com/item?id=3227980
err. no it isn't.
It's quite clear what the intent of the tax laws is, and it's quite clear that announcing a loss to the tax office but a massive profit to your investors is at the very least duplicitous.
If it was then what they are doing would be illegal
Interesting worldview there...
That most ordinary people would agree that this is the right approach tells volumes about the society we live in.
Someone out there has a moral code that encourages stoning women to death. Doesn't mean that has got anything to do with anything being as it is a vague and meaningless concept that doesn't inform governance.
> Availing yourself of a market
By which you mean acting as a VAT collection body and sending that money to the treasury for transactions within that market that occured under your business.
> the facilities and workforce of the UK
Would you rather the roads were empty because the people of the UK had no jobs?
There are ways to address this issue as discussed endlessly. But the last thing this is is immoral. It may not be just nor fair, but those do no interact with the morality of a benign government and their laws and regulations. It doesn't help the argument but it is rhetoric that is being thrown around that as much as anything hinders progress on this issue
I didn't claim morality was objective, no need to behave as if I did.
By which you mean acting as a VAT collection body...
What are you trying to say here? That because they collect VAT that's ok and they should be exempt from other taxes?
Would you rather the roads were empty because the people of the UK had no jobs?
False dichotomy. It's not the ability to move profits abroad that keeps people employed in the UK, arguably it sucks money out of the country and is a net loss to our economy.
> it is fundamentally immoral to operate like that.
Sounds pretty objectively-stated to me.
Count me in the camp that disagrees with you. Normal people do all sorts of perfectly legal tricks to pay less income tax. They're not cheating; they're just paying the minimum they're legally required to pay. Same deal for business. Whatever they can get away with without breaking any laws is the minimum requirement. Paying extra tax out of some patriotic duty is illogical, as is not taking advantage of the perfectly-legal loopholes found.
It is not up to the businesses to pay more tax than the current legal framework requires; it's up to lawmakers to amend the tax code so that 'undesirable' loopholes are closed.
Businesses act to maximize profits. There is nothing immoral about this.
I really disagree with this worldview.
When business dump toxic byproducts into water supplies, in places where nobody has yet legislated against that, is it not immoral?
I agree it's up to the lawmakers to change things, by the way, but I don't agree that it's always the right thing to do for companies to walk as close to the line of illegal behaviour as it's possible to get, just to maximise profit.
The morality of it is irrelevant because it is deemed to be an infraction of a law in most places
They are amoral.
Companies are made up of people, and these people are the ones taking the actions.
Corporations, like Nicheian supermen, are not subject to ordinary rules. If you were dodging taxes, your ass would be in court, not before parliament.