To reduce its tax burden, Google expands use of the “Double Irish” | Hacker News Reader

To reduce its tax burden, Google expands use of the “Double Irish”

arstechnica.com

43 pointslancewiggs60 comments

I wouldn't blame Google (or any multinational corporation) as much as I blame our legislators who failed to prohibit this kind of tax evasion schemes.

would you blame Google if they gave money to legislators for allowing this kind of tax evasion scheme?

Not so long as it was done in a legal manner.

Because something is legal doesn't make it right... Google it...

Avoidance, not evasion.

Legislators are beholden to rich benefactors. Look what happened to estate tax exemption during Bush era. It went from $675k to $3.5million. http://wills.about.com/od/understandingestatetaxes/a/estatet...

And rather than letting Bush law expire, Obama boosted the exemption to over $5 million.

This was a huge boon to wealthy class, and most people didn't even notice this crappy legislation from going into effect.

>Legislators are beholden to rich benefactors.

I think that is ucha's subpoint, if not the main point. We cannot effectively police this kind of stuff.

What you are blaming them for is not prohibiting tax avoidance, but for not anticipating that loopholes would be found in existing regulation. It's very likely that if these loopholes were eliminated, some other loophole would be found. At some point, maybe the discussion should be about the spirit of the law, not the letter of it (which can probably be worked around if you can pay for an army of lawyers and accountants in multiple countries)

You might as well blame them for creating free trade, and the european union. If legislators had the power to change the tax code, they would. Realistically they can't without doing something awful like currency controls or trade restrictions or something that will get shot down by the WTO.

I am not a huge fan of corporate taxation because it is so indirect, but I do think we need some new global rules around IP transfer pricing.

>If legislators had the power to change the tax code, they would.

Huh? They absolutely have the power to change tax code. Who do you think does? The IRS just executes the tax doctrine (with varying levels of compliance, of course).

The people who donate to legislators campaigns. The senator from Disney is a pretty good example of doing whatever it takes to represent his funder's best interests.

How could legislators in the UK impose higher taxes on Google without violating EU / WTO trade agreements? If there was an easy way to do it, then they would have already. That was my point.

Of course the legislators have the power to abandon all free trade agreements, leave the EU, and go Hugo Chavez and attempt to nationalize Google or something.

I bought a car a couple counties away from where I live for the lower sales tax rate than my home county. How is this ethically any different than that (other than the scale)?

Did you create three shell companies in different states, some with no reporting requirements, in order to carry out this purchase?

Your point is a good one. But it's hard for the nonspecialist to avoid associating this kind of tax avoidance with the behavior of Enron sometime back.

When somebody gets busted for computer hacking, the common line on here is that an activity's difficulty has very little to do with its legality. A for loop and curl are really simple, but just as illegal under the right circumstances.

You're doing the same thing: suggesting that the ethicality of a practice depends on its legal complexity.

I think my qualm has to do with the impression that the legal complexity is being used to subvert the manifest intent of the tax law. This in my mind is neither black nor white -- it's in the gray area of the law. But I'm not a lawyer.

Well I'd argue that the ethical difference is fundamentally the scale. How many lives could be changed if they paid taxes according to their social contract? Poverty, crappy healthcare and soaring incarceration are all problems that need money to alleviate.

The money they saved isn't destroyed. They can use it for all kinds of good things now---like giving it back to their shareholders.

i do hope you're kidding..

They have a fiduciary duty to do this to make more money for their shareholders. They have no enforceable social contract to provide taxes more than what they can legally pay. They can be sued by their shareholders for not using these schemes

Not saying this is right, but this is the way the law works right now.

I'm referring to the tacit social contract between the state and its citizens, in this case, the idea that the state supports the entrepreneur in the beginning, so that later the entrepreneur can support the state, if they can.

I'm probably butchering the term, so: http://en.wikipedia.org/wiki/Social_contract

I mis-understood who the 'their' was in your comment. I agree with you on this point.

There is an argument that allowing companies these tax breaks brings jobs to your country instead of somewhere else, and this brings prosperity. Certainly Ireland worked this way in the 90s to get their tech scene started. Locally, cities do this too - X year tax breaks to put your factory here instead of there is a common thing.

Is the social contract satisfied by just the generation of good paying jobs where there were none previously?

So how did the European states affected by this support Google, the entrepreneur, in the beginning?

It's not different, but I am surprised your country doesn't enforce those taxes through a use tax. In California, we have nearby states with much lower auto taxes, but when you import the car you have to pay the difference in the purchase state's tax and California's the moment you register the car.

He's talking about counties, not state. Within California difference by county can be a full percentage point http://www.boe.ca.gov/cgi-bin/rates.cgi

In your position, you actually have a requirement to pay the correct sales tax to your state based on where you live. This is more complex than 'I wasn't charged it, so I don't owe it'

You are breaking the law if you do not pay what you owe.

Google is using the various laws of these countries, and treaty agreements, to avoid taxes in one place to pay them at a different (much lower) rate in another.

Google is not breaking the law.

He said county, not state.

As all gamers know: the best way to fix a badly-broken rule is to exploit it relentlessly.

And get banned by the developers when they get around to fixing the problem. Getting stomped by the IRS when the close this loophole probably isn't high on Google's priority list...

Is this really a problem? Isn't corporate tax rate one of the ways countries compete for businesses to be registered with them and pay them tax? I'm sure any government efforts to reduce this will just make it harder for everyone to run companies from other countries.

Try moving large sums of money (even money earned abroad) around like this to avoid taxes as a private US citizen and you're likely to get 10-20 years of mostly distraction free time to ponder the question of whether this is or isn't a problem.

As long as you don't break any laws while doin it, I don't see why.

Meh, tax code is still grossly over-complicated in the US, simplifying it would help everyone.

Not everyone. It would help those who don't have the disposable income to find and use these loopholes, which is mostly everyone. Unfortunately the vast majority of the people that it WOULD help have little to no power to effect that kind of change.

I've always been curious about the pressure of shareholders in situations like this. Google is a publicly shared company, right? So if they don't maximize the shareholder's value, don't they open themselves up to lawsuits by shareholders?

So even if they wanted to "do the right thing" and pay some taxes on this money, they couldn't, else their board would get voted out by large shareholders who are only in it for the money.

Not commenting about google specifically, but please observe that many companies donate to charity, and, extrapolating from this observation, resist the urge to trot out the "legally obligated to maximize profits" thing in the future.

3 people constitute a majority ownership of Google.

Google by law has to take advantage of these "loop holes". They are a publicly traded and thus by law have the obligation to maximize their shareholder returns. So taking advantage of these tax loop holes they are fulfilling that duty. Doesn't excuse it but it does prevent Google from just saying no we won't do it.

This is patently false. Read Google's S-1 and Letter to Shareholders.

the "shareholder value theory" is a myth: http://blogs.law.harvard.edu/corpgov/2012/06/26/the-sharehol...

http://www.nytimes.com/2012/08/11/opinion/nocera-down-with-s...

there is no "law" that makes Google obligated to do this.

I'm Irish. They provide 2000 jobs here in Dublin, and that has the potential to double even in the next few years.

The fact of them being here is a direct reason Facebook, LinkedIn, and a load of other companies are also here.

They're indirectly responsible for, I would guess, about 10,000 jobs.

I couldn't care less if they don't pay 12.5% corporation tax - they've provided massive social value even without it.

Good for them. The government shouldn't be taking their money.

And how do you propose that government finds money to pay for roads, bridges, dams, police, firefighters, national security, national parks, environmental protection, regulatory standards etc?

> roads, bridges, dams, police, firefighters, national security, national parks, environmental protection, regulatory standards

Congratulations, you've enumerated most of the uncontroversial activities of government, which take up a few percent of the budget, and several of which are paid for in whole or in part by use fees.

>few percent of the budget

>national security

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY...

To be fair, if it was only actually used for defense, it really would be only a few percent. And then to be extra fair, "old people and the poor should not die of starvation or easily preventable diseases just because they haven't saved," is also not very controversial, and takes up more than a few percentage points of our governments budget.

These aren't just a few percent. Defense spending itself is a fifth of the budget [1]. Regardless of how much of the budget each of these items are, the point is that these are paid through taxes. Corporate taxes are just another one of the many forms of taxation we have, so while you can make an argument to simplify these, or to cut some spending, it's silly to characterize taxation itself as some sort of robbery. Your western standards of living would not exist if not for the things that society has deemed appropriate for government to do.

1. http://www.cbpp.org/cms/?fa=view&id=1258

Issue more treasuries and sell them to the Federal Reserve (since no one else will buy them) in another kick the can down the road way… oh wait…

>roads, bridges, dams, police, firefighters, national security, national parks, environmental protection, regulatory standards

Take a guess on the percentage of federal budget these services consume on a yearly basis.

Aren't most of those paid for by property and energy (gasoline) taxes?

Anarchist libertarians do have answers to all of those. Of course, I am not going to attempt to answer it all in one post here. If you genuinely want to learn, you could start with Block's excellent book on roads, free online here: http://mises.org/document/4084/

"But who will build the roads!?!?" is the question we typically make fun of statists for believing that monopoly provision is ideal.

Corporate taxation is just double taxation anyway: http://en.wikipedia.org/wiki/Double_taxation. Why not just tax individuals?

About half of these are paid and run by local or state governments. Concretely: roads, bridges, police, firefighters, even schools and hospitals. They're not supported by federal taxes.

May I recommend the book "Treasure Islands" by Nicholas Shaxson. http://treasureislands.org/

A brilliant read if one that might make you slightly angry about the system!

Fine they don't pay taxes on the earnings, but they can't really use that money either--it must remain permanently abroad. Part of the reason AAPL did that $17 Billion bond issue (largest ever until the Verizon $49B deal) even thought they have like 8 quadrillion dollars in the bank is they cannot use those permanently abroad monies to pay dividends to shareholders.

So, in short, what is good is tax-free money if you cannot use it? Are these companies all hoping that one day their will be a tax holiday and they can re-repatriate the funds?

Are these companies all hoping...

I think the answer is yes?

Presumably companies like Apple and Google spend a decent amount of money abroad (e.g., manufacturing phones). Can't they use it for that?

They already do. This debate is about the profits

What you do is you issue bonds in your high-tax market to raise capital, and to pay interest/principal on those bonds, you slowly bring in the funds from your low-rate piggy-bank country.

http://www.reuters.com/article/2011/05/16/us-google-bonds-id...

There was one in 2004. Brought in $300+ billion, but didn't create a lot of jobs, so who knows when the next one will be.

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