Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes - Bloomberg

http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html

by nir • 16 years ago

18 23 16 years ago

bloomberg.com

TGJ• 16 years ago

It's not lost. Since it is legal to begin with then the government cannot lay claim to it anyways.

sophacles2• 16 years ago

Thought experiment time:

Say you have created a site -- one that sells goods and services. You have written a bunch of code, and leveraged libraries and other components for the rest. Now, say, if I put certain values into the forms on your site, I get your services and goods for free or extremely reduced costs. Say that value looked something like this:

  sophacles'; insert into discounts (code, percent_off) values ("sophaclesmagic", 100);

for my name, and I put sophaclesmagic as my discount code.

Do you consider this acceptable? Your code allowed it. It's not like I would be doing anything so crass as stealing, you can't claim I broke rules. I just did something you allowed.

Or perhaps would you try to get "your lost money" anyway, as the code that allowed it "wasn't perfect, but obviously not what you intended".

How is this not basically the same thing as the laws?

hackinthebochs2• 16 years ago

Exactly. Lawyering around paying your intended tax rate is no different than hacking a system. You're using the rules of the system to circumvent "intent" of it. Yet hacking is seen as morally wrong and dodging taxes is perfectly fine.

Maybe we should just make a law making it illegal to dodge your intended tax rate, just as there are laws against circumventing the intent of a computer system.

richcollins• 16 years ago

“Who is it that paid for the underlying concept on which they built these billions of dollars of revenues?” Briloff said. “It was paid for by the United States citizenry.”

He says that as though they got nothing in return for the time / money they spent on Google.

adrianscott• 16 years ago

misleading article... most other countries don't tax foreign earnings the way the u.s. does...

viggity2• 16 years ago

Honest question: do you think more wealth/jobs/long term economic growth is created by Google having that $60 Billion or the government having the $60 Billion?

Second honest question: a corporation is owned by people. People pay taxes. Why should those people have to pay taxes twice on the same money - once one it gets to google and once when it gets to them?

wipt• 16 years ago

So far this seems to be the consensus of the comments here: Google is doing this legally (as are other companies), and that the article is misleading. Sure, it says that it's legal, but then it turns around and sympathizes for the US government that can't keep from spending money that it hasn't made (and has no hopes to make). I know everyone hates Wall Street, but they /do/ know how to make money - thievery or not.

Reduce costs, increase profit by increasing market by dropping taxes. Companies are moving away from the states, and law is remaining stagnant for a evolving market.

pedanticfreak• 16 years ago

Money gets taxed multiple times. That's not the point. I earn $50. I pay taxes on it. Then I buy something from you for $30. You pay taxes on that $30. Then you buy something for Jim for $10. Jim is taxed on that $10 you paid him. That same $50 got taxed three times in my example and will continue to get taxed until someone stuffs what's left under a mattress.

To your second point: Yes, obviously corporations are owned by people. But nothing forces a corporation to pay a dividend. So if you don't tax the corporation itself, the corporation becomes a tax free investment vehicle. People would just keep everything in a corporation including investments, cash reserves, houses, cars, jets, yachts, etc.

I find Google's behavior to be sociopathic and Enron-like. While it's perfectly "legal" it is socially irresponsible. If Google wants to withhold monies because it thinks corporate expansion is better for society, it should withhold from its charitable contributions rather than its taxes. Otherwise pay your goddamn taxes. I pay mine, I don't want to pay Google's, too.

viggity2• 16 years ago

The title implies that Google alone is "skirting" the $60 Billion, when really it is all the companies using this strategy combined are responsible for the "$60 Billion"

patrickaljord• 16 years ago

This is from October, has already been posted here but I guess the anti-google frenzy that is happening on HN these days will bring it back to the top. Also if your read the article, it says Facebook, Microsoft and just about any tech companies do the same. What's wrong with legally paying as less tax as possible?

diziet• 16 years ago

Tax avoidance is a perfectly legitimate tactic that every corporation with accountants and lawyers worth their salt employs. Not to do so would be to lose a large competitive advantage. The problem, of course, is the complicated tax code that can be circumvented.

fleitz• 16 years ago

“flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff

Paying the lowest amount of taxes required by law is certainly not evil. I wonder how much extra Mr. Briloff sends to the IRS, and I wonder how evil he considers that to be. If the law makers in the various jurisdictions didn't intend the tax code to be used in this way it's certainly in their purview to change it. Since this has not happened one can only assume that GOOG et al are acting in the manner which the law makers intended.

In my opinion persons such as Briloff who derive their income from schools which are largely publicly funded to teach people a trade which is largely only necessary because of the tax code are the people who should be paying extra because of what the tax code provides for them. (eg. their livelihoods)

If Briloff wants people to pay extra taxes perhaps he should encourage the gov't to provide services worth in excess of what they cost. Perhaps Mr. Briloff forgets that governments are instituted amongst men to secure rights and not to redistribute and destroy wealth.

hackinthebochs2• 16 years ago

>Paying the lowest amount of taxes required by law is certainly not evil

Lawyering around your "intended" tax rate is no different than (black hat) hacking. It's using the rules of a system to circumvent its intent. It's pretty well accepted that (black hat) hacking is morally wrong. How is one morally wrong and the other not?

sophacles2• 16 years ago

Because government is always bad, and anything they do can only be for the evil.

siglesias• 16 years ago

I can think of worse things that could happen with that tax money than have it go to an innovative, highly competitive American technology company that pays huge social dividends.

camiller• 16 years ago

misleading, the article goes on to say Google paid a 22.2% effective tax rate, the headlines 2.4% rate was only on a portion of their revenue, not all of it.

yock2• 16 years ago

I'm dubious of people who equate paying fewer taxes with the concept of evil, as if government ever did anything to earn income. There's far too prevalent a mindset in this country that sees falling tax revenue as a negative, then further perpetrate the lie by ascribing ownership of these missing tax revenues to the people. They use personal pronouns like "you," "we," and "our" when speaking of them.

Follow the money, or the lack thereof. Behind every one of these complaints lies, somewhere, someone who has some self-serving use for that money.

natnat2• 16 years ago

Tax revenue is necessary to maintain a functional government. When the government doesn't get enough tax revenue to pay for the things it spends money on, it must either increase taxes on everyone, or borrow money from other people to finance its programs. Either way, everyone else ends up paying more in taxes. That's why people treat taxpayer money as "their" money.

The government could choose to spend less money and avoid decreasing the tax burden on everyone else, but then the services everyone receives would decrease, and only those who don't pay as much tax would benefit. If we hold spending constant, someone who doesn't pay their fair share of taxes is increasing the tax burden on everyone else.

yock2• 16 years ago

When your income decreases, you buy less stuff. It's a lesson the government has never learned. I'm perfectly happy with fewer services.

nitrogen• 16 years ago

I have to groan when I hear people talk about "lost" money like this. Whether it's the RIAA/MPAA or a government analyst, the money is not lost, it is simply being put to (ostensibly more productive) other uses. Of course, the governments of the world could choose to stop trying to sway public sentiment and just close the tax loopholes. Unless they compensate for it in some way by significantly lowering taxes for startups and small businesses, I wouldn't be surprised to see general technological innovation significantly hindered.

duke_sam• 16 years ago

There is some[1] evidence to show that higher corporate tax rates result in lower wages so it's at least partially equivalent to a higher income tax rate.

[1] http://stumblingandmumbling.typepad.com/stumbling_and_mumbli...

naner• 16 years ago

Companies have massive incentive to use every tax loophole they can find. Honestly, what did they expect to happen? Another option is for the government to fix all the loopholes and then watch these companies move out of the US.

Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes - Bloomberg

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