Google Boss: We Follow The Law On Tax

http://news.sky.com/story/1094264/google-boss-we-follow-the-law-on-tax

by ceekays • 13 years ago

16 65 13 years ago

news.sky.com

dotcoma• 13 years ago

Then it must be the law which is crooked.

DannyBee• 13 years ago

I think it was jon stewart who said "these complicated carve outs weren't made by poor people"

Svip• 13 years ago

He did indeed. http://www.thedailyshow.com/watch/wed-may-22-2013/tax-men---...

mseebach• 13 years ago

As everyone who's attended internet pundit law school know, the effect of a law is dependant on the net worth of the author of it.

Nursie3• 13 years ago

The law, as is always the way, is several steps behind social progress and business practices. I'm not sure this can ever be otherwise.

skore8• 13 years ago

That may be true, I could conceive that if it were otherwise, there would be quite a high potential that you end up with something draconian.

However, I don't think that's the issue here. The issue is that there are corporations making massive investments to actively prevent the law from catch up.

Nursie3• 13 years ago

Of course you do dear, but you also exploit every possible loophole of inter-country commerce to make your bill as small as possible, regardless of the intention of the law in the countries involved or any sort of social contract.

Expect the law to change.

pvnick8• 13 years ago

You would make a terrible accountant.

Nursie3• 13 years ago

So? I'm not an accountant.

I'm an individual with an interest in multinationals paying tax on their profits rather than spiriting them out of the country tax free. This is why I hope to see the law change.

dasil0032• 13 years ago

Without specifics this is just so much hot air. Google's responsibility should not be to find ways to pay more tax. If there are tax loopholes it's the government's job to close them.

takluyver2• 13 years ago

I see a disturbing amount of this attitude: it's fine for corporations to be as unethical as they can get away with, and it's up to government to constantly rein them in.

I don't buy it. No, it's not Google's responsibility to find ways to pay tax, but they also shouldn't be constantly finding ways not to pay tax. A company is not a function relentlessly optimising for money, it's made up of real people making decisions. I expect those people to use some sense of what's morally right, not just what the law allows them to do.

The law is a heavy, slow implement, especially when multiple countries are involved. Multinational corporations can rearrange their accounts much faster than we can pass legislation to control them. It's like playing whack-a-mole with a vote before each hammer swing.

If they're dodging taxes within the letter of the law, they can expect judgement in the court of public opinion. Which is how this debate started.

dasil0032• 13 years ago

> I see a disturbing amount of this attitude: it's fine for corporations to be as unethical as they can get away with, and it's up to government to constantly rein them in.

That's not my attitude at all. My attitude is just one tiny facet of that attitude, which is that no one should have to pay more taxes than they are legally required to. I don't, for instance, think that corporations should be free to maximize profit by toeing the EPA line.

With regards to taxes, what's unethical about using the law to one's advantage? This isn't a rich guy socking away millions in the Bahamas; as far as we know there's nothing shady going on at all. Furthermore, we know Google pays some amount of tax all around the world and that they employee a lot of people in the UK all of whom pay gobs of taxes. Google decision of where and how to open offices may well be shaped by these tax laws, so it's really not fair to attract a company to your country with a certain tax regime, and then berate them for not following the "social contract" or whatever. Google is not a UK company. It didn't start in the UK, and it doesn't have to operate here. If tax laws change Google has to deal with it, so do it, but you can't have your cake and eat it too by attracting them in with a certain tax regime and then painting them as some sort of greedy villains because their accounts don't interpret the intention of the law and voluntarily decline tax breaks.

pvnick8• 13 years ago

If my accountant paid a penny more taxes than I owed I would fire them. That politicians are attacking successful companies for trying to pay as little in taxes as possible is offensive and embarrassing. If you're unhappy with the law then change it. Otherwise shut the hell up and stop wasting the tax money you're complaining about.

skore8• 13 years ago

Now now, be fair. There IS a difference between "paying only the taxes that I am required to pay" and setting up a Double Irish with a Dutch Sandwich.

One is investing resources to minimize failure ("I want to make sure we don't pay more than we need to pay"), which I completely agree with - if your accountant fails to do that, it's not a good accountant. But the other is a proactive investment of even more money to pay even less taxes ("I want to pay even less than what would be normal by the intent of the tax law").

pvnick8• 13 years ago

"My good friend and CFO, Larry, why didn't you set up that offshore account that would legally save us millions of dollars in taxes per quarter like we talked about? That way we could hire more workers so they could feed their families and receive adequate health coverage."

"Oh that wouldn't be fair to the people that couldn't do that."

"You're fired."

AnthonyMouse4• 13 years ago

I'm not sure what line you're attempting to draw. An accountant's job isn't just to make sure you file the right paperwork, it's to identify courses of action that could have a significant effect on the bottom line. You seem to be suggesting that a business would be doing something unreasonable by moving any of its operations into a jurisdiction with lower taxes, since that would be making an investment in order to pay less taxes.

summerdown2• 13 years ago

I have come across this attitude a lot recently, particularly amongst Americans of the libertarian persuasion ... the belief that the world must fit into one of, usually two, boxes and the only choice you're allowed is which box it is. (sorry in that it's not my intention to typecast you = I've just noticed a correlation which may or may not fit your particular case).

Anyway, I don't believe it's a binary choice at all (change the tax code or shut up). I think the situation allows much more variation.

People, including politicians have the right to discuss things publicly in a democracy.

Making public statements and using their pulpit is a valid tactic politicians can use. Likewise, the press and private citizens. Google may not like it, but public debate and sometimes condemnation is a valid feature of all open societies. It may also be a necessary prior step to actually changing the law.

mcintyre1994• 13 years ago

Google is clearly in the right here, unless somebody can actually point out a law they're breaking. Simplifying a lot, Google have 2 responsibilities here: Pay at least the amount of tax they owe, maximise stuff shareholders care about. It doesn't take much to work out the optimal solution to them two problems is to pay exactly the minimum amount of tax possible.

pvnick8• 13 years ago

Seriously, what's up with politicians recently, both in Europe and here in the States, hammering at successful companies for trying to minimize their tax liability? I specifically avoided saying "leftist" politicians because even the right is guilty (I'm looking particularly at that sniveling fool John McCain).

Expect the law to change, creating an even more complicated tax structure and destroying even more economic value while providing zero benefit to common citizens.

We should be looking in the opposite direction. Do away with large swaths of the tax code and ask less of the companies that support the global economy. Especially now that apparently the organizations that extract those taxes (specifically the IRS) have become political tools to harass those people whose politics our "leaders" disagree with.

svenkatesh3• 13 years ago

I agree with you about simplifying the tax code, but do not agree about reducing the tax-liability. Since these corporations benefit from society just like private individuals do, they should contribute to society (in the form of taxes) in kind.

figbucket3• 13 years ago

They maybe right but it isn't equal, it's giving them a competitive advantage.

I agree with paying the minimum amount of tax but what does that actually mean? Eric Schmidt said he believes taxes should be at the base of economic activity (ie Ireland) but this is bullshit because it puts all the power in the hands of the corporations and incentivies countries to lower taxes to encourage corporations to move there.

Taxes should be based on where products are consumed so that each country taxes the exact percentage of profits generated from sales in that country. If in the UK Google sales amounted to £1b profit then £230m should be corporation taxes.

mjw2• 13 years ago

Firstly, if google sees its only responsibilities as "maximize shareholder value" and "obey the letter of the law" then perhaps they should officially give up on the "don't be evil" thing.

Secondly, it's disingenuous of them to ask the taxpayer to "just change the rules" if we don't like their avoidance, when they're funding the very regulatory capture which makes it hard for us to do that, via their investment in these schemes.

roopeshv2• 13 years ago

let me introduce you to: https://plus.google.com/+MattCutts/posts/4U2mpZ6hazU

don't be evil is not the same as do no evil

DanBC3• 13 years ago

Laws are written by politicians, and interpreted by judges.

Tax cases are expensive and complex to investigate. Google probably has more money that the entire UK tax authorities. HMRC has to concentrate their efforts somewhere, and they concentrate on the people who are clearly breaking the law, or where they have whistle-blower evidence that laws are being broken.

That puts companies like Google at an advantage. They can operate at the edge of the law, exploiting loopholes, and then pay more if the laws are changed. And then, if we find out that they are not obeying the law but breaking it they make a deal with HMRC. See the deal Vodafone made where a huge tax bill was waived, if Vodafone paid a small part of the tax they had evaded. (http://www.guardian.co.uk/money/2011/dec/06/hmrc-tax-deal-vo...)

Dodging tax is only beneficial to these companies.

As to why they should pay: Apart from the fact that UK customers of Google buy UK ads for their UK potential customers using UK bank accounts and UK pounds and buy them from UK staff at Google's UK office (with a final 'close the sale' bit of paperwork done in Ireland for the sole purpose of avoiding tax in UK) - apart from that, Google makes use of UK schools and roads and police and fire departments and etc.

No one minds that Google pays less tax than they should. People only mind when Google goes to extraordinary lengths to avoid tax.

Shivetya• 13 years ago

Lets see, politicians have created a system so complex they themselves cannot understand it. Then they act upset that someone else has to that others advantage and attempt to vilify them instead of acknowledging that the system is too complex.

Sounds about right. You would think that they would instead focus on making a system even they could understand.

svenkatesh3• 13 years ago

Actually, if you look at the video from the Senate hearing, some of the senators are clearly fawning over, and pandering to, Tim Cook.

It's disgusting.

pvnick8• 13 years ago

What's your point? I thought that senate hearing was disgusting because they were hammering away at Apple for obeying the law. Apple is an incredible success story and they should be lauded as an example of free markets, not vilified for trying to avoid giving extra money to the incompetent fools in congress.

Which would you prefer - successful companies that lawfully avoid paying too much in taxes while supporting western economies, advancing technology, and providing countless jobs? Or a top-heavy, zero-liabilty, exploitive government that, even as it grows unsustainably larger, still demands more and more, always chasing that unreachable pie-in-the-sky ideal of the "fair share."

ancarda• 13 years ago

Is "Don't be evil" just a joke or was it actually the motto of Google?

ndr• 13 years ago

http://www.google.com/about/company/philosophy/

roopeshv2• 13 years ago

https://plus.google.com/+MattCutts/posts/4U2mpZ6hazU I 'll leave it here again. do no evil is not don't be evil

noonespecial• 13 years ago

I think politicians are just upset that those tax law loopholes that were supposed to be just for their friends are now being exploited by those upstart interweb companies like "the google".

Our supporters paid good money for those exclusive exemptions, dammit. This is just making us look bad...

mjw2• 13 years ago

Fair point, although it's rather disingenuous for multinationals (not singling out Google) to say to taxpayers: "don't like our tax avoidance? well just change the rules then!"

Arguably one of the main reason we're not able to change (or at least, enforce) the rules easily is because of regulatory capture of tax agencies around the world, and multinationals are (directly or indirectly) funding this regulatory capture via their investment in complex tax avoidance schemes and the whole industry around them which is in constantly in and out of the "revolving door" between regulators and accountancy firms.

So, likely there's always going to be opportunities out there for aggressive tax avoidance, because of exactly these kind of agency problems. And so a multinational is always going to have a decision to make about exactly how aggressive they choose to be. And they are going to be judged morally by the taxpayer for the decisions they make, whether they like it or not.

If they are judged badly as a result of their choices, they should have the good grace to just admit that they're being selfish because they can get away with it and that's the way things are, and not come up with disingenuous self-serving rationalisations.

genwin• 13 years ago

I think the politicians here are just trolling for campaign cash and other favors in kind. When Google greases the right palms the spotlight will shift elsewhere.

rayiner4• 13 years ago

I see a lot of talk about "tax loopholes" but not any specifics about exactly what those loopholes are. It's easy to blame the law (a process which is mostly just a self-reinforcing talking point), but has it occurred to anyone that maybe neither the law nor Google are "crooked?"

You can take the most straightforward law and it still won't withstand a company putting all their IP in a tax haven and then attributing most of their revenues to their tax haven subsidiary. That's not taking advantage of a "loophole" that's taking advantage of the fact that: 1) accounting for revenue is inherently complicated, regardless of the tax laws, especially for service businesses and software services businesses at that; and 2) multi-national corporations must have some way to attribute income to the various countries in which they operate; it wouldn't be fair for every country to individually tax all the company's income separately.

It's instructive to try and figure out a tax law that would allow say the U.K. to reach some portion of Google's income. It's harder than it seems. For example, is it relevant that Google has customers in the U.K.? It shouldn't be--there is no sales tax on search services. If someone in the U.K. for example calls up their accountant in the U.S. for advice, as a general rule the accountant isn't liable for income taxes in the U.K. Is it relevant that Google has servers in the U.K.? Sure. But how relevant? How much of the value of Google's service derives from the servers in the U.K. versus the code and algorithms that were developed in California? I think most people would agree that the servers are just incidental--the real value of Google's services is the algorithms and data. So why should the mere existence of servers in the U.K. entitle the country to tax some substantial amount of Google's income?

polshaw• 13 years ago

Google doesn't sell searches, it sells advertising. They do much of that sales process for UK advertisers (effectively all of it according to one whistle-blower) in the UK, and 'close' them (and declare them) in Ireland.

Nobody is suggesting double taxation, but google does a substantial amount of (profitable) business in the UK, and (at least morally) that portion should be taxed in the UK.

rayiner4• 13 years ago

But that's doesn't make things any clearer. Google might do the sales process in the UK, but how much should that count when the ads are shown internationally and the platform that brings in the eyeballs is developed outside the UK? Clearly they should pay some taxes in the UK, but how to divvy it up? And how to achieve that process when there is nobody with overarching jurisdiction over the whole entity?

ars• 13 years ago

> I see a lot of talk about "tax loopholes" but not any specifics about exactly what those loopholes are.

See here: https://en.wikipedia.org/wiki/Double_Irish_arrangement

The "cheating" accusation comes because you have to be very large to be able to make use of this. If everyone could use this tax arrangement people wouldn't complain. (Well, they would complain that it exists, but not that people use it.)

rayiner4• 13 years ago

The double Irish arrangement isn't a loophole, or if it is its a loophole that's the fault of the Irish by not taking account of US transfer pricing rules. The basic problem is that transfer payments within multinational corporations makes it hard to account for income, and rules to attempt to achieve that accounting are easily undermined by tax haven jurisdictions.

markvdb• 13 years ago

How can a Bermuda google subsidiary be the owner of the intellectual rights? Where do these funds come from?

I guess the biggest loophole, even more than the double Irish, is non-existing or very lenient transfer pricing rules...

DanBC3• 13 years ago

> So why should the mere existence of servers in the U.K. entitle the country to tax some substantial amount of Google's income?

This is wrong.

UK customers buy ads to be shown in the UK to UK viewers, from UK staff at Google's UK offices. They pay in UK pound sterling, from UK bank accounts. So far everything is in the UK. It is only at the very end of the process that someone in Google's Ireland office pushes a button to close the sale, thus taking the sale out of the UK (and our tax system) and into Ireland and their tax system.

This is a transparent dodge to avoid paying tax. It might be legal, but it's sleazy.

> but not any specifics about exactly what those loopholes are.

You don't know what you're talking about, which is fine, but why go to all that effort to create scenarios that aren't happening rather than just asking what is happening?

rayiner4• 13 years ago

> K customers buy ads to be shown in the UK to UK viewers, from UK staff at Google's UK offices. They pay in UK pound sterling, from UK bank accounts. So far everything is in the UK. It is only at the very end of the process that someone in Google's Ireland office pushes a button to close the sale, thus taking the sale out of the UK (and our tax system) and into Ireland and their tax system.

Except, arguably, the most important thing: the search algorithm and database that brings those UK customers to view those ads in the first place.

In any case, my point isn't that what Google is doing is the right answer. My point is that its quite debatable even from our armchairs how much tax revenue the UK is entitled to from Google's activities in the country. Google is just taking advantage of that complexity.

Google Boss: We Follow The Law On Tax

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