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Tax Accounting Evil at Google?
theodp writes "In its annual report, Google said it's done no tax-accounting evil, but the search giant acknowledged that both the IRS and SEC are taking a look at the way in which it accounts for income tax. Google is one of a number of U.S. companies that have come under fire for allegedly practicing 'profit laundering', i.e., moving book profits offshore to evade millions and even billions in taxes to the country where it really operates. In past SEC filings, Google has credited its Irish subsidiary for reducing its effective tax rate."
If Google had not done this then they would be pretty much the single exception from all other multinational companies.
;)
Here in Denmark we have this huge shipping company Mærsk or A.P. Møller as it also known.
They have lots of other activities also, the company has always been somehow very attached to Denmark and many Danes are proud that Mærsk is a Danish company.
The thing is that the government here in Denmark have been proposing to change how the taxing system works for companies. The general idea is to lower the tax rate but to remove many of the things that companies can withdraw from their incomes when taxes are to be calculated, in part to prevent what Google is being accused of doing here, namely putting all their income in countries where they have lot's of losses and expenses also.
Mærsk have been threatening the Danish government that if these tax changes are done as proposed then they may be forced to move many of their activities to other countries. I see no evil in this, companies have to look at the bottom line and for most businesses generating income for their shareholders or who ever gets the money in the end.
I would not consider Google to be evil if they did something similar to this, they would just be acting like pretty much any other multinational company does these days.
I feel pretty sure the Irish doesn't see Googles way of doing their accounting as evil
If something has to be done about this, it can't be done at the national level, I guess that is also what some of these movements like Attack (spelled?) and other have been talking about. I doubt there is ever going to be any real changes in this any time soon, there are far to big interests at stake for countries and big companies.
Why exactly do you define avoiding taxes as "evil"?
Unlawful, certainly. But evil?
Support the FairTax, bring corporate headquarters back to the US and end this ridiculous waste of everyone's time.
The government isnt evil for collecting taxes as above posters are claiming.
Google isnt evil for using a perfectly legal accounting system that works within the bounds of the law to pay as little taxes as they can.
Everyone takes as many deductions as they are legally allowed on their tax returns. Would we think that people claiming an exemption for having a kid are 'evil'? Really not much difference.
Currently the US foreign policy is driven by warmongering and profiteering. The US military has been outsourced to corporate mercenaries and little regard is given to the well-being of the actual force.
We're about to start a navel and air war with Iran, we're ignoring Darfur, we're disregarding our own people in their time of need (Katrina) and we're supporting countries on questionable moral ground.
If anything qualifies as evil, all that does. So if Google is avoiding paying taxes to a government which executes such evil behavior I'd say they're living up to their mantra.
You are checking your backups, aren't you?
That's part of their schtick. They aren't like other corporations, or so they say.
Turns out when money is on the line, oh yes they are just like other corporations.
So if they're like everybody else, why do they deserve geek community support?
Google's employees and founders have been unflinchingly supportive of Democrat candidates and policies. Those candidates and policies generally favor higher tax rates and oppose tax cuts "for the rich", and favor greater government spending on social programs. But now they're going out of their way to launder their money to avoid those same taxes. Is it evil? No. Taxes are evil. Is it hypocritical? Yep. You get to say all the right things to your pinko NoCal, silicon valley buddies, while avoiding the punitive policies you want to impose of everybody else and pocketing some extra cash for yourself. Lovely.
Maybe if Google didn't have to pay 40% of its profits in taxes, they wouldn't have to spend millions on accountants to move money. We have all seen the fantastic things that Google has done with the money they have, just think of what they could have done (4D Google earth, Google desktop that doesn't take up 1GB, chocolate pudding that tastes as good as Bill Cosby thought it should taste... who knows?) if the government didn't rape them for being successful.
If anything, we should be proud that Google doesn't put money into the vast wasteland of government spending.
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- Seconds per year ~ Pi * 10^7
This is a double logical fallacy, and a red herring. First, you are presuming that the government isn't already trying to get the maximum amount of taxes from us anyhow. Second, you are presuming that the government would actually spend that money to our benefit. Finally, "cash rich", is a red herring. The government never has taxed net-worth and never will, they tax income. That means that the business man who busts his ass to create 20 jobs and earn a million bucks will get his balls ripped off while the person sitting on a 10 billion dollar stockpile of cash will never notice at all no matter how high the tax rate is. People whose battle cry is "tax the rich" are stupid, and are killing opportunities for themselves more than anyone else.
As told to me by my ex-IRS tax accountant:
TAX AVOIDANCE is a patriotic thing to do. It does no good to give the government money in excess of what it needs to do its job, and what it has been lawfully authorized to collect.
TAX EVASION is illegal. That's what they got Al Capone on when then couldn't nail him for any other crimes.
I'm open to correction, but my guess is that the bulk of Google's people, physical facilities, and customer base is located in the U.S. That means Google enjoys a considerable set of benefits provided by local, state, and federal governments. Police protect it from being robbed; firefighters protect it from burning down; various agencies pave roads, provide power, etc., etc. Those governments also provide an educated workforce and help secure a style of living that tempts folks to come and stay in the areas surrounding Google. Those are likely among the reasons why Google *isn't* HQ'd in the Bahamas as you suggest.
If the bulk of their work is being done here, they should pay for those benefits. The linked Merck article provides an egregious example: all activities done in the U.S., but parent transfered IP as a sham to a foreign subsidiary, to whom the parent paid massive "royalties," zeroing its taxable revenue. That doesn't sound quite as bad as what Google's doing (their Irish sub actually has employees), but it sounds as though the SEC feels that Google isn't paying in proportion to the work that gets done here.
Innie or outie? -- phunctor
Now that Ireland has joined the Axis of Evil they can soon expect to be liberated by the US. Yumm, Taco Bell here I come.
Shin: a device for finding furniture in the dark.
I know a few tax lawyers. The tax laws of the U.S. have grown so complex over the decades that it has become literally impossible for one person to know them all. Tax law firms have lawyers dedicated to specific portions of the tax code.
When you have a set of rules as ridiculously long as the U.S. tax codes, it basically makes it impossible to comply 100%, because no matter what you do, there will be a segment SOMEWHERE in that massive wall of text that you unintentionally violate.
The novelty about the deeply complicated tax laws is that loopholes abound - it may be the specific reason the government maintains its complexity.
Google trying to minimize its tax burden is just good business. That they seem to have done it in a way that is suspect doesn't mean they intentionally broke a law, it probably means they did it so well that the IRS isn't sure it's legal or not.
But again, with tax codes as complex as ours, it will probably fall into the realm of ambiguity so that it can either be legal OR illegal, which is yet another governmental advantage of highly complicated tax laws.
"Study your math, kids. Key to the universe." -The Archangel Gabriel
Forgoing the income tax for a sales tax is a pretty bad idea.
First, the income tax is progressive. This would be impossible to achieve with sales tax. The only people that would benefit from a "flat" tax (sales or income) are those at the highest tax brackets. In order to replace the income lost from dropping taxes on the top 5%, taxes would have to be raised on the bottom 50%.
Second, a sales tax puts a disproportionate burden on the lowest income families. Those with low incomes--even up to $50k/yr for a single man--spend a very large proportion of their income. The lower your income, the higher percentage of it is spent. People making minimum wage are spending 100% of their pay checks.
Those making $1MM a year, on the other hand, may spend only a small fraction of their income.
And you can say that you would simply not charge sales tax on the things that poor people are spending their money on -- food, shelter and utilities -- but doing so would drastically reduce tax receipts. It would be impossible to exempt those things and the suggestion that it is possible is just used by proponents to try to sell their plan.
Furthermore, this is about Google. Corporations pay a pitifully small percentage of taxes in America. The percentage of taxes paid by corporations has dropped dramatically since the 1950's. Your notion that double taxation is a serious problem is just plain wrong. The tax code currently incentivizes businesses to invest in capital expenditures, R&D, etc.
In summary, the only people that want a sales tax are those that don't understand it's implications and those that could pay less taxes by shifting the tax burden more on the lower & middle classes.
The notion that there is tax injustice because the top minority of Americans pays the majority of taxes is absurd. The people at the top of the food chain reap the highest rewards of our society. Without our national infrastructure, they wouldn't be able to make and horde millions or billions of dollars. They SHOULD pay a tax burden that more closely resembles their share of the US pie, not necessarily their share of the US Population.
I, for one, welcome our new tax-avoiding overlords....
or not.
When driving to the "Googleplex", Google's employees drive on public roads. They drive on roads made safer by law enforcement. They're defended by a brave group of Americans that volunteered to give their lives when necessary. If they have an employee that's been in a car accident, many time a city/county EMS unit will take them to the tax-funded public hospital. If there's a fire at the Googleplex, the local fire department will respond.
When Google is ready to handle the cost of maintaining the public resources it wants/needs/uses, then allow it to dodge taxes. Until then, my opinion is that Google should hold buying their execs new platinum-stitched whaleskin hubcap covers at a lower priority than paying the cops, firemen, soldiers, and other tax-funded folks upon whom they rely.
Don't tell me to get a life. I'm a gamer; I have LOTS of lives!
Does anyone think that perhaps corporations shouldn't pay taxes at all? In thinking about basic economic realities, I've been leaning in this direction. It sounds like a bit of a radical idea on the surface, but it's always seemed to me that taxing a corporation is really just an indirect tax on anyone who uses that corporations's services or products. In other words, they'll just raise prices to the point that they're making a profit, and thus simply pass along any increased tax burden to the consumer.
It's the same sort of hidden tax as the idea of having employers pay for half of your social security benefits. Where do you think the extra revenue comes to do this? Higher prices on products and lower wages. The government loves to obscure the true source of taxes, especially when they can make it appear that someone else is really paying for them. These are two good examples.
Am I missing something in my logic here? I haven't really heard anyone else talking about this (although I haven't looked all that hard). My suspicion is that this would never fly, if only for the huge political target you'd make yourself for even bringing this up.
Irony: Agile development has too much intertia to be abandoned now.
Does it cancel out?
I want to delete my account but Slashdot doesn't allow it.