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IRS Auditing Google
theodp writes "Bloomberg reports that the IRS is auditing how Google shifted profits offshore to avoid taxes. According to Bloomberg, Google cuts its tax bill by about $1 billion a year using a technique that allocates profits to a unit managed out of a law firm in Bermuda, where there is no corporate income tax. In 2009, the most recent year for which records are available, this subsidiary collected 4.34 billion euros (about $6.1 billion) in royalties from a Google unit in the Netherlands. A spokesman for Google, whose stated mission is 'to organize the world's information and make it universally accessible and useful,' called the IRS probe 'a routine inquiry' and declined to comment further."
Hmm, this is well known for a long time, and only NOW the IRS is getting around to auditing them?
I think Google just pissed off the wrong politician somehow.
Methinks their goody two shoes nature finally rubbed some corporation the wrong way.
I assume the reason they don't close these tax loopholes is because they're the same loopholes used by senators, congressmen, etc.
No sig today...
I'm waiting to find out that I paid more than Google in taxes.
If only I could pull something so crazy off with my own income, shipping it to two different countries to avoid paying taxes.
Why are they picking on Google instead of someplace like, for instance, Koch Industries? Or News Corp? Or any of the other big companies pulling the infamous Double Dutch accounting tricks?
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
Google's probably got nothing to worry about. They've been doing this for a while. So has Microsoft. And Facebook. And probably most other large companies. Most of this falls under something called transfer pricing. Which is a global problem that you will find anywhere from China to Britain to Argentina.
... oh, right, I'm poor. We pay taxes. Corporations and people rich enough to afford shifty accountants don't. And, really, what motivation do my representatives have to change this situation? Their soft money doesn't come from me and my fellow citizens are too stupid, too easily misled and too illiterate to vote someone who would change this into office.
It's not quite right for this article to make it sound like a solely Google problem. It's far far larger than that. In the end, Google's got enough of the highest paid lawyers and accountants that this audit should turn up just about nothing.
Hmmm, maybe I'll just transfer all my profits to Bermuda
My work here is dung.
This, unfortunately, is a very common way for corporations to avoid taxes. The rules to decide which country "earned" a particular chunk of income are inherently complicated (with little way to simplify them), as there are plenty of legitimate reasons for part of a company to owe a foreign subsidiary money. It's a constant cat-and-mouse game between corporations and the IRS chasing this money around.
It's a complicated problem with no good answers. (Though you would never know it to listen to people on either end of the political spectrum... on one end you have people saying we should "eliminate loopholes", betraying their ignorance of why the problem exists to begin with. On the other end you have people that argue that corporations should pay no income tax since they spend so much effort complying (or fighting) with tax laws, but offer no way to make up that lost revenue, or volunteer cuts.)
I'm waiting to find out that I paid more than Google in taxes.
It's not just Google, here's a place to start. The problem is larger than that as some of the largest companies (Boeing, Ebay, GE) spend more money lobbying politicians than paying taxes.
My work here is dung.
Tax evasion is not theft. Tax evasion is tax evasion. It's already illegal and it's pointlessly stupid to try to shoehorn one crime into a different crime's definition.
We take the RIAA and MPAA to task for this shit every time they do it, so let's not make ourselves into hypocrites by doing the same thing, okay?
Google is a publicly traded company. They have to be audited every quarter simply for that reason. Every publicly traded company has to be independently audited every quarter. I doubt IRS will find anything Google can't.
Any guest worker system is indistinguishable from indentured servitude.
The last time the US Congress did that, companies just re-purchased their own stock with the money they brought in. In other words, the only people who benefited from that stimulus were the top executives. The rest of us saw a 3 Dollar uptick in the stock price, and thought ourselves lucky we could get a dinner at a nice place through selling the stock.
Those who can, do. Those who can't, sue.
Microsoft was doing spectacular tax transfers for a decade through Ireland. Now that other places have joined the race to the bottom in terms of throwing tax loopholes at big companies, Microsoft has "diversified".
Hint: Remember how Ballmer was saying that the Skype purchase wouldn't impact Microsoft because the funds were being repatriated from elsewhere? How do you think those billions in "loose change" got there in the first place? You "park" them elsewhere until you can bring them back onshore at the absolute lowest impact to your operation.
The offshoring of profits needs to end. Google is doing it because it saves on their tax bill. Microsoft does it too, and most banks. I remember seeing a program on TV that interviewed a man who cut the lawn of banks in the Grand Cayman Islands. There were over 350 (different corporate) banks on the island, but it was difficult for the locals to find banking services because there was only a local credit union serving the island. Zero corporate taxes means profits aren't taxed. I remember hearing about how Microsoft offshored money to Ireland and paid several hundred million less in taxes (or even shifting its (official for tax purposes) headquarters to Nevada to avoid paying tax in Washington State. Its a big loophole that could fund school for 50 million American kids, but the Republicans and Tea Party folk are good with 5 people who have a 3-5 billion in the bank, getting a new superyacht *and* redo all of the properties in the Hamptons *every year* instead of every 2 years.
Yes, tax evasion is illegal. Tax avoidance is not. Which one this falls under is yet to be seen.
But then this may be tax avoidance, which would be perfectly legal.
If that's the case then the only thing Google could be accused of is hypocrisy.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
If you believe that every system has flaws, then you might be able to see when it may fail. For example, the income tax system has always been ham handed. Those who understood it well enough could always slip between the regulations to avoid some or all of it. In the early days, about 90 years ago, most people ignored them. In the 1940s, they passed payroll withholding and started collecting from those who were employed by others.
When most of the revenues were coming from a large "middle class" the system worked because it was easier to pay the government than to pay a tax attorney to find the cracks. People who were really rich could still afford to pay tax attorneys to minimize or limit their taxes, but it was a relatively small percentage of federal income tax revenues.
But as wealth began to concentrate, an industry of bright financial and legal professionals flourished, allowing more income to be shielded from the IRS. The rich, who got richer, weighed the cost of the tax verses the cost of testing the tax avoidance in tax court and decided the best return was "playing in the gray." The IRS has no choice but to go to tax court when someone challenges them. They do not have enough people to fight every rich person or company. Often, the well-paid lawyers of the taxpayers are better versed on the law than the civil servant IRS lawyers. As the rich get richer, they influence tax laws to gain a greater advantage. Eventually you have a society of people who are either too poor to pay much tax or a few too rich to need to pay tax. That is when the tax system fails. Frankly, no tax system can succeed when the money is too closely held by a few.
The irony is that we tax productivity. Imagine a company going to its most productive people and cutting their pay as they worked harder and better. There is a better way to collect federal revenue -- http://www.forbes.com/sites/kellyphillipserb/2011/09/02/guest-post-income-tax-alternative/ .
This whole argument that "corporations are evil" and "corporations should pay their fair share" is based on the bizarre human tendency to anthropomorphize corporations (and groups of people in general). Saying corporations should pay their fair share of taxes is really no different from saying my wallet should pay it's fair share of taxes based on the money it has in it.
Corporations shouldn't be taxed, period. Money that comes OUT of that corporation through stock dividends and wages and bonuses and perks should be taxed. And that should all be taxed as plain old income, not special kinds of income like "capital gains" that has lower rates to compensate for corporate taxes already taken out.
I'm also highly in favor of targeted VATs. For example, the FDA should be entirely funded on a VAT levied on food and drugs. And if people want their food to be safer, then they have to agree to raise the food VAT to pay for it. And if people want to lower taxes by reducing the food VAT, then they have to deal with less safe food. And the FDA would be legally required to have a balanced budget (i.e. they would only get to spend whatever money they got through food and drug VATs). Same goes for all other government spending. For example, the military should be paid for with an X% 'military' income tax, and ONLY the revenue from that tax. If people want to increase military spending, then the only way to do so is to increase the military income tax. I strongly believe that taxes and spending were tightly coupled like this, most people wouldn't have a problem with taxes, and that it could be a path to balanced budgets in this country. But today, nobody wants to pay taxes because it all goes into a huge slush fund with no apparent accountability on how those funds are spent. Why would any sane person want to spend more on taxes in the current system?