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Outrage At Microsoft Offshoring Tax In the UK, Google Caught Avoiding US Taxes
Master Of Ninja writes "After the ongoing row about companies not paying a fair share of tax in the United Kingdom, and with companies such as Starbucks, Amazon and Google being in the headlines, focus has now turned to Microsoft. Whilst the tax arrangements are strictly legal, there has been outrage on how companies are avoiding paying their fair share of tax generated in the country."
And over here in the U.S., dstates sent in news of Google getting caught doing something similar: "Bloomberg reports that Google is using Bermuda shell companies to avoid paying billions of dollars in taxes worldwide. By routing payments and recording profits in zero-tax havens, multinational companies have been avoiding double digit corporate taxes in the U.S. and Europe. Congressional hearings were held in July on the destructive consequences of off-shoring profits. Why aren't the U.S. and Europe exerting more diplomatic pressure on these tax havens that are effectively stealing from the U.S. and European treasuries by allowing profits that did not result from activities in Bermuda or the Cayman Islands to be recorded as occurring there?"
"Why aren't the US and Europe exerting more diplomatic pressure on these tax havens...?"
Because where else would US politicians offshore their income? http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accounts
Sent from my ENIAC
No, actually I'm not. Not in the least. It's the way of things now, even when your motto is "Do no evil" or "What evil would you like to get into today?" Wall Street expects certain targets to be hit and the way to do that is cut corners and use loopholes.
A feeling of having made the same mistake before: Deja Foobar
If only this could apply to regular people - Hey some people are shoplifting the food from the market, let's just lower the price to a point where it's not worth bother... But I guess this only applies to the well-to-do..
Maybe the corporate taxes should be set at a more favorable rate. 20% of something is still more than 35% of nothing. (or whatever the current tax rate is.). Additionally we could simplify the tax code so these companies don't need to spend millions on their accounting and tax lawyers. Unfortunately we'd probably have to shoot all of the politicians first as this is where many of them came from, and are paid in campaign contributions to do.
a place like bermuda isn't a valid country that you compete with on tax rates. bermuda's tax laws are designed to parasitically leach off the fruits of another country's labors
the idea that you think this is about fair competition is a joke, a lie, or a delusion
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
I know this is crazy, but maybe the problem is the taxes. It doesn't make any sense at all tax corporate profits when you could just as easily tax the income shareholders make from the profits, or capital gains in the event a corporation doesn't post dividends.
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
Here's a thought; if you want companies to pay more taxes then make taxes reasonably low enough that companies find it more bothersome to play legal shell games than simply pay a tax.
Well... opening a shell company in a tax heaven and paying 3-4 accounting critters to take care of recording profits in zero-tax places is going to cost the company probably... say... half a million/year? Are you sure you want corporate taxes lowered that much in US/UK?
Questions raise, answers kill. Raise questions to stay alive.
The reason these loopholes work is that multinational corporations can allocated their costs to high-tax countries and profits to low-tax countries. For example, a US operation "licenses" some software from a subsidiary in Cayman Islands or pays for "consulting services" that end up eating up all of the profits. Through these tricks a US corporation ends up with near-zero taxable income, while all the profits are transferred to tax havens.
The solution is to tax ALL profits, regardless of which country they were supposedly "earned" in. That way, transferring profits to Bermuda or Luxembourg will have no effect.
___
If you think big enough, you'll never have to do it.
That's the argument we use for file "sharing", so let's not turn it on its head for tax. You want to earn it, make the argument for it.
There is no inherent merit to paying taxes. They are a necessary evil to fund useful public works, and should be kept to an absolute minimum. When States becomes bloated, inward looking, ever swelling monsters that squeeze the pips until they squeak, tax avoision becomes an act of moral rebellion.
Brits in particular tithe up to 75% of our "income" to the State, when you factor in income tax, national insurance, council tax, water and sewerage rates, VAT, insurance tax, parking fees, and fuel and customs duty on everything imported or moved around. And that "income" is what employers can afford to pay us after they pay all of their protection money to the biggest racket in town.
So good on Microsoft and Google and Amazon and all the other companies who are throwing two fingers up at the grasping State. Let it wither and die, as long as it rots from the head down.
If you were blocking sigs, you wouldn't have to read this.
Try that suggestion when the whiners actually CAN.
As much as you hate to admit it the elite DO have special privileges not available to the unwashed masses.
Someone's gotta pay for global military to be sure air bandits, pirates, and dubious govts don't steal corporate commerce as it moves around the world. And these companies have plenty of cash to pay taxes. Though not sure how deal with dubious governments....
mfwright@batnet.com
They may be evading sums as large as $99!!!
Because where else would US politicians offshore their income? http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accounts
I'm NO friend of Mitt Romney - to put it mildly. But let's not blame him for something that's not his doing.
1) Because Romney was running for president, US law REQUIRES he put his money in a blind trust.
2) Also under US law the trustee has a "fiduciary duty" to do his reasonable best to protect and grow Romney's money for him. That includes seeing to it that is not taxed substantially more than the law requires. If he can save, say, 40% of the trust's earnings from being taxed away by using a LEGAL tax haven in Bermuda, and trustees of such trusts are expected to know that, he is REQUIRED BY LAW to do so.
So let's not have cheap shots against politicians and financial managers who are only doing what the law REQUIRES them to do.
There are plenty of things politicians have done that we can LEGITIMATELY go after them about - which have zapped us to the tune of trillions of dollars - at $3,175.40 from EACH citizen for EACH trillion. Let's not the dilute the discussion, and give them something to use to discredit their critics, by flaming them over drops in the bucket that AREN'T THEIR FAULT.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
This is a very, very bogus report. "Outrage"? Come on! Is it legal? Yes. Is there some kind of "moral requirement" that we all maximize the taxes we have to pay or suffer "outrage"? Don't we all look for all the deductions we can legally get away with? WTF is all the bogus "outrage" at perfectly normal, legal behavior?
That's bullshit. Bermuda's tax laws have nothing to do with it. It is American tax law that makes the leeching so profitable.
“He’s not deformed, he’s just drunk!”
Trouble is, governments can be sociopathic bureaucracies just the same.
Circumcision is child abuse.
This isn't a problem with the companies in question - it's a problem with the game. As soon as a company has a presence in more than one country, the company needs to start making decisions about taxation. It's not an option not to make these decisions - one way or another, they have to be made. There is no option for them to simply "not play the game". They must.
And once they start playing, they find themselves in a crazy maze of exceptions, loopholes, provisos and special cases. If you want to cut down tax avoidance (not evasion) then you need to simplify the taxation system to the point where these loopholes don't exist. Of course, that'll never happen, because politicians for the last century have been busily creating loopholes in order to favour their particular patrons, and closing those loopholes would result in screams from said patrons.
The problem the politicians see isn't that these loopholes exist, it's that companies are using them who haven't paid politicians for the privilege.
Just because you're paranoid doesn't mean there isn't an invisible demon about to eat your face
If you don't want companies to use loopholes in the tax code to legally avoid taxes, don't put loopholes in the tax code. Let's all remember that those loopholes and deductions were all heartily lobbied and bargained for. If you didn't want them passed, why didn't you send funds to your representative in order to vote against them?
So, these companies employ competent accountants, tax attorneys and financial managers to preserve their shareholders' earnings. That's exactly what they're supposed to do.: It's called meeting their fiduciary duty.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
All of this crap is legal, that's why they call it tax 'avoidance'. It's not right, or fair, but it is legal.
Did a little checking: Actually a presidential candidate is not REQUIRED to put their money in a blind trust.
In principle Romney could have kept control and ordered his accountants to not use a tax haven.
The downside is that he'd be nuts to do so. In addition to the loss of money from such deliberate mismanagement, he'd be leaving himself open to legitimate attacks on any OTHER decision he made about the money, along withaccusations of conflict-of-interest when he makes political decisions. (Avoiding both conflicts of interest and the appearance of them is the whole point of blind trusts.)
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
Didn't you hear? Keeping your own money is stealing now.
"I assumed blithely that there were no elves out there in the darkness"
Lets at least get the metaphors slightly more accurate.
Store A is charging $20 for a loaf of bread, but provides an awesome atmosphere, chairs, clean eating space, nice employees, free coffee, and massages while you eat your loaf of bread. Store B sells the same bread for $5, but you can't eat your bread there. So you buy your bread from Store B, and then expect Store A to let you stay in Store A to eat your bread.
Companies pay taxes to pay for the externalities that they take advantage of while doing business in a country.
http://www.donarmstrong.com
Whilst the tax arrangements are strictly legal, there has been outrage on how companies are avoiding paying their fair share of tax generated in the country.
So, if the country's tax laws do not require these companies to pay their "fair share", then how exactly does one define their "fair share"??? Exactly how much more should they pay than what they are legally obligated to??? How large of an over payment would satisfy these critics???
...more and more implicit or explicit class warfare crap in the news. I suspect it's not coincidence.
"...Whilst the tax arrangements are strictly legal..." - THAT is where blame for these corporations ends, period. Do you deliberately pay more for milk than you need to? Do you volunteer some extra taxes because the government is in a bind? Of course not. These corporations do what they do to save money however they can - and as long as they stay within the bounds of the rule/laws, disparaging them is pointing in ENTIRELY the wrong direction.
Look instead at the incompetent government that WROTE THE RULES, morons.
Hey, I "get it". I'd cheerfully decimate the companies that bundled their crap investments, the 'rating' agencies that rated them AAA, and the bond traders that cheerfully swallowed instead of spitting. Then I remember: they were all largely conducting LEGAL business according to the rules and laws set forth by ... our incompetent government.
THEY would have suffered the natural result of their actions in the market, but then they were PROTECTED from their results (gotta make sure they get their bonuses, ya?) from...our incompetent government.
Want to know why I'm a libertarian conservative? Because in 45 years I've become convinced that while often it is well-meaning, almost all government is incompetent, and therefore the least possible government is best. Which is better, semi-anarchy where one is free to build ones own future as best one can, or some sort of perpetual serfdom to the landed classes that see us only as rubes to exploit, cows to milk, or votes to pander to?
-Styopa
Owners can live anywhere in the world. Corporations should pay taxes where the profit is generated to help pay for the external costs that made those profits possible.
It's funny you mention that, because in a competitive capitalist market price approaches cost. Therefore, people get that lowest price for their labor and do not need to steal as much. In non-capitalist systems, where prices are elevated, people DO have to use unethical means to get food ( for example, in Soviet Russia, hoarding, sneaking, stealing food etc etc)
Incorrect. This is only true in free markets. In markets where cartels and price fixing are allowed, and information about pricing can be hidden, then prices can be artificially held well above cost.
:-) That makes no sense, but given the nature of your reply, I doubt that's your objective. If Google wants to keep their American corporate charter, they should pay American taxes on their income, regardless of its origin. Otherwise let them incorporate in Bermuda, then they can pay American tariffs.
I'm gonna give you every inch of my love...
“He’s not deformed, he’s just drunk!”
And frankly, every single one of us does it when we can get away with it, as well.
"First they came for the slanderers and i said nothing."
They do pay taxes on their income. Unfortunately, their reported profits are much lower than their actual profits (courtesy of tax loopholes like the Double Irish strategy). Their are tons of articles on the internet that explains how this works. e.g., http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html
Are agnostics skeptical of unicorns too?
No, it's not. And their tax laws have everything to do with it. Their tax laws are setup such that only local companies pay taxes. Companies like Google pay nothing. Any other brilliant arguments, dipshit?
And this is somehow their fault? If positive, can you explain why a country shouldn't be able to do whatever their citizens please within their own borders?
Questions raise, answers kill. Raise questions to stay alive.
because you are seeking to attack the very people that have the legal and financial resources to simply shift money elsewhere where governments are less greedy themselves.
Thing is, all this "money shifting" is just legal trickery, and it's not hard to stop it.
Now shifting production is something that requires considerable legal and financial resources. And, of course, for some reason, all those companies are not clamoring to have their main offices, R&D campuses and manufacturing facilities in Bermuda or Ireland. Only the accounts. So it sounds like it's not so simple to shift, after all. And if they want to enjoy the economy that lets them be so productive, why shouldn't they be paying their fair share of taxes to maintain it?
Of course not. But deeply relying on other services that cost money to provide, while not providing a cent to pay for those services and expecting everyone else to pay for them isn't much better.
If, for example, Google didn't rely on the public education system, the transportation system, the military defense of the country's borders and other interests, communications infrastructure, the judicial system, and so on, then there would be no issue. Instead we basically have a corporate free-loader. And Google isn't unique. There are a lot of them. BIG ones. World-wide. Yeah, it's their money, and why should the government "steal" it from them? On the other hand, somebody is getting something for nothing via creative accounting that few regular taxpayers can arrange, and making much bigger *real* profits somewhere because of it. They aren't stealing, but they are corporate moochers, happily doing business in countries they can take advantage of for plenty of "free" stuff paid for by the rest of society.
Have you ever heard of some sort of investment bubble that went out of control recently ? Where do you think all that money comes from ? Its because some people accumulate so much that they never take it back as "income" that such bubble form. Some people are getting too much money, and that destabilize the economy in many different ways. More balanced income prevent the formation of bubbles because nobody has insane amount of cash to move around and demand 15% returns every year (in a 2-4% growing economy, including the housing market bubble, that's very sustainable, right). The giant money drain is taking real money from the real economy, and makes it an improductive lump that moves around stock exchanges worldwide, putting pressure on industry to demand unsustainable ROE, and inflating the next bubble that will destroy the economy when (not if) it collapses. That must stop.
I forgot to add: there is *nothing* illegal about what they are doing. It's perfectly legal. But that's the crux of the problem. What's legal isn't fair in this case, especially when everybody else has to pay higher taxes and/or endure "austerity measures" to make up the difference.
You can argue that the real solution is to lower the costs of government, to which I'd say: yeah, I'm all for making government more efficient. But even if you did that it wouldn't change the fact that regular taxpayers and small businesses are getting dinged for the costs of whatever size of government there is, and big companies are not, thanks to creative trans-border tax accounting that the regular people can't afford to do.
I mean, what exactly would happen, regardless of the size of government, if everybody were only taxed on their NET income for the year, and they could move as much of their revenue to another country as they wished to make sure they had no taxable net income? Answer: any size of government >0 would collapse in debt because of lack of revenue.
Calling taxes "stealing" might be a pithy turn of phrase, but taken to its logical extension, what these companies are doing would be a disaster if everybody could do it. I might not like taxes, but I have ZERO sympathy for what these companies are (legally) doing. It means even more money has to come out of *my* pocket in taxes. "Stealing" it may be, but if so why should I have my money "stolen" while they pay nothing? If they genuinely couldn't afford it, I could understand it. But accounting tricks don't count.
Hasn't this sort of thing been going on for quite a while with large companies? Heck, even smaller companies. It's always in the best interest of the business to keep as much of their profits as possible, and since it's only slightly trivial to buy a politician, loopholes will exist for the foreseeable future.
Yes, if someone's going to be outraged they should be outraged at the laws that allow it rather than the companies that do it.
Sheesh, evil *and* a jerk. -- Jade
The top 1% of tax payers earn what - 75% of total earnings in the US? They should be paying 75% of all income taxes. No, 20% is not plenty - even if that figure is accurate. The more you make, the more you pay.
Heh - I went googling for the actual percentage of total income taxes paid by the top 1%. I found a site with a wilder spin that I've read before - it claims they pay 38%, or almost double what you've stated. Which, only goes to prove that someone with an agenda can make any claim they like, and back it up somehow.
Bottom line - everyone pays xx% of their income, no matter how poor, or how rich, no matter how many influential people they bribe or sleep with. Set it at about 27 or 28%, and I'll see no change. Set it somewhere, anywhere - then ENFORCE IT FOR EVERYONE!
"Windows is like the faint smell of piss in a subway: it's there, and there's nothing you can do about it." - Charlie Br
Bottom line - everyone pays xx% of their income, no matter how poor, or how rich, no matter how many influential people they bribe or sleep with. Set it at about 27 or 28%, and I'll see no change. Set it somewhere, anywhere - then ENFORCE IT FOR EVERYONE!
Trouble is if you setup xx% high enough to be useful, you smash the lower end of the middle class and everyone earning less.
Flat income taxes are regressive. Losing 25% of your income is not a burden for someone pulling in a million a year, but it's crippling for someone pulling in $30k/yr.
It is available, actually. You could set up a trust fund in Bermuda or elsewhere. However it doesn't make much sense for most people to use it because most people want to spend their income on things useful for themselves. You don't typically live in one country, receive income in another and want to spend that income in a third country - why would you? You want to spend your income on nice food and houses and other things near where you live. But for a company it's a common scenario.
The real problem is *what* is taxed. Income is bogus. I don't see why, when I go to work, the money I earn is taxed at a higher rate than the income derived by a rich person's trust fund. No, "income" is a bad tax. What we need is a "net worth" tax. 2 or 3 percent should do it for everyone, including companies, because, companies are people too. They have 1st amendment rights according to SCOTUS, let them pay up as well.
Everyone calculate their net worth and pay 2-3% no exemptions.
Is it really the case that zero-tax havens like Bermuda and the Cayman Islands are 'stealing' from countries like the US or UK? They are providing an alternative to double-digit corporate taxes in other countries, but can they really be accused of stealing if they are charging 'zero' in taxes?
Was Microsoft 'stealing' from Netscape when MS bundled a browser with the OS for free?
Do food pantrys 'steal' from grocery stores by giving away what the grocery store sells?
Ken
We don't have a revenue problem in the US - we have a spending problem.
You've bought the conservative lies hook, line, and sinker.
The fact is, while this country is spending too much on its military (more than the next 13 military-spending countries combined), its main problem is, indeed, a revenue problem. The tax rates and the tax revenues as percent of GDP are lower than they have been at any time since the Great Depression.
So unless you are one of those who honestly believes that we'd be better off with, essentially, no federal government at all (in which case I disagree with you, but at least respect you for having beliefs consistent with your policy preferences), we need taxes to be a lot higher than they are if we want to continue to function as a first-world country.
Dan Aris
Fun. Free. Online. RPG. BattleMaster.
Flat is flat. Regressive is regressive. The meaning of regressive taxation is that the percentage of income paid as taxes goes down as income raises.
Consumption based taxes are usually regressive. I would be curious to know if the US has a regressive or progressive tax policy after summing all taxes and involuntary contributions. I bet it is regressive, primarily due to capital gains and the use of tax shelters.
You do know that sales taxes are ridiculously regressive, right?
If someone who makes $50k/yr spends $25k of that on taxable goods, that's 50% of his income. Do you really think that someone making $500 million/yr spends $250 million on taxable goods? I mean, it would be great if they did—that would be some damn good economic stimulus right there—but in reality, the richer you are, the smaller a percentage of your income you spend on taxable goods. Generally, the rich put large chunks of their income into various financial vehicles.
What all this means is that with a sales tax being the sole method of raising money for the government to operate, the poorer you are, the higher your effective tax rate will be. Sure, the rich will pay somewhat more in absolute terms than the poor, but vastly less than they would with a properly-operating income tax system.
Furthermore, because of this, total tax revenues would drop precipitously. Now, you may be one of those who believes that would be a good thing, but me, I like having roads, bridges, police & fire services, a social safety net, and all the other stuff that a properly-functioning first-world government provides.
Dan Aris
Fun. Free. Online. RPG. BattleMaster.
At any rate, the top 1% of taxpayers don't draw on 20% of the budget.
No, they don't. They draw on almost 100%. Who's running your telcoms and radio and TV stations? The 1%. We need the FCC to keep them in line. Who owns those big trucks that haul everything and cause most of the road damage? The 1%. Who leases public lands for oil exploration? The 1%. Who need the coast guard? The 1% almost exclusively. Who does the military protect? The 1%.
Who need the FBI? Not the bottom 1%! In fact, the FBI and DEA and BATF only benefit the 1% and the bottom 1% fear them.
The bottom 1% (probably the bottom 10%) use almost no government at all. They don't have any use whatever for the police, because if a poor man calls the cops he's usually the one to go to jail (and your local government gets federal grant money for cops and cop equipment). Social programs for the poor are very niggardly in the US compared to civilized nations.
When my grandfather was a young man, only the rich paid federal income taxes. How about we go back to doing it that way? Government benefits primarily the rich, the rich should be paying the lion's share of it (if not all, like in Grandpa's day).
We don't have a revenue problem in the US - we have a spending problem.
We have both a spending and revenue problem. I'd legalize, tax, and regulate drugs, disband the ATF and the DEA and the TSA and most of Homeland Security, but I'd keep FEMA (who benefits the most in a catastrophe, the guy with the ruined ten million dollar house filled with expensive items, or a renter whose most expensive posession is probably a used car? I'd cut the military in half or smaller. I'd cut most grants, and all grants to corporations. What would you cut?
But we can't cut our way out. As another poster already mentioned, federal taxes are lower than at any time since Truman. The rich are just being the greedy, selfish bastards one has to be in order to become or stay rich.
Free Martian Whores!