Schmidt On Why Tax Avoidance is Good, Robot Workers, and Google Fiber

Bruce66423 writes "Eric Schmidt said that a £2.5 billion tax avoidance 'is called capitalism' and seems totally unrepentant. He added, 'I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.' One must admit to being impressed by his honesty." Schmidt also says that if you want a job in the future you'll have to learn to "outrace the robots," and that Google Fiber is the most interesting project they have going.

Comments

Question

[Man On Pink Corner]

How many people reading this intentionally pay more tax than they are strictly required to?

Re:Question

[erroneus]

This is spot on. No one would.

Here's the problem: Those laws/rules/loopholes/allowances etc were created by the money influences which are benefiting from them.

So if tax policy were a naturally occurring thing, I would say "yes, let's take advantage of our knowledge and understanding of nature!" But it's not and these tax avoidance structures haven't always been there.

The government did not change the rules without cause. Find the cause and you will find the culprits.

Did Google help to create the rules? Not likely... the rules were in place, most likely, before Google rose to power.

The 'news' and subsequent inquiries seem to want to focus on the tax [non-]payers. Ostensibly to determine if they did anything 'illegal.' I'm willing to bet they have not done anything illegal. The real problem and where the focus should be is on the law.

Re:Question

[Anonymous Coward]

And how many people setup offshore bank accounts and front companies etc to avoid tax?

Re:Question

[MacTO]

If I had to venture a guess: most of us. Very few individuals have the money to find those legal loopholes or lobby governments for tax incentives. Even if we did, the return on investment would be in the red.

Re:Question

[DJRumpy]

I disagree. I think they are focusing on exactly that; abuse of the tax system. The current crop of GOP senators are very business friendly, and money plays a larger role in politics than in any time in the past. I can understand why Google takes this approach, but to appear unapologetic is just rubbing salt in the wounds.

Take individuals for instance. They get a very specific set of deductions, and are expected to take them. Because of the special interests and years of corruption in congress, we have businesses making billions in profit, and paying almost nothing in taxes. It may be legal, but it doesn't make it right. The system is geared to give every benefit to a business, and none to middle America.

What they are highlighting is not the fact that is illegal (it's not), but rather that it's unfair, which it is.

Re:Question

[dywolf]

Yes, but a rich asshole.
And you didn't answer the question.
You own a company. A company that is sposed to make you money.

Would you spend two point five BILLION pounds (so ~FIVE BILLION dollars) in taxes that you don't have to?

Yes or no.

If you answer yes, you're an idiot and will probably be replaced by your board of directors within an hour.

Re:Question

[MightyYar]

Why pick on the GOP? They are certainly not alone. The Democrat's current position is focused on "rates", which is clearly anti-reform. As long as the tax code is complex, it will favor those with the resources to exploit the complexity.

My personal opinion is that we should eliminate the corporate tax rate, removing the shenanigans altogether. Make up for this by making dividends and capital gains taxable as income.

Re:Question

[kenh]

Home Schooling & Private schools are, apparently, unheard of by you.

Very few hospitals are run by municipalities, most are run by either non-profits or charities, with a some being for-profit.

The public roads argument is interesting - do employers pay for roads so employees can get to work and so that they can ship and receive goods, or do employees pay for roads so they can get to work and buy the goods others have manufactured/raised/offer? The answer is both.

The original poster's point, which apparently escaped you, is that no one goes out of their way to OVERPAY their taxes, and someone who pays all their taxes as defined by the law (as Google does) is doing nothing wrong. It may not comport to a simplistic view that "they should pay more" but in reality, they are simply availing themselves of the incentives our lawmakers provided them.

Don't be angry with Google for following laws that allow them to pay less in taxes than you think they should, be angry at the lawmakers that craft the laws that allow them to do so.

Re:Question

[Anonymous Coward]

Ever thought the idea that the only responsibility a ceo should have is to the directors and shareholders is inherently fucked up?

Re:Question

[fuzzyfuzzyfungus]

How many people reading this intentionally pay more tax than they are strictly required to?

How many people reading this have any significant ability to adjust their 'nothing we did was other than legal' tax rate to be substantially different from their 'time to fill out the tax forms' tax rate?

That's the thing: complaints about corporate and HNW tax-dodging are not based on the premise that everybody should just voluntarily chip in an extra 10% for Uncle Sam; but on the (largely accurate) perception that there is a little-people tax code and a quite distinct, and very, very generous indeed, tax code for people who can afford the requisite caymans subsidiary, 'tax opinion letters', and suitably talented accountants.

It's like answering a complaint about criminal justice for poor schmucks with overworked public defenders vs. celebrities with fancy lawyers by asking "Well, did you go and voluntarily turn yourself in and plead guilty for all that jaywalking you've done?". That's orthogonal to the point: The complaint is not "some people aren't volunteering!" but "some people are forced, and some people would only be held to anything resembling what the rest are forced to if they were to volunteer."

Re:Question

[__aaltlg1547]

No, yes and no. There are influences other than big money at work too.

The mortgage interest deduction is a subsidy to banks and the home building industry. You may believe you benefit from it. I believe it simply makes you pay more for a house.

Re:Question

[penix1]

Don't be angry with Google for following laws that allow them to pay less in taxes than you think they should, be angry at the lawmakers that craft the laws that allow them to do so.

There is plenty of anger for them both and then some. Your argument is specious because those same corporations are buying those same politicians specifically to favor them with laws written by the corporation lobbyists. Of course the tax system favors them since they wrote the tax loopholes this dumb ass CEO is espousing as virtuous.

Re:Question

[prisoner-of-enigma]

Really? You're arguing that parting with $5 billion that you didn't have to give up in the first place is the more *ethical* path to be taken? It's not like Schmidt is pocketing all that money himself. It goes back into Google where we get things like Google Maps (free), Google Fiber (faster and cheaper broadband), and myriad other projects that wouldn't exist without Google funding. It goes to hire hundreds, perhaps thousands, of employees for Google. That in turn produces thousands, perhaps millions, of jobs globally for people who service and supply Google's infrastructure (hardware makers) and provide for the employees (cooks, janitors, dry cleaners, etc.). Other bits of it go back to Google sharesholders who use the capital gains to fund other startups (more jobs, more opportunities, better products and choices for all of us) or produce other goods and services jobs (rich folks buy stuff, after all, and somebody has to make the stuff).

In short, you can stop with the wealth envy line. I'd much rather Google have the $5 billion than the U.S. government. Google is much more likely to spend it doing useful, productive, innovative things than the government -- *any* government -- ever would. The ancillary effects of Google *not* having paid that $5 billion in taxes are far more beneficial to you, me, and everyone else if it stays in the private sector, not in some politician's pork barrel fund for inefficient, unwanted, or outmoded government programs oriented more towards buying votes and propping up cronies than ever "serving the public."

Re:Question

[fuzzybunny]

Is he breaking the law?

No.

“For Eric Schmidt to say that he is ‘proud’ of his company’s approach to paying tax is arrogant, out of touch and an insult to his customers here in the UK,” she said.

Maybe, but that's a subjective judgment. Tax law is not subjective. There is a very good reason for that.

Google should recognise its obligations to countries like the UK from which it derives such huge benefits, and pay proper corporation tax on the profits it makes from economic activity here. It should be ashamed, not proud, to do anything less. ”

It pays proper corporation tax. Proper corporation tax is what is legally required. If you don't like the amount of tax Google is paying, close the fucking tax loopholes that allow it to get away with less.

As a private citizen who does not have the financial means to do a double Irish, blind trust, or whatever-the-hell-else legal mechanisms I could use to legally optimize my taxes, does it gall me that Google is paying such low taxes? Of course it does. I find the whole system loathsome and unfair. Do I want to see the laws allowing them to do this changed? Absolutely.

Do I want to see them subjected to arbitrarily made up rules that are contrary to what the written law says? Fuck no. If someone does not understand why this would be a bad idea, it's not really worth arguing.

Re:Question

[Anonymous Brave Guy]

What they are highlighting is not the fact that is illegal (it's not), but rather that it's unfair, which it is.

All taxation is unfair. Taxation is, essentially, legalised theft. It is, arguably, a necessary evil for the effective functioning of society at least until we develop better ways to collaborate in our common interest, but at the end of the day you're still taking away someone's money whether they like it or not.

And so, when people talk about a tax system being "unfair", what they usually mean is that they are forced to pay more than they want to and they think someone else should be forced to pay more so they can pay less. And when politicians talk about a tax system being "fair", what they usually mean is that the wealth is redistributed in favour of those who might vote for them and away from those who never would.

Re:Question

[Liberty.45ACP]

How on earth do you think the government subsidies home schooling? We home school our son and pay property taxes that include subsidizing government schools. In the few areas that have some sort of voucher system, then those people may be getting some of their money back that was stolen (taxed) to support government schools.

Re:Question

[mcgrew]

The current crop of GOP senators are very business friendly

That's a euphamism for "worker-hostile". "Oh, no, don't raise taxes on the billionaires, make the roofer pound nails until he's 70. Oh, and cut down the amout of doctor visits he can go to as well, medicare costs too much."

The GOP is the party of unbridled greed.

Re:Question

[circletimessquare]

Look around you. Civilization. Not possible without taxes and a strong central government. Sorry fanboys.

Re:Question

[penix1]

Because corporations including Google had a big hand in lobbying to have the laws made so they can avoid paying as much taxes as possible while still demanding the government services those taxes go to pay for. Nothing like tilting the table then blaming the table when things fall off it.

Re:Question

[Rob the Bold]

Don't be angry with Google for following laws that allow them to pay less in taxes than you think they should, be angry at the lawmakers that craft the laws that allow them to do so.

And also don't be angry at someone who uses food stamps, medicaid, unemployment insurance, social security, medicare . . .

"Why is it that if you take advantage of a corporate tax break you're a smart businessman, but if you take advantage of something so you don't go hungry, you're a moocher?" -- Jon Stewart

Re:Question

[tehcyder]

All taxation is unfair. Taxation is, essentially, legalised theft.

No it isn't. It's a means of redistributing wealth, which is why rightwing Americans in particular hate it so much. Some people pay more tax, some less, but it all goes to paying for things that are for the benefit of society as a whole.

Re:Question

[medcalf]

Straw man. I don't know anyone who's angry at the recipients of such programs, but I know plenty of people (and I'm one of them) who would argue that we have structured our social welfare and safety net programs really badly, funded them worse, and if we don't reform them they will destroy our economy.

Re:Question

[circletimessquare]

monaco is a tiny parasitical entity. funded by the rich from other countries

maybe somalia is the example you were reaching for

Re:Question

[Mr. Mikey]

Taxation isn't theft.

Taxation is the honoring of a contract, the social contract you are implicitly a signatory to as a citizen of a civilized society.

You gain the benefit of roads you can drive on, tap water that is available and safe to drink, house fires that get put out, an educated populace (you know, all those citizens who don't happen to be your son), and so on.

You pay for those benefits via your taxes.

If you don't wish to enjoy those benefits, you are free to go somewhere like Somalia, where you won't be burdened with them... and neither will you enjoy all those benefits.

Good luck with that.

Re:Question

[Sloppy]

those same corporations are buying those same politicians specifically to favor them with laws written by the corporation lobbyists.

And yet it'll fall apart if we, on voting day, withdraw our support for those politicians. We never do, though.

We The People know how Democrats and Republicans get the text of the laws they enact, and every two years we re-affirm that yes, we want those people to keep on doing that.

There's nothing wrong with being angry, but you're getting angry with a machine that we've signed off on, which acts in a predictable fashion and hasn't malfunctioned. We knew what we would get, and we got it. Be angry at our hypocrisy instead, where we say we want fair government, but then vote against it, sometimes with mumbled excuses for why we reluctantly did it yet again.

I know what you're thinking: being angry at our hypocrisy will just lead to an acknowledgement of our responsibility, and nothing good ever comes of that. What we need is for a new veil of self-deception, since the old one is so tattered. Nobody believes our old excuses, or believes that we're stupid enough to believe them. It's time for a fresh start. Therefore, for the 2014 elections, I propose we each dedicate ourselves to one of two projects:

1. One team should come up with some new and credible reasons for why we should send Republicans and Democrats back to Congress again in 2014. Please, no right/left arguments; the claim that these parties politically ideological, is very old and tired and long-past exposed. Try a new approach to justifying these people, please.
2. The other team should come up with some credible pretenses for how we can all act SHOCKED, when the Democrats and Republicans "surprise" us by doing what they always do. What we want here, is for there to be a tragic narrative about how we all believed the stuff the first team comes up with, how it was an honest mistake anyone could have made, in spite of, in hindsight, being moronic beyond the imagination of the very best comedians.

We can do this if we try. There is no reason we, our our children, should ever have to face the realization that political power always rests in the hands of the governed.

He's right

[Cornwallis]

I can't fault anyone for taking advantage of legal loopholes.

If you want to blame someone go after the Sociopaths in Washington(TM) who created the U.S. tax code.

Please. Someone go after them.

Re:He's right

[girlintraining]

Please. Someone go after them.

Many have tried. They're all awaiting trial now or in jail. The main purpose of law enforcement is to maintain the status quo. You're not going to beat the system working within it or exposing yourself to it. That's been proven since the 60s in this country when, depite massive public opinion against it, the war in Vietnam continued. It's going to take more than words, banners, and a few picket lines to fix this problem -- our law makers do not listen even when they are surrounded by thousands of angry voters, because they know that voting and protest are both ineffectual. If you manage to get rid of one bad politician, another will take his/her place. The amount of effort required to overcome the bureaucratic inertia reinforcing and protecting these laws and legal mechanisms to extract money from the poor and give them to the rich is beyond the capability of even hundreds of thousands of organized citizens.

I cannot see this changing short of a major civil uprising.

Re:He's right

[ultranova]

I can't fault anyone for taking advantage of legal loopholes.

Why not? "I' won't be punished for it" is hardly good moral reasoning - indeed, it's literally infantile morality. And it actively harms society, not only by pushing tax burden on its weaker members but also by acting as an incentive to control all aspects of behaviour through laws.

Why on Earth should we not fault executives for refusing to grow up?

Do No Evil

[Anonymous Coward]

The more Schmidt speaks the less you can take the do no evil line seriously.

Re:Do No Evil

[K. S. Kyosuke]

Hmm. I'm not sure how much evil that is. After all, the money stays in the hands of a US company, or not? They're still going to spend it in the US economy.

Re:Do No Evil

[N1AK]

Not paying more tax than you are legally required to isn't evil; being honest about not minding doing it isn't evil. People need to stop throwing around hyperbole before we get to the point where it's "OMG Google are evil, someone died somewhere of something money could solve and Google didn't give them any!"

robot workers

[Iamthecheese]

Why would it be a good thing for us to work really hard so we can keep jobs by outpacing robot workers?

The goal should be 0% involuntary employment.

Re:Socialism may win after all

[runeghost]

Extrapolating from current trends, we're going to hit the hyper-wealth singularity only to find out that it's a feudal nightmare.

Re:Corporate Taxes == Political Favoritism

[Overzeetop]

3%-5%, but on gross receipts, not profits. The security, safety, and infrastructure the US Government provides is a cost of doing business, not a luxury which is consumed when profit occurs.

Re:The most interesting bit is about unemployment

[SuricouRaven]

That would be a very likely dystopia. Automation leading to mass unemployment, but without the foresight to shift society to a model able to operate under those conditions. The result being billions of people living in poverty because there is simply no work for them to do, while those who do control wealth have no incentive to share it freely. The only apparent solution is some sort of techno-socialism, but the S-word is considered obscene in US politics, so that isn't going to be easy.

Taxes are used for policy. US view

[Anonymous Coward]

*THEY* , the politician , have a lot to explain. not the company using it.

Yes, exactly. It's been quite a while since my US tax days so my examples are dated by a couple of decades and are US centric, but the point still holds.

Anyway, there are still plenty of tax breaks for drilling for oil. So, many that you can write off more than you invested in the drilling operation - that's right, the US taxpayer subsidies oil drilling. Why? Because Congress (expecially back in the 70's ) was scared shitless about not having domestic oil supplies. Mix in industry lobbying and BINGO! A sweet tax loophole.

Contrary to general opinion, big industry just can't walk into the legislature and say, "Give us a big honking tax loophole or else!" Politicians aren't that stupid.

But if they can give a big tax break to basically buy votes, then they'll do that too - see all the local tax breaks municipalities and states give to lure businesses locally. This allowed the politicians to say, "Look! I brought JOBS to the area! Re-elect me!"

The home owner deduction in the States is also a policy thing - get more people to own homes because it's believed that home ownership strengthens communities. It also makes workforces less mobile, but that's a different post.

Anyway, tax policy is the carrot when politicians don't or can't use a stick. Tax loopholes are also a way to get industry on board with restrictions on their business.

There's a whole lot more to this, obviously, but there's a point of view.

Re:Tax avoidance is abd for a simple reason

[danbert8]

Not really an apt analogy. Capitalism is about mutually beneficial voluntary transactions. Stealing does not fit into that category. Speaking of stealing, that's why avoiding taxes isn't applicable to shoplifting because it would be more akin to keeping a fake wallet in an easily accessible pocket with a few bucks in it for pick pockets where you keep most of your money in your shoe. You are preventing the thieves from taking all your money while giving them enough to think they got away with something.

Re:eric schmidt is text book hubris gross arroganc

[jrumney]

This isn't just about deductions and credits though. Its about moving your money to subsidiaries in countries where no actual business is taking place and cooking the books in such a way that you practically avoid paying any tax at all on billions of dollars in profit.

Yeah. But what's "reasonably" angry?"

[Chas]

Again. These companies are under no legal, moral or ethical constraint to assume the maximum tax burden possible.

They're under fiduciary constraints to maximize their shareholders' investments.

If you think that the current tax avoidance schemes are a Bad Thing, stop pissing and moaning at the companies who are simply doing what they're supposed to be doing and change the fucking laws.

Not that easy in reality

[sjbe]

As long as the tax code is complex, it will favor those with the resources to exploit the complexity.

The fundamental problem is not that the tax code is complex (though I agree that is a problem) but rather that it is really, really difficult to define income in such a way that it closes all potential loopholes. It's even more difficult to do so in a way that is politically possible, especially considering the influence corporate concerns have with elected officials. I understand what you are saying but I'm actually a certified accountant and I can tell you that eliminating loopholes in the tax code is MUCH more difficult to achieve than most people realize.

My personal opinion is that we should eliminate the corporate tax rate, removing the shenanigans altogether. Make up for this by making dividends and capital gains taxable as income.

Umm, then companies will stop paying dividends and companies can avoid paying taxes by avoiding realizing capital gains. Both are fairly easy to accomplish. You also haven't considered the effects of national and state boundaries. A lot of tax avoidance strategies are based upon exploiting differences in tax codes in different countries, states and/or municipalities.

Re:Not that easy in reality

[MightyYar]

it is really, really difficult to define income in such a way that it closes all potential loopholes

Agreed. I'm saying don't try. Only tax individuals. Sure, they can play games with getting things like company cars and not count them as income, but they already play such games and my proposal won't make this any better or worse.

Umm, then companies will stop paying dividends and companies can avoid paying taxes by avoiding realizing capital gains.

Companies paid dividends before the special dividend rate - stockholders will want to get paid, whether they pay more tax or not.

Companies would have no reason to fear capital gains, because they wouldn't be taxed on them.

Re:Yeah. But what's "reasonably" angry?"

[mjr167]

So if someone was standing on the street corner with a bag of money and they said "whosoever approaches while hopping on one foot gets $1000 cash", would you do it? Or would you say "someone else needs the money" and ignore him?

Should I not claim the mortgage interest deduction and the child tax credit? The original idea behind tax credits/deductions is for the government to encourage desirable behavior. You can't cry foul when you say "People who do X will get money!" and then people do X and take the money. If you don't want to give them money, stop providing the hoops to be jumped through. But then don't complain when they stop jumping.

Re:Yeah. But what's "reasonably" angry?"

[serviscope_minor]

This is not about corporations making full use of tax credits.

This is about corporations licensing "IP" e.g. the name "Google" from some company in the Bahamas for almost as much money as they make (before the licensing) in a country such as the UK. As a result they appear to make no UK profit (since they have to pay so much for the name "Google") and hence have to pay no tax.

Basically it's about moving all actual profit offshore before it's taxed.

It might be legal, but it is unethical and it looks like lawmakers are looking to fix that loophole.

And FYI, that is something it is possible to do as an individual. Most people don't and those that do are generally looked on as scum.

Re: Leave

[Anonymous Coward]

Shut up, lobby or leave. Really? In a free society, you insist we can't speak out ("whine" you call it)? No freedom of speech for us!

If there is a "contract" with the government that requires we pay taxes under threat of severe penalties, what is government required to do? Are they required to respect our hard earned money by being as frugal as possible and very careful how they spend it? Gee they don't do that. Are they required to avoid "vote buying"? Waste? Boondoggles? Bad programs? Earmarks? Spending that favors their "big supporters"? Nope to all that.

If this is a "contract" why is the government under no obligation to do anything?

You'd bleat that they maintain the "infrastructure". Have you actually looked around? Vote buying, boondoggles and favors to their "big supporters" take precedence over all that.

Your instructions are to shut up and pay up, it's "in the contract". Wow! The government likes your attitude.