Google Invests $1 Billion To Build New London HQ

redletterdave writes "Google just purchased a 2.4-acre plot in the King's Cross Central development in London, where the company plans to build a brand-new, 1 million square foot office. Google reportedly invested about £650 million ($1.04 billion) on the property, which, when finished, will be valued at more than £1 billion ($1.6 billion). While Google traditionally leases its overseas offices, the company's decision to buy rather than rent in this case was likely tax motivated, since Google can't repatriate its cash to the U.S. without paying a hefty tax."

Comments

Can someone explain how multinationals work?

[metrix007]

With companies like Google or Coke or Sony, is it one company....say Sony is a Japanese company, that incorporates businesses in many countries which are owned by the Japanese company, and just funnel the money back into the Japanese parent corp? What is to stop the independent company from doing its own thing or making different decisions?

Or in the case of Google, how do they have say over the UK iteration of the company? Are they all controlled by the same people? What are the relationships?

Re:Can someone explain how multinationals work?

[hcs_$reboot]

Rules are country related, besides taxes, UK makes sense for the Google-in-Europe strategists: English speaking, 3 hours from Paris, and as they say We’re one of Google’s largest engineering operations in Europe.

--
If you consider an idiot someone who ignores ACs for some reason, you're an idiot.

Re:Can someone explain how multinationals work?

[hughbar]

Great word bludgers! I think you may have meant bu**ers and I agree. Apart from how to tax them, we need to have a debate about whether we want these currently untaxable, intrusive, search-solely-for-profit [rather than search-for-general-utility in the economic sense] eavesdroppers in the middle of Kings Cross. Personally I preferred it as a red-light area.

Re:Can someone explain how multinationals work?

[JaredOfEuropa]

You'd have to address this issue in the rest of Europe as well, at the very least. Companies are being taxed on profit so they do anything to reduct that profit. As far as I know, companies can freely funnel money around in Europe (same for goods, services and labor) so they incorporate in a tax haven and send all the money there, reducing their UK profit to zero. Getting it across the pond is a little harder, but there are ways like labeling funds as "management fees" or fees for using the parent companys patents.
Most of the talk I've heard about doing something about this centered on convincing tax havens to raise their taxes, but as long as there is one around, doing so is pointless. And as a country, there are advantages to being a tax haven.

As a freelancer, I incorporated a few years ago and was surprised at how easy it is to reduce ones profit on paper, even for a small 1 man firm. And it's easy to set up a company nowadays, a few phone calls and a signature is all it takes; I'm considering setting up a company on Cyprus and sending my revenues there to enjoy an even lower tax rate. One of our royals was discovered doing the same thing, and after some public outcry, Internal Revenue hastened to proclaim that the whole thing was fully legit. So I do not feel bad about dodging taxes, not with IR approval and a royal endorsement.

Re:Can someone explain how multinationals work?

[91degrees]

I have the feeling that it's actually HMRC not enforcing the rules that actually exist, because they're letting the companies dictate what the interpretations are.

Re:Can someone explain how multinationals work?

[Znork]

As a general rule it's not 'one company', but many and varying forms of companies in many countries depending on the forms of incorporation that are available in each country. Most countries have variants that can be owned and controlled by outside entities, which is why the local ones don't go around doing their own thing.

This of course creates all sorts of ways to move money around to the place in which profits are best taken, as they can usually make internal sales for imaginary numbers to their subsidiaries which allows them to control exactly where the profit goes. For the specific corporate structure used by google and many others you can look up Double Irish on Wikipedia, which is a structure that allows any corporation to basically pay very close to no taxes at all.

Re:Can someone explain how multinationals work?

[iserlohn]

So what are the moral implication of funnelling money through a tax haven that has no real purpose other than to reduce tax load? It may be legal, but is it moral?

This is the reason that I have avoided doing the same. Obviously, if your main base of business is in your own country, the corporation tax should also go back to you country to fund public expenses in your country, as opposed to a country which has nothing to do you your business apart from having low tax rates.

There are some people that go even further than that. They roam around Europe with no fixed abode, claim non-domiciled status and can avoid the majority of dividend tax. There is more to being honest than staying within the boundaries of the law.

Re:Can someone explain how multinationals work?

[queazocotal]

The unfortunate fact is that tax laws are fucking complex, and contain loopholes smart people can find and exploit.

If you are a large corporation, do you:
A) Pay a hundred million in tax.
B) Pay 20 million in legal research to find completely legal loopholes and ways to arrange your corporate structure so you can pay 10 million in tax.

There is then the wrinkle that to not do 'B' may be against your shareholders best interests.

Re:Can someone explain how multinationals work?

[burisch_research]

Bludger: Australian slang for someone who lives off government handouts, and who refuses to work.

Re:Can someone explain how multinationals work?

[Anonymous Coward]

OK, let's do this:

Fred Smith works for Foo UK Ltd. He's running their whole Foozle operation on a day-to-day basis, most Foo workers in the UK think of Fred as the "big boss" but he's just an employee like them.

Fred reports to Amy, Bob and Chris who are the Directors of the company. Some of the directors could also be employees, but in this case they're not, regardless they are responsible for the "big picture" of the company. The directors are legally responsible in some senses for the company, for example if a court felt that the company as a whole had done something wrong, and the directors had been aware, or should have been aware and did nothing, the directors could go to jail.

Amy, Bob and Chris report to the shareholders of Foo UK Ltd, as the name suggests the shareholders own some "share" in the company. Shareholders can get rid of directors and find new ones, but they don't have any direct control over the company. If Foo UK was an independent privately owned business these shareholders would be various ordinary (but probably rich) individuals. Most people who work for Foo UK would have no idea who the shareholders were. If Foo UK is a public company, its shareholders could include almost anyone, you can buy shares online for a few dollars right now, but most would probably be held by pension companies and other "hands off" institutional investors. Finally, if Foo UK exists only to make life easier for Foo International Corp, who are based in Australia, then there is only one shareholder, Foo International Corp, and obviously if the directors do anything except what Foo International Corp wants, they'd be dismissed immediately. Also some or all of them would probably be Foo International Corp employees. Amy, Bob and Chris, as directors of Foo UK Ltd might actually all live in Australia and perhaps never even have seen the UK, they could still give orders to Fred maybe over a weekly video conference.

In the specific example you gave, the UK Google has exactly one shareholder, Google Inc in the US. This gives them 100% control, which they exercise by appointing directors who are also Google US employees. The UK staff are just employees, including the head of the UK business.

Re:Can someone explain how multinationals work?

[towermac]

Over here, I am called a conservative, but yes; we are classical liberals.

As your simpler, dumber brother on the other side of the pond; please allow me to condense your thought into a sound byte so we can understand it over here:

If a billion dollar building in downtown London is cheaper than the tax, then the tax is too high.

Re:Can someone explain how multinationals work?

[LordLucless]

The unfortunate fact is that tax laws are fucking complex, and contain loopholes smart people can find and exploit.

And why are there loopholes? Look into it, and you'll find that it's basically a massive patchwork of hacks to maintain favourable exemptions for certain industries that are politically important/give politicians a lot of money. The tax system could be massively simplified to eliminate those loopholes, but it's in nobody who counts' interest to do so - companies would pay more tax, politicians wouldn't be able to manipulate the system to scratch the back of companies' "lobbying" them, and individuals, well, since when have they counted anyway?

Re:Can someone explain how multinationals work?

[dkf]

There is then the wrinkle that to not do 'B' may be against your shareholders best interests.

I wouldn't really say there's much of a maybe about it... and as far as I know isn't it a legal requirement that you can't do anything against their best interests?

But there's usually a way to spin virtually anything that management want to do as being in the shareholders' best interest. The issue is that shareholders have a very large range of interests, many of which will be directly divergent from one another, and there's a need to have many different strategies over many spans of time.

In practice, the fiduciary responsibility regulations only really have real bite in limited circumstances where the actions of management may verge on the fraudulent (e.g., selling substantial parts of the company for much less than their fair value to another company owned by the CEO; whether or not that's technically fraud, it's still seen as clearly wrong). Most of the time, so long as management are trying to do the best for the company as they see it, they're not on the hook for fiduciary responsibility violation.

If you want to identify real problems, point your finger at investment firms that just want a fast return on their money and care nothing for the success of the businesses that they invest in. All they do is try to force everyone else to act like as big a corporate psychopath as they are. (This is why businesses run by their founding entrepreneurs often do better: they don't just focus on boosting their share price or returning dividends over the next 3 months, but instead actually build the business.)

Re:Can someone explain how multinationals work?

[RLU486983]

bu**ers = buggers

bugger (noun)
1. Informal. a fellow or lad (used affectionately or abusively): a cute little bugger.
2. Informal. any object or thing.
3. Often Vulgar. a sodomite.
4. Chiefly British Slang.
- a. a despicable or contemptible person, especially a man.
- b. an annoying or troublesome thing, situation, etc.

Re:Can someone explain how multinationals work?

[TheLink]

If you transfer 1 billion dollars to Google USA and Google USA spends that 1 billion dollars, does that 1 billion dollar show up as taxable profit? I should think there's a way of spending it so it doesn't become profit right?

And if it doesn't show up as taxable profit then it could mean that Google doesn't have anything in the USA that they want to spend 1 billion dollars on.

Also the billion dollar building might be worth more in the future than USD1 billion (inflation and all that).

yeah, new industry

[bmimatt]

Hi Google,

Please change industries and move to real estate completely.   While you are at it, do not send banks to the internet - we love our hysterical authentication on their sites.

Thanks!

Re:A new way to add new building to your city?

[Shimbo]

Except it's to avoid US tax they are doing this. Reuters article.

One trick is through sales

[SmallFurryCreature]

Ireland and say Spain have radically different tax rates over profits over a sale. So... what can you do if you are devoid of all morals?

Say the product in Spain sells for 100 dollars but really costs 10 to produce in China. Then Ireland buys it from China for 10 and sells it to Spain for 99.99. The sale in Spain then to the consumer is for 100, giving the Spain division a 1 cent profit.

Of course, since you are making so little money in Spain, you do claim all the subsidies and tax breaks you can to support your struggling business.

The fact is that our society is run on the principle that everyone is nice, that everyone is going to try their best to live together and play well with each other. The order keepers can NEVER check everyone doesn't speed, doesn't run red lights, gives the right of way. AND we NEED that, just imagine HOW hard it would be to travel anywhere if you couldn't at least somewhat count of right of way, people stopping for signs and keeping a similar speed. Remember that those who hate the speed limit ONLY talk about the MAX speed limit, the speeders NEVER complain about SLOW vehicles being banned from certain roads. No speed limits means you can drive ANYTHING ANYWHERE.

It is the same with taxes, it would be un-workable to check everybody, so the system relies on most people paying their tax neatly.

Evil people/Republicans often claim the rich pay the majority of the tax burden... apart that from the fact it ain't as a big a burden if you are rich, that is only logical, those who have the majority of the money, pay the majority of the taxes. The hidden lie (you know it is a lie because a Republican said it) is that the rich SHOULD be paying FAR more. But countless loopholes make the likes of Romney have a taxrate of 11%. No wonder he wants to see a birth certificate but does not want to show his tax records. If the rich payed their due share (who benefits more from police patrols, the rich guy with police guard or the poor guy living in a police no-go area) there would be far more tax-revenue AND then EVERYONES taxes could come down. If one rich guy avoids paying 1 million, that is a LOT of minimum wage workers who have to make up the difference because no Republican tax avoider would think of spending less on the army.

Tax avoidance is a gigantic business, the economy of Ireland practically runs on it. And that is the huge problem, there is ALWAYS someone who benefits when society is harmed.

The funny thing is that any call for chance will get you millions of piss-poor Republicans living on benefits saying you shouldn't tax the rich! Willing slaves. Because one day YOU may own a slave, you defend your own slavery. The American Dream, the ultimate brainwash.

Re:One trick is through sales

[Sun]

I think that's only telling part of the story, and the wrong part, at it.

If all those companies were doing was setting up most of their profit areas in low tax countries, I, personally, would find that legitimate. Ireland has low taxes, so Google, Microsoft, Facebook and many others have huge development centers there. That's just called a "tax plan", and is legitimate.

The point at which, IMHO, this crosses the line is where all of those companies want to show profits for their publicly traded, US based, parent companies. "Google Ireland Inc" (or whatever) is not traded in wall street. Nobody gives a rat's !@%!@# how much profit it made. It's the US based GOOG that is traded, and in order for its stock price to rise, they would really want its balance to show a huge profit.

That's the part I don't understand. How do you get the American company to show profit, and yet claim that the taxes for those profits need to be paid in Ireland. That's the part I suspect is breaking some laws.

Shachar

Re:One trick is through sales

[batkiwi]

I don't find claiming 90+% of the profit from ireland as legit if 0% of the work involved was done there.

Re:One trick is through sales

[towermac]

There is another explanation for your apparent dichotomy, but I believe your vitriol for "Evil people/Republicans" is blinding you to it.

You defined the problem: The cost of doing business in Ireland and China is far cheaper than Spain (and the US and other places). There are two solutions to that, although you only see the one of going after Ireland and the people who do business across borders. You could try to make it cheaper to do business in Spain. You can't magically lower the cost of commodities and land, but you can cut taxes. Especially if that was one of the major costs of doing business.

11% would be a decent tax, especially on a guy making millions. Romney's, like mine, was actually closer to 14%; which means about $7,000 for me, millions and millions for him. What's your moral justification for making either one of us pay a higher percentage than the other? Don't envy his stuff, man. Don't vote based on envy, which is simply self-justified greed.

The corporate rate over here is 35%. That's not a tax, that's a freakin' partner. It's obviously too high. "Tax" is supposed to be an incidental cost, not a major portion of a transaction. I'm not talking opinion here, the proof is in the facts. All these companies holding money offshore; they don't get to have that money either. It's still their money, but while it sits in the Caymans, not really earning enough interest to cover inflation; they don't get to have it, use it, spend it; just like we don't get to tax it. Google needs a billion dollar building in London about as much as you or I do. Hell, I guess that's better than it sitting in a damn bank somewhere though.

The fact that they would rather do without their own money, rather than have it, and pay the tax on it, proves the tax is too high. And if they are truly as greedy, and covet their money as much as you say, then you can trust their judgement on this one.

Re:One trick is through sales

[cheesybagel]

No. The moral course of action is to pay sales taxes where you sell the product and corporate tax where you actually operate your business. Which is certainly not Ireland.

Re:One trick is through sales

[divisionbyzero]

11% would be a decent tax, especially on a guy making millions. Romney's, like mine, was actually closer to 14%; which means about $7,000 for me, millions and millions for him. What's your moral justification for making either one of us pay a higher percentage than the other? Don't envy his stuff, man. Don't vote based on envy, which is simply self-justified greed.

You are focused too much on the absolute value of the dollars. The moral justification is that beyond a certain number those millions of dollars have less value than your $50,000. In other words basic necessities take up a far larger percentage of your income than Romney's. The additional tax revenue from people like Romney helps pay for the social costs of company's like his that force other companies to pay their workers substandard wages and benefits and thus turn to the government for help in order to increase profit margins to give people like Romney even more money. Do you see how this cycle works? If companies paid their employees a more reasonable wage, a so-called living wage, I could see the case for lowering taxes.

As for the rest of your post, competing on taxes is a downward spiral that leaves governments unable to take care of their people in order to export wealth out of the country. A certain amount of tax competition help keep things lean but it's better to compete on things like education and infrastructure that hard to replicate. The reason tax competition is so popular is that it just takes some paper shuffling rather than real investments in a country's future.

$1 billion will buy you some excellent tax lawyers

[PolygamousRanchKid]

They'll personally pick up that $1 billion wherever you want, and hand it back to personally wherever you want it. All perfectly legal. Oh, they will want a small "taste" of that $1 billion. Hell, they'll take it to the Moon or Mars for you. The first manned colonies there will be tax shelters.

Or they could mint some $1 billion platinum coins, and take them in their pockets on flights from London to San Francisco.

Evading taxes, is never a problem for big corporations. Now that they are investing $1 billion in the property in London, the rent rates in that neighborhood will surely skyrocket. Who owns, or partially owns, the real estate in the area . . . maybe Google, as well . . . ?

Buy up some cheap real estate in a distressed area, and then build something big there. The cheap real estate suddenly becomes quite valuable. A nice business plan . . .

Re:A new way to add new building to your city?

[Runaway1956]

I don't think slashdot deletes posts. I've had it happen a few times, that my posts don't show up. I've always blamed some other thing - my browser, or the internet, or something. Maybe the stars are just improperly aligned, I don't know. But I do know that a lot of worthless shit and shinola appear on slashdot, that would be deleted ANYWHERE ELSE. Slashdot just leaves it up there, to be viewed by people like myself, who don't mask any posts.

Check your settings, and if they are all correct, then blame gremlins. We're so busy concentrating on that stupid rover on Mars, that we didn't even notice when the Martians sent their own ship this way, in retaliation. Latest estimates are that the ship could have carried as many as 16 billion gremlins. Awesome, isn't it? Each person on the planet can have one or two personal gremlins of their own! I'm sure it won't work out that way, though. The 1% will probably take about 15.5 billion of them for their very own.

It sucks being part of the 99% . . .

Actually "Occupy WS" was the media creation ...

[drnb]

We used to call them "Wall Street Bankers", but then the Tea Party arose and convinced people (perhaps with the aid of a new source of funds) that WS wasn't the real problem.

Actually the Tea Party's roots are in reigning in gov't spending. It was in fact an organic grass roots movement. They went after Bush and the Republican controlled Congress when they were spending like mad. However it eventually became co-opted to a degree by the Republican party.

It was Occupy Wall Street that was a creation:
"The Canadian anarchist group Adbusters initiated the protest with assistance from the Manhattan-based public relations firm Workhorse, who was well-known for its successful work on client brands including Mercedes and Saks Fifth Avenue."
http://en.wikipedia.org/wiki/Occupy_wall_street
And like the Tea Party became co-opted to a degree, though by the Democratic party.