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Google, Apple and Microsoft Squirm As Global Tax Schemes Scrutinized
An anonymous reader writes: Google, Apple and Microsoft chiefs were hauled in front of an Australian Senate Committee on Wednesday and forced to answer questions about their tax dodging structures. "Under questioning from Greens Senator Christine Milne, [Google's Maile Carnegie] revealed none of the revenue derived from Google's lucrative advertising business is taxed in Australia, rather it is booked in Singapore where the corporate tax rate is set at 17 per cent, as opposed to Australia's 30 per cent. ... However in the strongest defense yet of the company's complex tax structure, Ms Carnegie attempted to highlight the hypocrisy of criticising global technology companies for using the same approach that Australian mining firms, like Rio Tinto, use when deriving profits from China. 'These are international tax arrangements and what Google is doing in Australia is very very similar to what Australian companies are doing outside of Australia. I am not sitting here today trying to defend whether those practices are right or wrong, they are simply the way the global tax system is currently working and we are trying to operate within that.' Ms. Carnegie said it was up to the government to create a different system, which the company would then abide by."
Governments all over the world have been hoodwinked or bribed to set up loopholes which are beneficial to corporations, and not so good for domestic economies.
Because people have been buying into the lie that somehow cutting taxes on corporations is a net benefit, when in fact it's just a way for corporations to pay less tax and skim off the time, while taking ever bigger profits.
There has been a lot of evidence that all of these tax cuts don't benefit anybody but corporations, and that trick down economics is pretty much not working as advertised.
It's time to start saying "too fucking bad" to the corporations and stop giving them special loopholes to play shell games with money.
Start handcuffing CEOs to bears, make the world a better place.
Lost at C:>. Found at C.
This is what happens when you have two sets of rules to follow - the "law", which is laid out in black and white as to what is allowed and what is not allowed, and is backed by the courts and amended by acts of government. And then there is the "spirit of the law", which is fluffy, ethereal and changes depending on who you talk to, when you talk to them and what their agenda is.
As Ms. Carnegie points out, if you want stuff taxed in your jurisdiction, change the law so that happens - dont wave the "spirit" of the law around as if it has any meaning other than a method of blackmail.
It's up to you to not pass the laws for which we lobby.
Tic-Tac-Toe, Global Thermonuclear War, and relationships all have the same winning move.
If countries want tax revenue to stay in their countries, lower the tax rates to be come more competitive. After all, 17% of something is much better than 30% of nothing.
You have ANY presence (Brick and Mortar, offices, internet) and obtain ANY income there, you pay taxes there.
Mis-reporting income and expenses is fraud last time I looked. This goes for businesses where one division over-charges another to shift profits from one country to another. These practices are coming under increasing scrutiny globally.
Want to straighten the ad problem out fast? Sales tax in the country/state/county of purchase.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
False equivalence, 10 yard penalty.
As long as a company is obeying the law and not hurting anyone, they are legally and morally in the right.
Forget diamonds, copyright is forever.
Unfortunately, I would agree.
If a country wants a piece of the action, maybe they should take a good hard look at their tax code. They may have to lower taxes *gasp* Perhaps getting 17% of something is better than getting 30% of $0.
The reason companies do this is because it's more profitable to hire an army of lawyers and accountants to skirt local laws.
there will always be moldova, antigua, vanuatu, etc.
but the major countries, the ones that provide certain legal frameworks corporations need and desire, need to get together and agree upon a common set of policies, and commit to sharing info with each other about company's returns, and stamp this shit out
the motivation is simple: to not be screwed financially. the motivation should be sound and compelling. didn't a lot of countries recently (last 15 years) band together and force switzerland to stop being the secret banking haven for narcothugs, selfish tax dodgers, corrupt politicians, etc around the world? if we can bring sleazy amoral switzerland to heel, we can do this
if a company wants to file in a country that is cheap, then let them get extorted by corrupt government officials, have their shipment of good confiscated/ help up at borders, etc. all the problems that come with countries with shit legal enforcement and bad laws
and those financially responsible countries that agree on sharing tax profiles can exclude such companies and such countries from certain streamlined benefits, if not outright ban them if their activities are too financially scumbag
of course, one country or another will be more attractive for financial reasons than another country
which is absolutely ok. i envision a future where ireland or singapore or wherever is the country of choice for corporations to pay taxes, like delaware in the usa for incorporation, or liberia for ship registration, etc.
but for anyone defending this tax avoidance as "fair": corporations are not made from the loins of a single "captain of industry" standing all alone. please understand the difference between low iq fantasy and reality. corporations exist because of the benefits of a stable secure society that allows them to be created and to grow. those benefits need to be paid for. corporations need to be contribute their share. especially if we want to make believe they are "people" as some philosopher-morons insist
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Mis-reporting income and expenses is fraud last time I looked. This goes for businesses where one division over-charges another to shift profits from one country to another. These practices are coming under increasing scrutiny globally.
Then these companies will soon be in court on fraud charges, won't they?
Want to straighten the ad problem out fast? Sales tax in the country/state/county of purchase.
Yeah, let's put all those mom-and-pop Internet businesses out of business because they don't want the hassle of complying with the tax laws of three hundred pissant little countries. Right on! That'll stick it to the Man!
No, they were not hauled or forced. Did they come and answer questions reluctantly? Sure, but can we drop the hyperbole?
Just another day in Paradise
The BBC had a news article a while back about an African country that officially had a 30% (I think) tax rate, but no-one paid it, so they offered people the option of registering for a 3% tax rate, which increased their income because the average they actually managed to collect with their 30% rate was only 2%.
But, hey, it's all the fault of the EVIL BASTARDS who won't pay their FAIR SHARE!
Where do you see anything on them misreporting, or charges of fraud?
Just another day in Paradise
There's a reason I feel zero guilt in using ad-block. It's perfectly legal for Google to dodge taxes this way, and it's perfectly legal for me to dodge Google's ads using browser extensions.
In itself, that's just a race to the bottom on corporation tax. Then you find rich people earn nothing and simply channel all their funds through companies... oh wait.
jh
People blah blah about these companies not paying their fair share which depends upon your views on taxation. But the key word is fair. The real problem is that while these companies are able to pretty much magically avoid taxes in countries outside the US the potential competitors in countries like Germany, UK, France, Australia, etc are paying these taxes.
This pretty much makes it impossible for a homegrown company in any of these countries to compete. Nobody can compete with a company that is has all that extra tax free profit to use in acquisitions, research, marketing, or just making their product higher quality.
What baffles me is that nearly all the countries being screwed out of those taxes aren't even more angry that they are also potentially being screwed out of viable competitors. If a country such as the UK had the next Google or Apple it could literally change the face of that country's economy as companies of that size don't just hire lots of people and pay lots of taxes but also create a nexus of similar companies. You can't build a Silicon valley out of a few government IT contractors and a handful of Best Buy warehouses. On the otherhand you can build one based upon a Google or two.
To me this is a very simple tax problem. All they need to do is say if you make a profit in our country you pay the same taxes on that profit that a company in this country would pay. But the key is that the profit is calculated by estimated real costs, not the costs presented on paper. Thus Apple could no longer claim that each iPhone cost $699 to build and sell it for $700.
But the real win would be if these countries were able to mostly ignore R&D costs that happen outside their own boarders. If this was no longer easily deductible it would become an instant R&D win biasing in favour of their own country. The simple reality is that as the future comes closer and closer countries that train and use the brains in their countries will do well, while those that outsource their IP development will falter. This tax exploitation by these companies provides an opportunity for various western countries to swing the pendulum unfairly in their own favour as a punishment for past exploitation.
When you cheat you tax collectors a few thousand then you end up in court. When a large corporation is minimising tax then it is much more of a negotiation. You are insignificant. Google employs lots of people and generates lots of revenue and can hire the best legal advice and accountants.
Your definition of not hurting anyone is fairly important though. I think in this case, the company *and* the government could be morally but not legally in the wrong. They transferring money from the government to their own bank account. If you pretend for a minute that the government does things that are good for the people, then they're preventing some of this from happening.
jh
You try refusing to appear in front of Congressional, Senate or Parliamentary Committee once they have required your attendance. Those invitations are akin to subpoenas, so yes they were forced to appear and answer questions.
It's either legal, or it's not. If it's not illegal, calling it abuse is inaccurate.
Just another day in Paradise
Ms. Carnegie said it was up to the government to create a different system, which the company would then abide by."
In other words: "if you lower your taxes to a number that we like, we might consider paying them".
Must be nice being a multinational corporation, getting to chose how much taxes you pay and where you pay them...
Meanwhile in the real world, people go broke (no more jobs... sorry), small and medium-sized businesses go broke (can't compete with Amazon? Too bad), local governments and states go broke (not enough revenue? Your taxes are too high, just lower them so you can compete with the 0% rate in Dubai and the United Arab Emirates).
The system works.
Why should a mom-and-pop internet business be exempt from taxes that the mom-and-pop brick-and-mortar store has to pay?
Because in the second case, mom-and-pop live in Singapore?
Is this a trick question?
In the United States, your assertion that "working stiffs" are burdened with most of the taxes is not supported by the facts. If you look at total taxes paid (local, state, and Federal) as a percentage of income, the bottom 40% are taxed at about 20% and the top 20% are taxed at about 30% (Washington Post). So the rich are paying taxes at a higher rate then the "working stiffs."
If you look at it from the "income to the Federal government" perspective, as of tax year 2011, the top 5% paid 57% of the collected income tax and the bottom 50% paid 12% of the collected income tax.
Based on those two facts, I assert that the "working stiffs" are not taxed at a higher rate then the rich. Also, at the Federal level, the rich pay far more in taxes. Where the "working stiffs" lose out (and the Washington Post article shows this) is at the local and state level.
"Though why anyone thinks the world will be a better place if governments have yet more billions of dollars to waste is beyond me."
Of course, we shouldn't let governments have extra money to feed the poor, educate citizenry, provide health care, protect the environment, make streets safer, or let the citizenry vote to decide how to spend it, for after all, we should simply let corporations establish tax policy through an army of lawyers armed with political kickbacks so that the already ultra wealthy can get tax breaks denied to everyone else, so they can waste it instead.
Mis-reporting income and expenses is fraud last time I looked.
They aren't mis-reporting their earnings. They simply are taking advantage of loopholes in the law. It's almost always perfectly legal. Morally dubious but quite legal.
Frankly when you can afford literally hundreds of staff specifically for the purpose of avoiding taxes by exploiting obscure loopholes in the law, you are engaging in something that is ethically on the edge. I'm an accountant and I find the tax avoidance practices of these companies to be reprehensible. I'm particularly disgusted by my colleagues who facilitate this sort of activity.
And I'm pretty far left, and have heard the same idea from other "lefties." Go ahead and cut the corporate tax to zero. The largest and most powerful corporations will bribe governments and set up special loopholes that work for them (but not smaller competitors) anyway. Level the playing field, as you say.
...and do away with special tax treatment of dividends and capital gains. Tax the owners of the corporations rather than the corporations themselves. This has a side benefit of no longer taxing investment income at a lower rate than actual earned income from working.
As long as a company is obeying the law and not hurting anyone, they are legally and morally in the right.
Fact is that these companies ARE hurting people. Specifically the taxpayer. By avoiding substantial tax burdens these companies are forcing the government to either borrow more money to cover the shortfall or raise taxes on everyone else. That borrowing costs interest and that affects everyone else who pays taxes.
So they ARE hurting others by their actions and trying to justify it by pointing out that they haven't technically broken any laws is letting them off on a technicality. If you want to argue that the tax code should be changed I would agree 100% but the fact is that they are using obscure loopholes to avoid taxes which hurts you and me in a very clear and measurable way. So yes I have a BIG problem with that.
Of course people don't want to pay their taxes - they just want to reap the benefits of living in a civilization (what taxes pay for). It's the prisoner's dilemma, and what is best for the individual is that they don't pay their taxes and that everybody else does.
This unwillingness to pay taxes doesn't prove taxes are inherently stupid, just that people haven't collectively worked out the dilemma yet.
Slashdot: providing anti-social weirdos a soapbox, since 1997.
Don't blame Google for doing what the government allows. Blame the government for thinking it can tax without consequences. Tax avoidance is a responsibility of the tax payer, and if government can't figure out how to design a tax system that is "fair" and "progressive" that is not the fault of those avoiding taxes.
The rich can always learn how to avoid paying taxes. This means that even "progressive" taxes are regressive. All of them. The problem is taxes shape behavior in unintended ways, and often ways that adversely affect the economy. Only stupid people think taxes exist in a vacuum, and have no effect on the economy. All those crying "tax the rich" and "fair share" are just envious idiots who think that it has no effect on them.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
Why should a mom-and-pop internet business be exempt from taxes that the mom-and-pop brick-and-mortar store has to pay?
Because the mom-and-pop brick-and-mortar store only has one set of three tax structures which they are beholden to (federal, state, city). The mom-and-pop Internet business would have literal thousands of tax codes to be subject to (that is, the tax laws of every nation, province/state, county, city, federation, etc. on the planet - at least outside of North Korea). That is not, as you declare, a "level playing field" by any means.
Large brick-and-mortar international concerns and large internet international concerns are already level with each other tax-wise aside from sales taxes (which vary by locale).
Quo usque tandem abutere, Nimbus, patientia nostra?
There's a reason I feel zero guilt in using ad-block. It's perfectly legal for Google to dodge taxes this way, and it's perfectly legal for me to dodge Google's ads using browser extensions.
You shouldn't feel guilt about thwarting Google displaying the ads.
You should maybe feel a teensy bit of guilt over the fact that you are using an ad-supported site which derives its revenue from displaying Google ads to its visitors, in lieu of a subscription fee.
Google could probably care less; in fact, in cafeteria discussions at Google, this came up once, and the general consensus was that, if the ads were not going to result in sales, Google preferred that people run the ad blockers.
Of course, this reduces the revenue for the ad-supported site which you liked well enough to visit, but not well enough to pay for. So I suspect, at some point, that the ad-block-detection code (which is there) will give you a temporary redirect to another page that says:
"If you don't like seeing advertisements, fine, we'll save that in your preferences and quit trying to show them to you; but in lieu of having ads, would you please support the continued operation of our site with a small donation, so that we can continue to provide you with the content you came here to see?"
So, actually, if anything, it's a "Poor Site I Like Who Is Now Getting Any Income..." situation.
Just saying.
When you cheat you tax collectors a few thousand then you end up in court. When a large corporation is minimising tax then it is much more of a negotiation. You are insignificant. Google employs lots of people and generates lots of revenue and can hire the best legal advice and accountants.
That's also the reason bankers and corporate use news media like the Daily Mail or Fox News to get you worked up over J.Q Public down the street cheating on his taxes or scrounging a few $ / £ / € in benefits because it distracts your attention from their corporate and banker friends who are cheating the public purse out of billions upon billions. It is a constant source of puzzlement to me how people can get so worked out about Polish/Romanian/Bulgarian workers coming to the UK and cheating on benefits (when in actual fact studies have shown that they work more and cheat less on benefits than native Britons) that I have actually heard people talk about wholesale deportations (and some ideas that are way scarier than that), but they do not seem to be bothered at all by bankers and corporations (read: the owners of organizations like the Daily Mail and Fox News et. al.) swindling the state out of amounts of money that make benefits swindling look like a mosquito on an elephant's ass.
Don't confuse legality with morality. It may be legal but I think you'll find more people than not think it is very much NOT ok.
I think it ok. If Google keeps the money, they will spend it on research into deep learning, robotic cars, and better organization of human knowledge. Microsoft dollars are finding a cure for malaria. The government would use the money to drop bombs on Iraqis.
I believe that this is the law. The trick is defining "earnings". Earnings implies gross revenue minus operating expenses.
Let's say a multinational corporation operates in the USA (30% tax rate) and in the Cayman Islands (1% tax rate). Call them Foogle. They get 99.99% of their revenue from the USA, and 0.01 from the Cayman Islands. However they have a subsidiary, also based in the Cayman Islands, and they "license" the intellectual property for their company from this Cayman Island corporation for an amount precisely equal to the amount of their global revenue.
So in the USA, they show zero "earnings" (profits) and in the Cayman Islands, they show a ton of earnings (profits). So they pay 1% tax to the Cayman Islands and 0% to the USA.
That is the type of game they play. And when the laws get written to tighten that up, they just play more complex games.
If you try and tax corporations on their gross revenue, you will make a lot of activities unprofitable. For example, if you are a bookstore and you sell $10m worth of books for a profit of $100k, and you now have to pay 5% tax on the $10m instead of 30% on the $100k, you will now owe more 5x more in taxes than you have in profits.
It's also about having a level playing field. For large multinationals it is easier and cheaper (in terms of cost vs profit) to invent new loopholes, vet them with legal and financial experts, and set up the necessary vehicles for shifting profits to a country with low taxes. For small local businesses with no foreign presence this is a lot harder. They lack the required knowledge, and the cost of experts and legal fees are prohibitive compared to the tax advantage they stand to gain. So local businesses pay the full 30% or whatever your local tax rate is, while multinationals get away with a couple %. Besides, a local business cannot readily threaten a government to vote with its feet and leave.
With that said, I agree with Google lady that governments should fix the loopholes rather than appeal to corporations to pay their fair share. If you bring morality into it, you don;t understand what a corporation is.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
With global warming soon to make planet Earth uninhabitable for humans in as little as 200 years
That's extremely unlikely in all of the published scenarios. End of technological civilization, sure, end of humanity, no.
...it is easier to pay taxes in Singapore than it is in Australia. In Brasil, only the names of taxes, contributions, tariffs, fees, dutys and rates we pay (R$500 billion until March 31st) would be enough to flabbergast any company...
\m/
I suspect that the disconnect lies in one sentence:
Most people seriously confuse "fair share" with "fair misery" when it comes to wealth and taxation.
What I mean is, when some folks say they want "progressive taxation", or "fair tax", what they really mean is that they want the wealthy to be just as miserable financially as the average person after taxes are paid. It's an emotional rather than a logical demand.
Quo usque tandem abutere, Nimbus, patientia nostra?
Or you know.. maybe take a business class.
tax Evasion is illegal.
tax Avoidance is perfectly legal and is taught in accounting classes in every business school.
If privacy had a tombstone it would read "We did it for your own good" . -- John Twelve Hawks
Comment removed based on user account deletion
That's not true. Companies charge what the market can bear, and if they had lower taxes, they'd mostly just reap higher margins. Do you really think Apples prices would significantly rise if their tax burden went up? That's certainly not true of all markets.
jh