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Spanish authorities raid Google offices over tax

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Re: Spanish authorities raid Google offices over tax

#181

Post by gpderetta »

wyager wrote: post #114
melenaboija wrote: post #111

I don't think there is a justification for big corporations to do what they do and they have to be pursued. I've been working for a bank in a tax haven in Europe and I've seen that financial engineering powerful people use has been a known and accepted tool for the governments for a while, and now that Europe is living a financial crisis governments start asking. These companies play in an absolutely different league…

Why are you blaming the companies for acting rationally, rather than the governments for creating absurd tax environments? I agree it's unfair, but I can't fault anyone for trying to legally minimize their tax burden. Tax law should just be simple enough that anyone can do it themselves.

The problem is that thanks to the complexity of the tax systems and the interaction of international tax treaties the tax avoidance/tax evasion boundary is fuzzily defined and at the end of the day only a judge can decide on the legality.

So if a company, instead of staying well within the boundary decides to skirt it (and I'm sure that they take into account the probability of being caught on the wrong side in their minimization process), it is only fair that they get a visit from the tax man.

Re: Spanish authorities raid Google offices over tax

#182

Post by kafkaesq »

fizzbatter wrote: post #158
Gargoyle wrote: post #124

Earlier quoted context omitted.

Yes, those absurd tax environments are in no way created by companies and their money. Not at all.

I agree with your sentiment, but ultimately Governments are the ones allowing and enabling it. If legal, corporations are just doing what is allowed. I hate them for it, but ultimately, i hate that it is allowed. If the law was put into place via illegal bribing/etc, then yes, both parties are to blame. But if it's all above board, then it's entirely on the Government imo. Take America for example. Lobbying is an utt…

I agree with your sentiment, but ultimately Governments are the ones allowing and enabling it.

Again, the key focus of the Spanish investigation is not into whether Google rationally took advantage of "loopholes" -- but whether they made false representations as to their business structure and the activities of their local subsidiaries.

See today's El País article for an explanation of the authorities' reasons behind the raid.

Re: Spanish authorities raid Google offices over tax

#183

Post by ianai »

antr wrote: post #168
wyager wrote: post #114

Earlier quoted context omitted.

Why are you blaming the companies for acting rationally, rather than the governments for creating absurd tax environments? I agree it's unfair, but I can't fault anyone for trying to legally minimize their tax burden. Tax law should just be simple enough that anyone can do it themselves.

I'm an energy investor and get to work with tax advisors and lawyers very often in order to maximise tax structures and cash repatriation. Everything we do is approved by tax authorities and positively seen by our shareholders. I agree to a certain extent with you that companies are acting rationally. I can assure you it's my responsibility to make the best use of these tools. However, the direct and indirect pressur…

On the other hand, it's an incentive for countries to do what it takes to increase the wages of their citizens. Ie minimum wage laws.

Re: Spanish authorities raid Google offices over tax

#184

Post by peter303 »

Panama Papers showed a significant fraction of EU officials stash money in low tax havens. Icelands PM resigned as a result. The Panama Papers was a leak of terabytes of documents from a legal office who sets up these corporations and accounts.

Ironically the USA is a top tax haven due to anonymous shell corporations you can create in several states. Lots being stashed here due to anomymity and economic safety.

Re: Spanish authorities raid Google offices over tax

#185

Post by alkonaut »

AnthonyMouse wrote: post #102
alkonaut wrote: post #69

Earlier quoted context omitted.

> How would that even work? The costs are actually costs. I'm not sure how it would work. Corporate income taxes don't make much sense in itself of course. The profits could be taxed as cap gains and everyone would be happy - so long as companies weren't multinational. The problem here is that a company may be making a huge profit in some country by using resources paid for by tax money in that country (such as roads…

> The only solution to this problem if you do have corporate income tax is to establish how much profits Uber actually made in each country , and have the profits taxed correspondingly. The problem is that's not how profit works. There is no "in each country" to calculate. They paid $15B to employees in 20 countries and then made $20B in revenue from 20 countries. There is then $5B of international profit, but how mu…

Thats my point - now it's arbitrary and decided by the company who can setup whatever scheme necessary to transfer profits to where they are least taxed. Making it arbitrary for some companies how much taxes to pay in a country obviously isn't a good thing.

Maybe what it all comes down to is that it makes more sense to tax transactions and charge corporations for services (e.g use of roads) that are tax funded.

To avoid doubly charging companies that do pay taxes for profits one could charge fees for use of infrastructure and count taxes collected against those fees.

Companies like Google and Uber that use public infrastructure could be charged for it, and unless they paid enough taxes they'd owe the difference.

How much of the internet infrastructure Google should finance, or how much the cost of Ubers road use is will be somewhat arbitrary of course, just like the current situation - which is the lesser evil comes down to whether one is more comfortable leaving arbitrary decisions for tax authority bureaucrats or enterprises.

Re: Spanish authorities raid Google offices over tax

#186

Post by vec »

goodplay wrote: post #161
qsymmachus wrote: post #151

Earlier quoted context omitted.

This is why abuse of rights is an important legal principle: https://en.wikipedia.org/wiki/Abuse_of_rights Rational != Ethical

The parent raises a good point though: Tax law is extremely complex when it doesn't need to be. The only justification for this complexity (that I could come up with) is exactly that it's complex to enable tax evasion/tax burden minimization.

Partly, but partly its just that all regulatory frameworks naturally tend toward complexity.

First, the legislature often decides that raising or lowering specific taxes is a good way to encourage some behavior or other (i.e. mortgage tax deductions or extra taxes on cigarettes). Most of these are actually pretty justifiable individually, but eventually you end up with too many exceptions and special cases for any nonspecialist to keep them all in their head.

Second, there's a huge body of caselaw and regulatory rulings that crop up around the actual tax code. Dozens of courts somewhat haphazardly decide that this weird edge case counts as income, but that weird case doesn't. Again, almost all of these are pretty reasonable taken in isolation, but you end up with a swiss cheese of arbitrary and contradictory rules.

Finally, wealthy entities will inevitably try to game the system. They will try to find a few well-intentioned but poorly thought out edge cases and alter their finances to try and intentionally fit a huge percentage of their income into them. By the time this happens, it's often very difficult to fix without hurting the innocent bystanders that the edge cases were put in place for in the first place.

Wealthy individuals and companies do lobby for favorable tax provisions, and politicians do sometimes pass laws specifically to benefit those entities. But the reality isn't that simple. International tax law is an emergent phenomenon, and it's really only going to bend to systemic incentive changes.

Re: Spanish authorities raid Google offices over tax

#187

Post by khedoros »

qsymmachus wrote: post #151
wyager wrote: post #114

Earlier quoted context omitted.

Why are you blaming the companies for acting rationally, rather than the governments for creating absurd tax environments? I agree it's unfair, but I can't fault anyone for trying to legally minimize their tax burden. Tax law should just be simple enough that anyone can do it themselves.

This is why abuse of rights is an important legal principle: https://en.wikipedia.org/wiki/Abuse_of_rights Rational != Ethical

Unethical != Illegal. If acting in an unethical manner causes a company fewer liabilities than acting ethically, which choice do you expect them (an amoral entity) to make? I expect that they'll keep pushing boundaries until it starts costing them.

Re: Spanish authorities raid Google offices over tax

#188

Post by anonymousDan »

AnthonyMouse wrote: post #128
uola wrote: post #73

Earlier quoted context omitted.

> (which would then allow the US rate to be lower for the same revenue) While I'm sure it can be minimized, the US doesn't have a particularly low corporate income tax rate. > And if they paid that tax in the US [...] how would that help Spain and France? Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acqu…

> Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acquire their European competition. We're essentially in a trade war, just that Europe hasn't realized it. Except that "US companies" incorporated in Ireland aren't US companies. Can't European companies also incorporate in Ireland?

Yes but the point is that if their main HQ is in another European country they can't avail of the repatriation laws unless that country has similar laws. Of course many EU countries have lower corporate tax levels than the headline US tax rate, but not all. I'm more concerned though about the race to the bottom in terms of corporate taxation than any EU/US competition. Interesting discussion, thanks.

Re: Spanish authorities raid Google offices over tax

#189

Post by conjectures »

wyager wrote: post #114
melenaboija wrote: post #111

I don't think there is a justification for big corporations to do what they do and they have to be pursued. I've been working for a bank in a tax haven in Europe and I've seen that financial engineering powerful people use has been a known and accepted tool for the governments for a while, and now that Europe is living a financial crisis governments start asking. These companies play in an absolutely different league…

Why are you blaming the companies for acting rationally, rather than the governments for creating absurd tax environments? I agree it's unfair, but I can't fault anyone for trying to legally minimize their tax burden. Tax law should just be simple enough that anyone can do it themselves.

Rational actions can be deeply unethical.

It might be rational to hire a big team of tax lawyers to find loopholes. It might be rational to launch PR campaigns to misinform the public about your tax affairs. It might also be rational to hire private investigators to dig up dirt on politicians and blackmail them. Or bribe them, or otherwise corrupt them.

UK tax law is complicated partly because the large accountancy firms have become deeply entwined with the policy making process [1]. This is used as a way to introduce and then milk advantage from the complexity. This goes way beyond just playing the tax game by the rules.

I do think the government has a responsibility for allowing these abuses to occur. That doesn't make the abuses OK though.

[1] https://www.theguardian.com/business/2013/apr/26/accountancy...

Re: Spanish authorities raid Google offices over tax

#190

Post by downandout »

melenaboija wrote: post #111

I don't think there is a justification for big corporations to do what they do and they have to be pursued. I've been working for a bank in a tax haven in Europe and I've seen that financial engineering powerful people use has been a known and accepted tool for the governments for a while, and now that Europe is living a financial crisis governments start asking. These companies play in an absolutely different league…

Corporations have a fiduciary responsibility to their shareholders to reduce their tax burden to the lowest possible levels. Assuming the tactics they embrace are legal, they are doing exactly what they can and should.
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