Spanish authorities raid Google offices over tax • Hacker News Board

Re: Spanish authorities raid Google offices over tax

#311

Post by khuey » Thu, Jun 30, 2016, 8:51 PM UTC

dailo10 wrote: post #257

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…

There are multiple aspects at play here: 1. Fiduciary responsibility - Corporations have a financial objective to minimize their tax burden, in order to maximize shareholder value. Sure. 2. Legality. There are numerous loopholes that are technically legal. And it's remarkable how much gray area there is when it comes to tax law. This is why you have the big teams of lawyers to figure out how to best game the system a…

Most of the problem is defining "where [the profits] are made".

Re: Spanish authorities raid Google offices over tax

#312

Post by charlesdm » Thu, Jun 30, 2016, 9:02 PM UTC

spangry wrote: post #236

charlesdm wrote: post #41

Earlier quoted context omitted.

But how does not licensing IP make sense? That creates a whole set of new problems, i.e. why should affiliated parties allow IP to be licensed for free, where the same expenses would be tax deductible for unaffiliated parties?

You've actually hit on the basic 'integrity rule' for these kinds of arrangements (at least in Australia): foreign related entities must charge on-shore related entities using 'arms-length' pricing (the 'transfer pricing' rule). Same goes for the interest rates on loans made by foreign related entities, because the interest is deductible against gross profits (the 'thin capitalisation' rule). I've simplified somewhat…

Even minimum corporate taxes wouldn't work, no? You'd also need to make sure there is no way to artificially extract these profits by imposing withholding taxes on most transactions inside a specific economic system (i.e. the EU). This seems almost impossible to do.

> Companies will end up in court when their definition of an arms-length price/interest rate is significantly higher than what the national tax authority considers to be reasonable.

A second issue I see is that smaller countries will often see certain transactions as "at arms length", whereas larger ones (with higher corporate tax rates) will not. But if a multinational can produce valid evidence from, let's say, 3 different jurisdictions that a transaction is at arms length, this will often be accepted by the court as being at arms length. In most countries, the burden is on the tax authority to prove something is not at arms length.

So yes, countries are often screwing each other over. Add to that that each country wants to stop avoidance (loss of tax revenue), and at the same time attract investment (by granting fiscal deduction for special interest groups) and you end up with a big mess.

This whole tax game is essentially basic arbitrage within a complex framework.

Re: Spanish authorities raid Google offices over tax

#313

Post by Tiksi » Thu, Jun 30, 2016, 9:14 PM UTC

venomsnake wrote: post #267

Tiksi wrote: post #263

Earlier quoted context omitted.

By that reasoning, the state does not have an innate right or authority to provide or guarantee human rights. And really, it's human's that guarantee the state's rights, not the other way around. The state is an abstract concept that exists only because humans gave it that right at some point.

Power gives right and authority. The only universal definition of state is monopoly over the use of force over any given territory.

Yes but that monopoly is granted by the humans in the territory, and humans are the ones that exercise the state's power.

Re: Spanish authorities raid Google offices over tax

#314

Post by javitury » Thu, Jun 30, 2016, 9:18 PM UTC

ptaipale wrote: post #133

javitury wrote: post #88

Earlier quoted context omitted.

You forget that european VAT is cancelled with businesses upstream, that is, you can deduct the VAT charged to consumers with the VAT of your purchases so you only owe the net amount. Also there is no unified european tax rate, there are some tax havens inside the EU.

However, Google does not make very much purchases in EU, so there is not so much VAT to deduct, which means that much of the VAT is "real" tax revenue, not just a flow-through amount. This is simply because Google doesn't have a substantial part of its real operations in EU; it has sales offices, and in some countries it has data centers, but these are not such a big cost that the VAT would factor in by too much. The…

> Google does not make very much purchases in EU, so there is not so much VAT to deduct

I was arguing about the scheme that AnthonyMouse discussed. Also they can't recover all the other taxes "owed" to Spain by means of VAT.

AnthonyMouse > So now there is an independent contractor in Spain that pays Google Ireland for ad space and resells it for just enough money to pay its own bills and makes no profits.

If the VAT rate in Spain were higher than in Ireland the difference would stay in Spain. In that case marginal increse in the VAT rate would increase tax revenues, whereas and increase in income tax would not.

But right now VAT is higher in Ireland(23%) than in Spain(21%) and increasing the VAT rate can have sideffects on the economy as a whole.

Re: Spanish authorities raid Google offices over tax

#315

Post by MichaelGG » Thu, Jun 30, 2016, 9:31 PM UTC

dailo10 wrote: post #257

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…

There are multiple aspects at play here: 1. Fiduciary responsibility - Corporations have a financial objective to minimize their tax burden, in order to maximize shareholder value. Sure. 2. Legality. There are numerous loopholes that are technically legal. And it's remarkable how much gray area there is when it comes to tax law. This is why you have the big teams of lawyers to figure out how to best game the system a…

1. This "fiduciary responsibility" is trotted out and misunderstood. There's not a requirement to do things that might be harmful for the company. People say this responsibility like it's some law that companies must do any and everything that shows any possibility of short-term profit. But it'd be totally fine for a company to decide to do something else. Justification can be as simple as "This increases trust towards our brand".

But the rest of the points are accurate. They are doing nothing illegal and it's stupid to expect people to pay more tax than they owe. If countries want them to pay more tax, then change the law. It's silly this is even a discussion.

Re: Spanish authorities raid Google offices over tax

#316

Post by disordinary » Thu, Jun 30, 2016, 9:37 PM UTC

linkregister wrote: post #295

ransom1538 wrote: post #291

Earlier quoted context omitted.

Courts? Why? There is a simple fix: Since these are felony allegations (criminal not civil) IRS investigators should sit a few of these CFOs down in a cement room and ask: "Does any of this money come back to the US?" Then the CFO has a few options: 1) lie to a federal agent (not a good plan) 2) plead the 5th (not a good plan) 3) state to a federal officer that none of the money is used, transferred, or used to pay e…

When the funds come back to the U.S., Google is taxed on them. But they haven't returned yet. Have you missed all the news stories talking about how many of these companies keep the funds outside the U.S. for this purpose?

Who cares about the taxes returning to the us? They're making money in foreign territories and should pay tax there. For instance here in nz Google reportedly only pays 200k in tax which is obviously outrageously low.

Re: Spanish authorities raid Google offices over tax

#317

Post by khedoros » Thu, Jun 30, 2016, 9:37 PM UTC

varjag wrote: post #310

khedoros wrote: post #272

Earlier quoted context omitted.

> so we expect them to make a moral choice. We do? Why? Because, by one interpretation, they pay lip service to it by saying "Don't be evil"/"Do the right thing"? I take those as marketing (both to the public and to their employees). Even if we take their mottos as honest statements of intent, how do you know that their definitions of "evil" and "right" match yours? Or that their definitions won't shift to fit the si…

I don't care. They pretend to play morality games, they get held to a certain standard by public, that's just how it works. If they are amoral entity, I'm sure they won't care for Spanish government doing unethical but not illegal things to them as well.

> If they are amoral entity, I'm sure they won't care for Spanish government doing unethical but not illegal things to them as well.

Why would that be true? It would be inconsistent for them not to fight for their own self-interest. Also: Governments must be held to higher standards than corporations.

I expect the Spanish government to act (nominally) in the best interests of its citizens. I expect Google to act in its own best interests.

Re: Spanish authorities raid Google offices over tax

#318

Post by disordinary » Thu, Jun 30, 2016, 9:40 PM UTC

downandout wrote: post #190

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.

Thinking like this is why capitalism sucks.

You can have socially reprehensible investors and companies, you can also have too much money.

Don't be evil my arse.

Re: Spanish authorities raid Google offices over tax

#319

Post by kyrra » Thu, Jun 30, 2016, 9:42 PM UTC

linkregister wrote: post #271

ransom1538 wrote: post #231

Earlier quoted context omitted.

Tax cheats. 26 U.S. Code § 7201 - Attempt to evade or defeat tax: "Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law" I have worked at companies performing the "double-irish". True, they aren't prosecuted. But legal? Because a british lawyer says it is? 26 U.S. Code § 7201 is extremely easy to r…

I think the taxes Google, Apple, et. al. are avoiding aren't imposed by that U.S. Code. The profits are not earned by U.S. Corporations; they're earned by alien corporations. In order for this regulation to cover these alien corporations, large parts of precedent, legislation, and regulation would have to be repealed/rewritten. Intuitively, it feels bad. But until the profits actually come back to the U.S., the USG d…

The double irish is going away come the year 2020:

https://en.wikipedia.org/wiki/Double_Irish_arrangement

Re: Spanish authorities raid Google offices over tax

#320

Post by varjag » Thu, Jun 30, 2016, 9:57 PM UTC

khedoros wrote: post #317

varjag wrote: post #310

Earlier quoted context omitted.

I don't care. They pretend to play morality games, they get held to a certain standard by public, that's just how it works. If they are amoral entity, I'm sure they won't care for Spanish government doing unethical but not illegal things to them as well.

> If they are amoral entity, I'm sure they won't care for Spanish government doing unethical but not illegal things to them as well. Why would that be true? It would be inconsistent for them not to fight for their own self-interest. Also: Governments must be held to higher standards than corporations. I expect the Spanish government to act (nominally) in the best interests of its citizens. I expect Google to act in i…

Separation of morality and law is a recent trend. For most of human history, morality was the law. As such, it was a social contract born out of necessity and not some arbitrary installation.

It's fine to take a modern, legalistic, maximize-shareholder-value-or-gtfo approach and eschew the ethics and spirit of law perspective altogether. However, generally it would be irrational for corporation to expect a favourable outcome in a survivalist game on a legal field against the host government. That's why most corporations at least do lip service to ethics, community values, social responsibility and so on. Which leads us to square one.