This is disgusting. Literally stealing from the pockets of the american people. It doesnt matter that its technically legal. This news should bring outrage.
Maybe so, but please don't post unsubstantive comments to HN.
The missing profits of nations
11–20 of 103 posts
Re: The missing profits of nations
#12Earlier quoted context omitted.
Does that risk pushing their spending to low tax jurisdictions?
Probably some amount but I reason this would be much harder. You must pay workers where they live and buy resources from where they are produced. It's easier to offshore a made up entity like a corporation than a bunch of people and their hardware.
> You must pay workers where they live and buy resources from where they are produced.
If tax law provides the incentives, companies can do all sorts of gymnastics to obfuscate those two things. There is always a loophole if you look hard enough for it.
Pay workers where they live? Why not hire them through an offshore firm that pays them as international contractors?
Buy resources where they are produced? Buy the rights to the resources from an offshore company who owns the IP rights to the method of production.
These are convoluted examples but the point is, companies can always add a level of misdirection to fit within a loophole.
Re: The missing profits of nations
#13Large companies should be taxed where the value is created. And because that’s hard to measure, cost should be used instead. So if Google spends 60% of its budget in the US, 60% of its profits should also be attributed to the US. (Side note: the alternative of taxing profits where the revenue is generated does not make much sense as this would be equivalent to a sales tax.)
The article itself points out the difficulty with this. The numbers are hard to obtain. It's why they don't go after them in the first place.
Re: The missing profits of nations
#14Large companies should be taxed where the value is created. And because that’s hard to measure, cost should be used instead. So if Google spends 60% of its budget in the US, 60% of its profits should also be attributed to the US. (Side note: the alternative of taxing profits where the revenue is generated does not make much sense as this would be equivalent to a sales tax.)
One trick used to push profits offshore is to use "transfer pricing": transactions are made with a subsidiary based in a tax haven (either part of the same legal entity, or a partner/shell company used to the same effect), with prices skewed so that the offshore company comes out with a huge profit. (Googling around, I found http://repository.essex.ac.uk/8098/ which seems to my untrained eye to give a reasonable overview of this).
For example, the subsidiary company might have ownership of a trademark, and the onshore company pays a ludicrous amount to license that trademark. The accounts show this as a cost for the onshore company, lowering its profits; whilst the offshore company makes a large profit. An example I've come across (but can't find/verify them at the moment) is pencils being bought from an oversea office for thousands of dollars each.
If corporations were charged based on location of costs rather than profits, as you suggest, I can imagine this being used the other way: almost all of a company's assets, from across the globe, are funnelled into an offshore division, in order to pay a ludicrous amount for some trivial local item (e.g. rent and security guard for their empty 1-room office).
PS: I think these sorts of tricks are the reason the article keeps using the phrase "tangible assets", rather than just "assets".
Re: The missing profits of nations
#15And this is where the main issue is. Local newspapers, local advertising companies, global search companies that could have been; all of them are competing with Google on vastly unfair terms. Google is not paying tax. The others have to.
Same thing played out with Amazon. The embedded 7-9% sales tax advantage gave them a massive price advantage (even if the headline price is the same, the price the consumer pays is less) that retailers couldn't keep up with.
Re: The missing profits of nations
#16This is disgusting. Literally stealing from the pockets of the american people. It doesnt matter that its technically legal. This news should bring outrage.
"Literally stealing ... technically legal".
I think at least one of those four words must be incorrect or poorly chosen.
Re: The missing profits of nations
#17This is disgusting. Literally stealing from the pockets of the american people. It doesnt matter that its technically legal. This news should bring outrage.
Well... legal where?
The tax avoidance strategy of choice, the Irish Sandwich, is perfectly legal in Ireland and the Irish government actively invites companies to use it. They take taxes away from EU countries and collect generous subsidies from those same countries, double-dipping. Focus your ire there, or Luxembourg, or any of the other countries who have made a whole industry out of it.
Re: The missing profits of nations
#18Maybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal?
I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in US taxes that same year. Is it because "making the use of tax havens illegal" is hard/impossible?
Re: The missing profits of nations
#19Maybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal? I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in US taxes that same year. Is it because "making the use of tax havens illegal" is hard/impossible?
In the ideal world, corporate tax rates and taxes on investment income are zero. Google et al should be paying taxes on its earnings when it spends it on compensating employees, buying equipment for their offices, renting office space, etc.
Re: The missing profits of nations
#20Maybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal? I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in US taxes that same year. Is it because "making the use of tax havens illegal" is hard/impossible?
Yes, making the use of tax havens illegal is very hard. It's basically a giant game of whack-a-mole, where the corporations have more people with stronger incentives working to get around the tax laws than the government has trying to write new ones.
Here's a fun explanation of the kinds of hoops corporations will jump through to dodge taxes: https://en.wikipedia.org/wiki/Double_Irish_arrangement