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How does Google pay 2.4%?

cameronkeng.com

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Re: How does Google pay 2.4%?

#71

Post by Jach »

travisp wrote: post #60
mahyarm wrote: post #54

Earlier quoted context omitted.

I also want to note that the USA is the only country in the world to base income taxation on citizenship/green card and residency, vs residency only for the rest of the world. Be a citizen of anywhere else and you can be really tax free/low tax.

Not only does the US tax its citizens who live and work abroad, it will also do so for 10 years after one renounces citizenship.

How do they enforce that one, or even get a hold of your income to know how much they're missing out? Or is it just a general "set foot on this country again and it's prison time for you"?

Re: How does Google pay 2.4%?

#72

Post by camz »

hncommenter13 wrote: post #66

The reality is much more complicated than the article or the blog post makes it out to be. Google's foreign tax rate is 2.4% (quite low), and they shift lots of their earnings offshore where it is not subject to US tax ($17.5B cumulatively, per Note 15 of the 10K). However, it is not the case that Google only pays 2.4% of their US operating profit to the IRS, as a look at Note 15 of their 10K shows. There are lots of…

I agree with your thoughts and I will definitely take that into consideration in the future, the post was meant to simply the concept of how they tax plan their business and how difficult it is to enact such a plan.

To clarify, Google's foreign tax rate is 2.4% and their US tax rate is 21.2%. But, I believe it is important to delve further than the surface of these numbers. The 2010 fiscal year has been the most profitable year yet for Google and $17.5B is more than 7x the net income presented on their current financial statements. Also, they've refused to disclose the amount of income that is transferred to their offshore activities through their APA.

But, note that their income from foreign sources is equated to 52% of their overall revenues of approximately $30B. This would suggest that at a minimum their foreign sourced income held overseas is at least more than 50%. The APA is designed to help the company shift the tax incidence to different tax regimes, thus it would be more than likely that the true number is much higher. But, it would be impossible to determine without access to a number of documents beginning with the agreement (which lasts for 5 years before they must renegotiate for a new plan).

We could make this much more complicated, but I wanted to focus on the tax plan since most people were interested in that aspect.

Re: How does Google pay 2.4%?

#73

Post by mckoss »

mahyarm wrote: post #56
mckoss wrote: post #47

Our congressional representatives are corrupt, doling out tax breaks to wealthy corporations, while ordinary people are left to pay high tax rates on ordinary income. I think Google should be ashamed to be part of this corrupt system. It's BS to say that they owe it to their shareholders to try to defraud the federal government of as much tax revenue as possible. They should instead be fighting for corporate tax refo…

It's not fraud, there is no lying involved in this. Your an international company that gets money from everywhere, your based everywhere, and you have employees everywhere. Who deserves the bulk of the tax revenue? Should Toyota pay the majority of it's taxes to the US because they sell a large amount of cars there, or only the income taxes of their employees in the US and the profits they receive from car sales in t…

The highest marginal federal tax rate for corporations is 35%. I think that's too high. But Google, a US Corporation, who derives most of it's earnings from it's US operations, is paying but a small fraction of that.

I think in the case of Google, they should at least be paying higher tax rates on all advertising earnings from US users; it seems to me they are maying barely 1 tenth of that amount currently.

Just as "selective enforcement" of laws leads to corruption, so too does gaming the tax system. Large corporations pay legislators to create these tax loopholes for them.

Re: How does Google pay 2.4%?

#74

Post by sethg »

Symmetry wrote: post #30

Why on Earth do we bother with a corporate income tax at all? Just get rid of it and bump up capital gains to compensate.

I would actually do it the other way around: since there are fewer corporations in the US than there are people, it is harder for a corporation to evade taxes than for a person. So it makes sense to raise the corporate rate, and either reduce individual rates or raise the exemption.

Another suggestion I’ve seen would be to not tax corporations directly, but to pass the obligation down to the shareholders: if you own 100 shares of Apple, and Apple made $15 of taxable profit per share, your taxable income goes up by $1,500. (Presumably Apple would pay you a dividend to make up for your tax bite, but note that this kind of scheme would make stock ownership more attractive for people with modest incomes.)

Re: How does Google pay 2.4%?

#75

Post by danssig »

BCM43 wrote: post #57
jrockway wrote: post #39

Earlier quoted context omitted.

I'm not sure that makes sense. Let's say, hypothetically, the Europe and Asia have a tax rate of 99%. We offer a tax rate to foreign companies of 2%, to make it obviously worthwhile to funnel their money through the US. At the same time, we tax US companies at 98%. This makes sense because it maximizes revenue -- US companies aren't going to go abroad, and everyone else in the world will want to give us 2% of their m…

Would wouldn't the U.S. companies just move abroad and funnel their money though the US?

Move where? Everyone else taxes at 98%.

Re: How does Google pay 2.4%?

#77

Post by bzbarsky »

shawnee_ wrote: post #5

There's a great slide from my "Taxes for Hax0rs" (SHDH 44) presentation http://www.transparentaccounting.org regarding the history of the Federal Income Tax. In a nutshell, the way it was originally written was meant to tax corporate income only and only the most wealthy Americans, not common folk. One needed to make >= $4000/year in deflated 1893 dollars to even be eligible to need to pay any taxes. Not sure, but on…

> Today even the poorest Americans likely end up short more > than 2.4 percent (effective annual rate)

That really depends, due to the complexity of the tax code. In particular, depends on whether you're married, whether you have children, etc.

You can see some historical data for 4-person families at the median, half median, and twice median income levels at " rel="nofollow">http://www.taxpolicycenter.org/taxfacts/Content/PDF/family_i.... Note the negative numbers in the "average tax rate" column in recent years for the half-median level (due to the making work pay tax credit, in addition to the preexisting earned income tax credit and child tax credit). But yes, before that the average rate was higher than 2.4%. And this is federal only, not counting state and local taxes. (And the part that really makes me mad about the numbers in this chart is the marginal rate on the half-median income level, by the way.)

Of course if you're not married with children, your tax burden is definitely higher. For a single California resident in 2007 you can see a simple marginal tax rate graph at " rel="nofollow">http://www.dbaron.org/views/taxes-2007.html>; the average rate would just be the integral of the graph, which gets to be higher than 2.5% pretty early on.

Re: How does Google pay 2.4%?

#78

Post by bzbarsky »

digisth wrote: post #48

Here's another idea: drop the corporate tax rate to 0% and raise income, high-end property (let's say houses that cost 2x the median in a particular area), and high-end consumption taxes (a "yacht tax".) Another handy related idea would be to have a maximum income multiplier. Something like "the highest paid employee cannot make more than 20x the lowest paid in total compensation", so if you want to make one million…

We had a federal "yacht tax" (literally) from 1991 to 1993. It didn't work very well. See http://www.thecitizen.com/blogs/lance-mcmillian/07-12-2011/t... for the gory details, but the summary is that people bought many fewer yachts, a bunch of yacht-making companies went bankrupt, 25,000 employees of said companies were laid off, and revenue from the tax was far below projections (because the purchase volume fell). Now it's possible that one issue here was credibility of the tax: maybe people figured it would be repealed soon and just tried to wait it out. But it's hard to tell, and even if that's the issue any proposal to introduce taxes like this needs to take that factor into account.

Re: How does Google pay 2.4%?

#79

Post by mahyarm »

Jach wrote: post #71
travisp wrote: post #60

Earlier quoted context omitted.

Not only does the US tax its citizens who live and work abroad, it will also do so for 10 years after one renounces citizenship.

How do they enforce that one, or even get a hold of your income to know how much they're missing out? Or is it just a general "set foot on this country again and it's prison time for you"?

You have to submit accurate tax returns with possible audits resulting extraditions and criminal charges if you don't. And there is FBAR.

Re: How does Google pay 2.4%?

#80

Post by brazzy »

shawnee_ wrote: post #5

There's a great slide from my "Taxes for Hax0rs" (SHDH 44) presentation http://www.transparentaccounting.org regarding the history of the Federal Income Tax. In a nutshell, the way it was originally written was meant to tax corporate income only and only the most wealthy Americans, not common folk. One needed to make >= $4000/year in deflated 1893 dollars to even be eligible to need to pay any taxes. Not sure, but on…

The problem is that corporations are incredibly adept at finding and exploiting the kind of legal tax loopholes described in this article, and rapidly adjusting to any changes. It's a cat-and-mouse game where the tax collection agencies are always a few steps behind.

Individuals, even most very rich ones, are much less able to avoid taxes, so over time they are taxed more and more in order to collect any taxes at all.

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