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The Tax Haven That's Saving Google Billions

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Re: The Tax Haven That's Saving Google Billions

#41

Post by shin_lao »

curt wrote: post #27

This is exactly why high taxes hurt startups. How can a startup/small business compete profit wise against Google or another large company when they are paying a much lower effective rate. Since their tax burden is so much lower they can charge a much lower price, effectively pricing any startup/competition out of the market. We just need a super low corporate tax with zero loopholes that make it less expensive to ju…

Although you would reduce the amount of fraud with a lower tax rate, you would also decrease your income. The goal is to have the highest income possible, even if that implies fraud or optimizations.

Big companies will always have an advantage regarding taxes: they can provision more easily, pay people to optimize, lobby, etc.

I'm not saying you have an optimal tax rate in the USA, but the naive approach regarding this problem will probably not work.

More information: http://en.wikipedia.org/wiki/Optimal_tax

Re: The Tax Haven That's Saving Google Billions

#42

Post by barredo »

Matt_Cutts wrote: post #18

This is an article from 2010 that's already been submitted to HN in the past: http://news.ycombinator.com/item?id=1815457 Personally, I find the sub-headline misleading. The subhead reads "Google uses a complicated structure to send most of its overseas profits to tax havens, keeping its corporate rate at a super-low 2.4 percent." But I believe that number refers only to Google's overseas tax rate. This more recent a…

> But I believe that number refers only to Google's overseas tax rate

It does. It says so in the article.

Re: The Tax Haven That's Saving Google Billions

#43

Post by dsplittgerber »

illumen wrote: post #38
Matt_Cutts wrote: post #18

This is an article from 2010 that's already been submitted to HN in the past: http://news.ycombinator.com/item?id=1815457 Personally, I find the sub-headline misleading. The subhead reads "Google uses a complicated structure to send most of its overseas profits to tax havens, keeping its corporate rate at a super-low 2.4 percent." But I believe that number refers only to Google's overseas tax rate. This more recent a…

Note, Matt_Cutts works for Google. Don't you think Google should be paying the UK tax on UK profits?

I don't agree at all.

First, what exactly are "UK profits" supposed to be? Say Apple has a net margin of 20 % on every iPhone sold. It's designed in California by Americans (most surely several non-native Americans among them), manufactured in China by probably lots of Chinese workers and immigrants, shipped and flown across the world by god knows whom, etc. It's not like it's designed in Brixton, manufactured in Manchester and sold in London only. Which country is supposed to retain the tax on profit on each iPhone sold? The point of sale-country is one alternative. Is it the most logical? Is it equitable and fair (whatever that means)?

Second, if your local legislator is just too stupid - or, more accurately, for a lot of reasons - unwilling to close tax loopholes, why on earth should a company be willing to waste shareholder's money by settling a claim (tax) that is not legally binding due to existing loopholes? There is a lot of hypocrisy involved in politicians blaming companies for using tax law loopholes - if they were at all serious about that, they would just write better laws. Sure, it's always playing catch-up with tax lawyers looking for "tax-efficient" structures, but most loopholes are well known among legislators, and they knowingly decide not to close them.

Re: The Tax Haven That's Saving Google Billions

#44

Post by joshfraser »

How hard would it be to set up a system for startups, or at least mid-sized corporation to get the same tax breaks in mass? For example, could a company handle setting up all the holding companies & bank accounts around the world and make the process more affordable by doing it for hundreds of companies at once? You could share the same mailing addresses for each of the companies and the cost of keeping up w/ all the tax laws would be amortized across a much larger group of corporations.

Re: The Tax Haven That's Saving Google Billions

#45

Post by zerostar07 »

zerostar07 wrote: post #12
cperciva wrote: post #3

My knowledge of international corporate tax law is practically nil, but if I understand this correctly, the money sitting in Bermuda is still subject to taxation when it gets brought back into the US; so Google isn't avoiding taxes, but is rather postponing taxes by doing this.

I suppose the bermudan company can make investments in america or even give out a loan to google if needed

They can't? Their bermudan arm can act as a holding company that invests in the US as well as elsewhere

Re: The Tax Haven That's Saving Google Billions

#46

Post by namdnay »

curt wrote: post #27

This is exactly why high taxes hurt startups. How can a startup/small business compete profit wise against Google or another large company when they are paying a much lower effective rate. Since their tax burden is so much lower they can charge a much lower price, effectively pricing any startup/competition out of the market. We just need a super low corporate tax with zero loopholes that make it less expensive to ju…

I don't think your argument that this hurts startups is true. Tax rates don't impact profitability, as they are calculated on profits.

Re: The Tax Haven That's Saving Google Billions

#47

Post by OliverM »

a3camero wrote: post #23
angli wrote: post #10

Earlier quoted context omitted.

I don't believe that Google is actually just postponing taxes. Instead, they are also being selective about what money they pay it on. Basically, the money has been obtained in Ireland, sent to the Netherlands, and then Bermuda. So it hasn't touched the US, and they don't owe US taxes. They can then do two things with that money. One, they can bring it into the US, pay taxes on it, and use it to do whatever it is the…

The Irish are probably not going to be too upset that companies are taking advantage of the system that they setup in order to attract large companies and the associated financial/legal industry. It's not a case of big companies exploiting the poor Irish.

Except, from the original article, I don't get why they don't just set up in Denmark & avoid setting up in Dublin altogether. They must be doing _something_ worthwhile with those 2,000 Irish employees.

Disclaimer: I'm Irish.

Re: The Tax Haven That's Saving Google Billions

#48

Post by Zakharov »

OliverM wrote: post #47
a3camero wrote: post #23

Earlier quoted context omitted.

The Irish are probably not going to be too upset that companies are taking advantage of the system that they setup in order to attract large companies and the associated financial/legal industry. It's not a case of big companies exploiting the poor Irish.

Except, from the original article, I don't get why they don't just set up in Denmark & avoid setting up in Dublin altogether. They must be doing _something_ worthwhile with those 2,000 Irish employees. Disclaimer: I'm Irish.

This is just a guess, but if they were set up in the Netherlands, wouldn't they have to pay Dutch taxes? My impression is that they don't have to pay Dutch taxes because the money is just passing through the Netherlands, not being earned there.

Re: The Tax Haven That's Saving Google Billions

#49

Post by danssig »

JoshTriplett wrote: post #30
rayiner wrote: post #28

Earlier quoted context omitted.

Capital gains taxes are not "double taxation." If you buy an asset for $1,000, you've paid for it with $1,000 after-tax dollars and acquire $1,000 in basis on the asset. If you then sell it for $2,000, you're taxed on the $1,000 accretion in value as a capital gain, but you are not taxed again on the $1,000 which forms your basis in the asset.

In the case of a business, that business had to grow to justify the increase in value, and that growth typically occurred via some taxable event, such as income. Then, that growth makes the business more valuable. If you sell your interest in the business, you pay taxes again on the increased value. So, yes, double taxation. Very similar to the double taxation experienced when taking in taxed business income and usin…

Capital gains aren't exceptional in this. If I buy a car, a house or anything else I'll be taxed when I sell it again.

Re: The Tax Haven That's Saving Google Billions

#50

Post by idspispopd »

This is going to sound like a 99% rant, however this article perfectly demonstrates a scenario where tax-avoidance benefits few at the expense of the greater populace.

To quote the article: "a company's obligation to its shareholders is to try to minimise its taxes and all costs, but to do so legally"

Let's talk about who those share holders are: In tech companies the largest percentage of shares usually belong to the founders or the investors. Meaning that the tax minimisation is directly profiting few, and in some cases a single individual.

Regular persons do not have the financial clout to either purchase shares, even in low volumes which would see so little of the avoided-tax-returned-as-profits. Similarly small companies don't have sufficient funding to set up elaborate tax minimisation schemes, effectively forcing them to bear the brunt and be less competitive.

Governments deprived from tax income then turn to the population to bolster their coffers, and often to remain popular the tax rate is kept lower than required - which means cutting back on programs which benefit the greater good. We've seen some pretty ridiculous examples of how underfunded the education sector is becoming. (Somewhat hypocritical when the education sector is responsible for creating the skilled individuals that fuel these companies.)

Stopping international loopholes is incredibly difficult, however there is still plenty that can be done to entice companies to not start them in the first place. Incentive rates could be introduced which allow companies (especially smaller ones) to take advantage of a lower rate in exchange for certain business restrictions that limit these sorts of activities.

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