To reduce its tax burden, Google expands use of the “Double Irish”

[ucha]

I wouldn't blame Google (or any multinational corporation) as much as I blame our legislators who failed to prohibit this kind of tax evasion schemes.

[pcurve]

Legislators are beholden to rich benefactors. Look what happened to estate tax exemption during Bush era. It went from $675k to $3.5million. http://wills.about.com/od/understandingestatetaxes/a/estatet...

And rather than letting Bush law expire, Obama boosted the exemption to over $5 million.

This was a huge boon to wealthy class, and most people didn't even notice this crappy legislation from going into effect.

[Zoomla]

would you blame Google if they gave money to legislators for allowing this kind of tax evasion scheme?

[alphakappa]

What you are blaming them for is not prohibiting tax avoidance, but for not anticipating that loopholes would be found in existing regulation. It's very likely that if these loopholes were eliminated, some other loophole would be found. At some point, maybe the discussion should be about the spirit of the law, not the letter of it (which can probably be worked around if you can pay for an army of lawyers and accountants in multiple countries)

[daniel-cussen]

Avoidance, not evasion.

[jcampbell1]

You might as well blame them for creating free trade, and the european union. If legislators had the power to change the tax code, they would. Realistically they can't without doing something awful like currency controls or trade restrictions or something that will get shot down by the WTO.

I am not a huge fan of corporate taxation because it is so indirect, but I do think we need some new global rules around IP transfer pricing.

[koenigdavidmj]

I bought a car a couple counties away from where I live for the lower sales tax rate than my home county. How is this ethically any different than that (other than the scale)?

[allochthon]

Did you create three shell companies in different states, some with no reporting requirements, in order to carry out this purchase?

Your point is a good one. But it's hard for the nonspecialist to avoid associating this kind of tax avoidance with the behavior of Enron sometime back.

[tomfakes]

In your position, you actually have a requirement to pay the correct sales tax to your state based on where you live. This is more complex than 'I wasn't charged it, so I don't owe it'

You are breaking the law if you do not pay what you owe.

Google is using the various laws of these countries, and treaty agreements, to avoid taxes in one place to pay them at a different (much lower) rate in another.

Google is not breaking the law.

[chiaro]

Well I'd argue that the ethical difference is fundamentally the scale. How many lives could be changed if they paid taxes according to their social contract? Poverty, crappy healthcare and soaring incarceration are all problems that need money to alleviate.

[jamesaguilar]

It's not different, but I am surprised your country doesn't enforce those taxes through a use tax. In California, we have nearby states with much lower auto taxes, but when you import the car you have to pay the difference in the purchase state's tax and California's the moment you register the car.

[Pxtl]

As all gamers know: the best way to fix a badly-broken rule is to exploit it relentlessly.

[falcolas]

And get banned by the developers when they get around to fixing the problem. Getting stomped by the IRS when the close this loophole probably isn't high on Google's priority list...

[itchitawa]

Is this really a problem? Isn't corporate tax rate one of the ways countries compete for businesses to be registered with them and pay them tax? I'm sure any government efforts to reduce this will just make it harder for everyone to run companies from other countries.

[georgemcbay]

Try moving large sums of money (even money earned abroad) around like this to avoid taxes as a private US citizen and you're likely to get 10-20 years of mostly distraction free time to ponder the question of whether this is or isn't a problem.

[moinnadeem]

Meh, tax code is still grossly over-complicated in the US, simplifying it would help everyone.

[tensafefrogs]

I've always been curious about the pressure of shareholders in situations like this. Google is a publicly shared company, right? So if they don't maximize the shareholder's value, don't they open themselves up to lawsuits by shareholders?

So even if they wanted to "do the right thing" and pay some taxes on this money, they couldn't, else their board would get voted out by large shareholders who are only in it for the money.

[jamesaguilar]

Not commenting about google specifically, but please observe that many companies donate to charity, and, extrapolating from this observation, resist the urge to trot out the "legally obligated to maximize profits" thing in the future.

[judk]

3 people constitute a majority ownership of Google.

[Arcticus]

Google by law has to take advantage of these "loop holes". They are a publicly traded and thus by law have the obligation to maximize their shareholder returns. So taking advantage of these tax loop holes they are fulfilling that duty. Doesn't excuse it but it does prevent Google from just saying no we won't do it.

[21echoes]

the "shareholder value theory" is a myth: http://blogs.law.harvard.edu/corpgov/2012/06/26/the-sharehol...

http://www.nytimes.com/2012/08/11/opinion/nocera-down-with-s...

there is no "law" that makes Google obligated to do this.

[judk]

This is patently false. Read Google's S-1 and Letter to Shareholders.

[RafiqM]

I'm Irish. They provide 2000 jobs here in Dublin, and that has the potential to double even in the next few years.

The fact of them being here is a direct reason Facebook, LinkedIn, and a load of other companies are also here.

They're indirectly responsible for, I would guess, about 10,000 jobs.

I couldn't care less if they don't pay 12.5% corporation tax - they've provided massive social value even without it.

[javert]

Good for them. The government shouldn't be taking their money.

[alphakappa]

And how do you propose that government finds money to pay for roads, bridges, dams, police, firefighters, national security, national parks, environmental protection, regulatory standards etc?

[patrickdavey]

May I recommend the book "Treasure Islands" by Nicholas Shaxson. http://treasureislands.org/

A brilliant read if one that might make you slightly angry about the system!

[jgalt212]

Fine they don't pay taxes on the earnings, but they can't really use that money either--it must remain permanently abroad. Part of the reason AAPL did that $17 Billion bond issue (largest ever until the Verizon $49B deal) even thought they have like 8 quadrillion dollars in the bank is they cannot use those permanently abroad monies to pay dividends to shareholders.

So, in short, what is good is tax-free money if you cannot use it? Are these companies all hoping that one day their will be a tax holiday and they can re-repatriate the funds?

[valleyer]

Presumably companies like Apple and Google spend a decent amount of money abroad (e.g., manufacturing phones). Can't they use it for that?

[prostoalex]

What you do is you issue bonds in your high-tax market to raise capital, and to pay interest/principal on those bonds, you slowly bring in the funds from your low-rate piggy-bank country.

http://www.reuters.com/article/2011/05/16/us-google-bonds-id...

[vellum]

There was one in 2004. Brought in $300+ billion, but didn't create a lot of jobs, so who knows when the next one will be.

[sliverstorm]

Are these companies all hoping...

I think the answer is yes?