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Outrage At Microsoft Offshoring Tax In the UK, Google Caught Avoiding US Taxes 768

Posted by Unknown Lamer
from the finding-common-interests dept.
Master Of Ninja writes "After the ongoing row about companies not paying a fair share of tax in the United Kingdom, and with companies such as Starbucks, Amazon and Google being in the headlines, focus has now turned to Microsoft. Whilst the tax arrangements are strictly legal, there has been outrage on how companies are avoiding paying their fair share of tax generated in the country." And over here in the U.S., dstates sent in news of Google getting caught doing something similar: "Bloomberg reports that Google is using Bermuda shell companies to avoid paying billions of dollars in taxes worldwide. By routing payments and recording profits in zero-tax havens, multinational companies have been avoiding double digit corporate taxes in the U.S. and Europe. Congressional hearings were held in July on the destructive consequences of off-shoring profits. Why aren't the U.S. and Europe exerting more diplomatic pressure on these tax havens that are effectively stealing from the U.S. and European treasuries by allowing profits that did not result from activities in Bermuda or the Cayman Islands to be recorded as occurring there?"
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Outrage At Microsoft Offshoring Tax In the UK, Google Caught Avoiding US Taxes

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  • by Press2ToContinue (2424598) * on Monday December 10, 2012 @08:51PM (#42247769)

    "Why aren't the US and Europe exerting more diplomatic pressure on these tax havens...?"

    Because where else would US politicians offshore their income? http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accounts [vanityfair.com]

    • by Dyinobal (1427207) on Monday December 10, 2012 @08:55PM (#42247795)
      Pretty much this, anytime someone talks about getting politicians to raise taxes on the top 2% they are talking about getting politicians to raise taxes on themselves. Just look at the income of anyone in any law making or policy making decision in the government and it is no wonder that the middle class and poor have a higher tax rate than the wealthy elite.
      • by Anonymous Coward on Monday December 10, 2012 @09:44PM (#42248151)

        Don't worry, they'll pass a pay raise for themselves to offset the extra burden. Just like with Obamacare & Medicare/Medicaid. Those are good enough for the common folk, but they've the Rolls Royce of medical plans for themselves. The kind of plans some of receive from our employers that they now want to tax as income (at upwards of $5000/year in some cases).

        This isn't Democrats or Republicans. It's Democrats AND Republicans. The entire lot of them are a bunch of selfish, hypocritical, thieves.

      • by Anonymous Coward on Monday December 10, 2012 @09:53PM (#42248203)

        Perhaps you missed Obama filling his cabinet originally. He had to go through 50 people to get 20 from the DNC that had ACTUALLY paid taxes. Daschle failed to pay taxes, a woman named Hillary (not Clinton) was rejected for failure to pay taxes, Tim Geitner was still confirmed even though he didn't pay taxes. Go into Congress and you can find more, like Charles Rangle who didn't pay taxes. There was even a stink about John Kerry mooring his boat in Rhode Island to avoid state taxes from Mass.

        Your point is invalid because its the DNC that raises taxes and its the DNC politicians that constantly fail to pay taxes.

        • by Anonymous Coward on Tuesday December 11, 2012 @07:21AM (#42249160)

          Your point is invalid because its the DNC that raises taxes and its the DNC politicians that constantly fail to pay taxes.

          No, his point is not invalid, and no it's not the DNC which raises taxes. CONGRESS raises taxes, you need to get this through your thick skull. It's ALL of them, don't buy into the rhetoric and political bullshit they spew out from one side or the other.

          This circles back to the article itself. Did Google break any laws? Did Microsoft? In both cases it appears to be no, they did not. So quit pissing and moaning about "Big Corporations" and/or the Rich evading taxes. Quit giving a pass to the people we elected to run the country. They need to fix the laws so that these types of filthy loopholes simply don't exist.

      • Not in the UK, our PM is only paid around £70k (about US$110k) per annum, it's a fair old wage but dwarfed by any similar job in the private sector. What they're really worried about is the "party donations" and the future "consultancy work" which is where politicians make the real money once they've left office. It's all a scam of course, and we already have a way to stop it - simply refuse to vote for any party which receives significant amounts of money from any lobbying group, and ideally vote f
        • Re: (Score:3, Informative)

          by Anonymous Coward

          It's cute that you actually buy that. David Cameron has a net worth of $50 million [celebritynetworth.com]. Even if supposing he's financially illiterate and shoves it in a savings account it would still net him $1.5 million each year. But let's all just ignore the facts and pretend he's an underpaid middle-class average Joe like you and me.

    • They do have some other "incentives" as well. Campaigns aren't free and friends in high places can be invaluable..

    • by man_of_mr_e (217855) on Monday December 10, 2012 @09:00PM (#42247845)

      Actually, the US has no business exerting any pressure on other sovereign nations regarding what they do in their legal system, with perhaps exceptions for human trafficking, human rights abuses, and other such things.

      The US should simply make it illegal for these US companies to do this. If they flaunt the law, then they should be punished for it. No need to fuck with other countries laws.

      • by maccodemonkey (1438585) on Monday December 10, 2012 @10:10PM (#42248307)

        The US should simply make it illegal for these US companies to do this.

        The problem is these aren't technically US companies. That's how a shell company works.

        It's not that I don't disagree with you. It would be great if the US could put a stop to this behavior. But on paper, these companies are fully foreign companies that happen to have a relationship with a US company. That relationship consists of holding a lot of money overseas.

        • by Archangel Michael (180766) on Monday December 10, 2012 @11:29PM (#42248801) Journal

          It is easy to figure out how to hurt "shell" companies. All you have to do is tax transfers of wealth between corporations. Period. Taxing income is stupid, because all you have to do is hide the income long enough to get it to an offshore holding company in some island in the pacific. BUT if you put a 1% (or whatever) tax on money going out of the country, corporation to corporation, and you have all the revenue you need. Put a tax incentive of .75% tax break on any US corporation bringing money from offshore, and you'll spur the economy.

          Tax the things you don't want, incentivize the things you do want and you can fix the world. Problem is, most politicians do the exact opposite, by taxing productivity and rewarding failure. The fix is simple, but we are unwilling to mess with status quo too much.

          • by TheRaven64 (641858) on Tuesday December 11, 2012 @07:16AM (#42249146) Journal
            The problem is that the 'transfers of wealth' are the same kinds of transfer as normal purchasing. When a company pays another company to build widgets for them, they transfer money. When they license a patent, they transfer money. When a company like Starbucks sets up a subsidiary that owns their trademark and pays that company to license it back, then it's the same sort of transfer: money being paid in exchange for a product or service. It's very hard to write a law that would block the shell-game money transfers without blocking real purchases between companies, and if you do it wrong then you end up penalising smaller companies.
            • by Archangel Michael (180766) on Tuesday December 11, 2012 @08:44AM (#42249578) Journal

              I didn't say transfers of money, I said transfers of money out of the country, corporation to corporation. Corporations that transfer money, inside the country are not taxed. Are you being productive, then you won't mind 1%, if you're not, you will. Like I said, you incentivize the opposite, so that people get a bonus for bringing money into the country. It is really that simple, it would cause a shift in how business is done.

              In your case, Starbucks paying "licensing" fees to Starbucks Holding Company would be taxed straight up 1% (my example, not a real number) on the totality, not the "profits". While Starbucks paying NEC USA (registers) would pay nothing in taxes for that transfer. NEC USA would pay the tax when transferring money to parent company in Japan (or wherever)

      • "If they flaunt the law" English is very tricky. The word you want is flout.
      • by swb (14022) on Monday December 10, 2012 @10:58PM (#42248627)

        The US government should simply announce that they are prioritizing their overseas support of US business based on perecent of revenue booked in the US.

        When Microsoft or Apple get pissed about piracy or knockoffs overseas, the US should simply tell them that they can ask Bermudan or Cayman Islands officials to take care of the issue.

    • by Ungrounded Lightning (62228) on Monday December 10, 2012 @09:25PM (#42248019) Journal

      Because where else would US politicians offshore their income? http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accounts [vanityfair.com]

      I'm NO friend of Mitt Romney - to put it mildly. But let's not blame him for something that's not his doing.

      1) Because Romney was running for president, US law REQUIRES he put his money in a blind trust.

      2) Also under US law the trustee has a "fiduciary duty" to do his reasonable best to protect and grow Romney's money for him. That includes seeing to it that is not taxed substantially more than the law requires. If he can save, say, 40% of the trust's earnings from being taxed away by using a LEGAL tax haven in Bermuda, and trustees of such trusts are expected to know that, he is REQUIRED BY LAW to do so.

      So let's not have cheap shots against politicians and financial managers who are only doing what the law REQUIRES them to do.

      There are plenty of things politicians have done that we can LEGITIMATELY go after them about - which have zapped us to the tune of trillions of dollars - at $3,175.40 from EACH citizen for EACH trillion. Let's not the dilute the discussion, and give them something to use to discredit their critics, by flaming them over drops in the bucket that AREN'T THEIR FAULT.

      • by Nerdfest (867930) on Monday December 10, 2012 @09:34PM (#42248101)

        All of this crap is legal, that's why they call it tax 'avoidance'. It's not right, or fair, but it is legal.

        • by phantomfive (622387) on Monday December 10, 2012 @10:23PM (#42248381) Journal
          And frankly, every single one of us does it when we can get away with it, as well.
      • by Ungrounded Lightning (62228) on Monday December 10, 2012 @09:35PM (#42248105) Journal

        Did a little checking: Actually a presidential candidate is not REQUIRED to put their money in a blind trust.

        In principle Romney could have kept control and ordered his accountants to not use a tax haven.

        The downside is that he'd be nuts to do so. In addition to the loss of money from such deliberate mismanagement, he'd be leaving himself open to legitimate attacks on any OTHER decision he made about the money, along withaccusations of conflict-of-interest when he makes political decisions. (Avoiding both conflicts of interest and the appearance of them is the whole point of blind trusts.)

  • I'm .. I'm stunned! (Score:3, Interesting)

    by ackthpt (218170) on Monday December 10, 2012 @09:00PM (#42247837) Homepage Journal

    No, actually I'm not. Not in the least. It's the way of things now, even when your motto is "Do no evil" or "What evil would you like to get into today?" Wall Street expects certain targets to be hit and the way to do that is cut corners and use loopholes.

  • Maybe the corporate taxes should be set at a more favorable rate. 20% of something is still more than 35% of nothing. (or whatever the current tax rate is.). Additionally we could simplify the tax code so these companies don't need to spend millions on their accounting and tax lawyers. Unfortunately we'd probably have to shoot all of the politicians first as this is where many of them came from, and are paid in campaign contributions to do.
  • by mosb1000 (710161) <mosb1000@mac.com> on Monday December 10, 2012 @09:05PM (#42247891)

    I know this is crazy, but maybe the problem is the taxes. It doesn't make any sense at all tax corporate profits when you could just as easily tax the income shareholders make from the profits, or capital gains in the event a corporation doesn't post dividends.

    • by stanjo74 (922718) on Monday December 10, 2012 @09:25PM (#42248027)
      Exactly. Money left in the corporation can only be used for 2 things - reinvest in the business or pay employees/shareholders. If you reinvest, that's a good things - exactly what the US needs; if you pay out, income tax on the individuals should catch that.

      Problem is that capital gains are taxed very low compared to wages, so the company has incentives to keep cash on the books to appreciate the stock without reinvestment risk, thus creating wealth for shareholders at low income tax rates. You will never see the money reinvested or increase of wages at the company.

      • by mosb1000 (710161) <mosb1000@mac.com> on Monday December 10, 2012 @09:37PM (#42248113)

        Yet another tax policy that makes no sense at all. There is no reason capital gains and dividends shouldn't be taxed as regular income, they justify it today by saying "corporations pay taxes so taxing these things as income is double taxation." It's all just a stupid shell game. They make up a bunch of bizarre, self-reinforcing justifications for a convoluted tax scheme, then move their money through all they loopholes they've built so that is perfectly legal. It's nonsense.

  • by Anonymous Coward on Monday December 10, 2012 @09:07PM (#42247901)

    "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

    • by jxander (2605655) on Monday December 10, 2012 @09:24PM (#42248009)

      Problem is that the rich make the laws. So they adjust the rules to benefit themselves unfairly.

      Hey there poor person, why don't you have your investments setup in IRAs and 401(k)s? You should get into the consulting business and write a few books. Capital gains taxes are rather agreeable. What's that you say, you can't afford food? Well, if you'd taken my advise ...

  • by RelliK (4466) on Monday December 10, 2012 @09:10PM (#42247925)

    The reason these loopholes work is that multinational corporations can allocated their costs to high-tax countries and profits to low-tax countries. For example, a US operation "licenses" some software from a subsidiary in Cayman Islands or pays for "consulting services" that end up eating up all of the profits. Through these tricks a US corporation ends up with near-zero taxable income, while all the profits are transferred to tax havens.

    The solution is to tax ALL profits, regardless of which country they were supposedly "earned" in. That way, transferring profits to Bermuda or Luxembourg will have no effect.

  • by Rogerborg (306625) on Monday December 10, 2012 @09:12PM (#42247939) Homepage

    That's the argument we use for file "sharing", so let's not turn it on its head for tax. You want to earn it, make the argument for it.

    There is no inherent merit to paying taxes. They are a necessary evil to fund useful public works, and should be kept to an absolute minimum. When States becomes bloated, inward looking, ever swelling monsters that squeeze the pips until they squeak, tax avoision becomes an act of moral rebellion.

    Brits in particular tithe up to 75% of our "income" to the State, when you factor in income tax, national insurance, council tax, water and sewerage rates, VAT, insurance tax, parking fees, and fuel and customs duty on everything imported or moved around. And that "income" is what employers can afford to pay us after they pay all of their protection money to the biggest racket in town.

    So good on Microsoft and Google and Amazon and all the other companies who are throwing two fingers up at the grasping State. Let it wither and die, as long as it rots from the head down.

  • by k6mfw (1182893) on Monday December 10, 2012 @09:13PM (#42247955)
    Someone's gotta pay for global military to be sure air bandits, pirates, and dubious govts don't steal corporate commerce as it moves around the world. And these companies have plenty of cash to pay taxes. Though not sure how deal with dubious governments....
  • by hobarrera (2008506) on Monday December 10, 2012 @09:23PM (#42248005) Homepage

    They may be evading sums as large as $99!!!

  • by miltonw (892065) on Monday December 10, 2012 @09:26PM (#42248029)
    This is a very, very bogus report. "Outrage"? Come on! Is it legal? Yes. Is there some kind of "moral requirement" that we all maximize the taxes we have to pay or suffer "outrage"? Don't we all look for all the deductions we can legally get away with? WTF is all the bogus "outrage" at perfectly normal, legal behavior?
  • Tax Games (Score:4, Insightful)

    by LordLucless (582312) on Monday December 10, 2012 @09:33PM (#42248087)

    This isn't a problem with the companies in question - it's a problem with the game. As soon as a company has a presence in more than one country, the company needs to start making decisions about taxation. It's not an option not to make these decisions - one way or another, they have to be made. There is no option for them to simply "not play the game". They must.

    And once they start playing, they find themselves in a crazy maze of exceptions, loopholes, provisos and special cases. If you want to cut down tax avoidance (not evasion) then you need to simplify the taxation system to the point where these loopholes don't exist. Of course, that'll never happen, because politicians for the last century have been busily creating loopholes in order to favour their particular patrons, and closing those loopholes would result in screams from said patrons.

    The problem the politicians see isn't that these loopholes exist, it's that companies are using them who haven't paid politicians for the privilege.

  • by Chemisor (97276) on Monday December 10, 2012 @09:33PM (#42248091)

    If you don't want companies to use loopholes in the tax code to legally avoid taxes, don't put loopholes in the tax code. Let's all remember that those loopholes and deductions were all heartily lobbied and bargained for. If you didn't want them passed, why didn't you send funds to your representative in order to vote against them?

  • Good for them. (Score:3, Insightful)

    by jcr (53032) <jcr@[ ].com ['mac' in gap]> on Monday December 10, 2012 @09:34PM (#42248097) Journal

    So, these companies employ competent accountants, tax attorneys and financial managers to preserve their shareholders' earnings. That's exactly what they're supposed to do.: It's called meeting their fiduciary duty.

    -jcr

  • by sribe (304414) on Monday December 10, 2012 @09:46PM (#42248165)

    Whilst the tax arrangements are strictly legal, there has been outrage on how companies are avoiding paying their fair share of tax generated in the country.

    So, if the country's tax laws do not require these companies to pay their "fair share", then how exactly does one define their "fair share"??? Exactly how much more should they pay than what they are legally obligated to??? How large of an over payment would satisfy these critics???

  • by argStyopa (232550) on Monday December 10, 2012 @09:47PM (#42248169) Journal

    ...more and more implicit or explicit class warfare crap in the news. I suspect it's not coincidence.

    "...Whilst the tax arrangements are strictly legal..." - THAT is where blame for these corporations ends, period. Do you deliberately pay more for milk than you need to? Do you volunteer some extra taxes because the government is in a bind? Of course not. These corporations do what they do to save money however they can - and as long as they stay within the bounds of the rule/laws, disparaging them is pointing in ENTIRELY the wrong direction.

    Look instead at the incompetent government that WROTE THE RULES, morons.

    Hey, I "get it". I'd cheerfully decimate the companies that bundled their crap investments, the 'rating' agencies that rated them AAA, and the bond traders that cheerfully swallowed instead of spitting. Then I remember: they were all largely conducting LEGAL business according to the rules and laws set forth by ... our incompetent government.

    THEY would have suffered the natural result of their actions in the market, but then they were PROTECTED from their results (gotta make sure they get their bonuses, ya?) from...our incompetent government.

    Want to know why I'm a libertarian conservative? Because in 45 years I've become convinced that while often it is well-meaning, almost all government is incompetent, and therefore the least possible government is best. Which is better, semi-anarchy where one is free to build ones own future as best one can, or some sort of perpetual serfdom to the landed classes that see us only as rubes to exploit, cows to milk, or votes to pander to?

    • by Anonymous Coward on Monday December 10, 2012 @10:50PM (#42248587)

      LMFAO. The government is incompetent and writes bad rules so they get exploited... I'm a libertarian so we can have less rules... That's like saying "I got mugged once - the police system doesn't work! Let's abolish all laws."

      This is why libertarians aren't taken seriously. If you really think semi-anarchy leaves one free to build one's own future, you should take a look at (semi)-anarchies throughout history and across the world now. Warlords, (robber) barons, and a feudal system do not make for a better world.

    • by Areyoukiddingme (1289470) on Monday December 10, 2012 @10:54PM (#42248615)

      some sort of perpetual serfdom to the landed classes that see us only as rubes to exploit, cows to milk, or votes to pander to?

      That's what we have right now, which is why the subject is being debated so much. Class warfare has been in place for generations, and the rich have won it. Again. This is not the first time in history, either. The last time, the result was really really ugly. The French Revolution is the favorite example of just how ugly it gets.

      So. We're talking about it. Again. Because it happened. Again. Now it's time to figure out how to bash them back into a box so we can get on with civilization for another few hundred years until the next time the sociopathic assholes win the rigged game AGAIN. It's about goddamn time there was some reverse class warfare. Again. But this time, we're trying to figure out how to accomplish it without blood in the streets. There are a lot more of us now than there ever have been before, so if we do it French Revolution style, you could only dream of your semi-anarchy where one is free to build one's future as best one can. What you'll get instead is pogroms that would make Stalinist Russia look like a picnic in the park with sunshine and birdies and champagne.

      Capitalism has broken civilization. Again. It happens on a regular basis. It's a bug in the system. Historically, the solution to the bug is a system reboot with guns. This time, we would prefer to fix the problem without armed revolution. We like peace and quiet. We like it quite a lot. Violent crime has been declining even in the gun-happy United States. But we DON'T like playing in a rigged game we're guaranteed to lose because a very very small group of people have already won it.

    • by Inda (580031) <slash.20.inda@spamgourmet.com> on Tuesday December 11, 2012 @06:56AM (#42249094) Journal
      >>Do you deliberately pay more for milk than you need to?

      Do you pay more than the menu price for your cup of tea?

      Do you give the taxi driver more money than is displayed on the metre?

      Do you pay the neighbours' child an extra few quid for washing your car?

      No so black and white anymore, is it?
  • by mlwmohawk (801821) on Tuesday December 11, 2012 @08:03AM (#42249348)

    The real problem is *what* is taxed. Income is bogus. I don't see why, when I go to work, the money I earn is taxed at a higher rate than the income derived by a rich person's trust fund. No, "income" is a bad tax. What we need is a "net worth" tax. 2 or 3 percent should do it for everyone, including companies, because, companies are people too. They have 1st amendment rights according to SCOTUS, let them pay up as well.

    Everyone calculate their net worth and pay 2-3% no exemptions.

  • by kenh (9056) on Tuesday December 11, 2012 @08:05AM (#42249368) Homepage Journal

    Is it really the case that zero-tax havens like Bermuda and the Cayman Islands are 'stealing' from countries like the US or UK? They are providing an alternative to double-digit corporate taxes in other countries, but can they really be accused of stealing if they are charging 'zero' in taxes?

    Was Microsoft 'stealing' from Netscape when MS bundled a browser with the OS for free?

    Do food pantrys 'steal' from grocery stores by giving away what the grocery store sells?

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