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David Cameron, the Prime Minister of the UK, said that companies like Google are immorally minimizing tax bills

Google has managed to skip paying about $1.6 billion USD (£1 billion) in taxes by way of the island Bermuda -- and the Prime Minister of the United Kingdom isn't happy.

Google sent £6 billion through Bermuda over the course of last year, which halved its 2011 tax bill. In fact, Google funneled 80 percent of its global revenue through the island and ended up paying about £1 billion less to the government.

Google's Executive Chairman Eric Schmidt said this "is called capitalism."

“We pay lots of taxes; we pay them in the legally prescribed ways,” said Schmidt. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.”

David Cameron, the Prime Minister of the UK, said that companies like Google are immorally minimizing tax bills and need to be stopped. He even wrote a letter to fellow leaders of the G8 requesting a global crackdown on tax avoidance for large companies such as Google and Starbucks.

“I do believe we all have a common interest in being able to tell our taxpayers who work hard and pay their fair share of taxes that we will make sure others do the same,” wrote Cameron in an open letter to the G8.

Google's UK Head Matt Brittin said politicians are the ones who set tax rates, and that Google is playing by their rules.

Google funneled £2.6 billion of British revenue through Bermuda, which cut its UK tax bill by £200 million.

In April of last year, it was reported that Apple made $9.5 billion USD in Britain for 2011, but only paid 0.16 percent in taxes. Amazon was also targeted for its headquarters in the tiny European Union nation of Luxembourg and Google's placement in Ireland with subsidiaries in the Caribbean and Luxembourg for more tax dodging gains.

The New York Times then blamed Apple for dodging billions in taxes in a lengthy article last year.

Source: Business Insider

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two faced
By Nortel on 1/2/2013 11:57:31 AM , Rating: 1
"Don't be evil" - Google's famous slogan

RE: two faced
By FaaR on 1/2/2013 12:06:04 PM , Rating: 4
Nowadays reads: "Don't be evil (that people notice (too much.))"

RE: two faced
By nafhan on 1/2/2013 12:18:47 PM , Rating: 5
So, in order to not be evil, they should give the UK government more money than they are legally obligated to give? That's a really specific and kind of odd definition of evil.

Seriously, the solution to problems with tax law is NOT going to be asking for big corporations to play nice. The solution is to fix the f'ing laws!

RE: two faced
By Argon18 on 1/2/2013 12:33:28 PM , Rating: 5

Bermuda is a British territory. If Britain chooses to implement a tax structure with a favorable corporate tax rate in Bermuda, how can they fault corporations for using it? No laws were broken here, Google did everything correctly, according to British law.

This is no different from the stink the Dems made over Mitt Romney's finances. The man did everything correct and legally, he broke no laws, yet some on the left chastised him for "immoral" finances? Wtf?

Would YOU pay more in taxes than you are legally obligated to? If your tax guy says you can take these 6 deductions, are you going to say "No thanks, I only want 3 deductions, the government needs this money more than I do"? Of course not. So don't be a hypocrite and expect others to make irrational decisions.

RE: two faced
By hubb1e on 1/2/2013 1:27:13 PM , Rating: 5
And the PM knows this. It's just a stupid populist propaganda ploy. The sheep need someone to hate and it can't be the government or they won't get re-elected.

RE: two faced
By maugrimtr on 1/3/2013 9:04:43 AM , Rating: 2
It's easy for the UK to forget how things work. The main corporation tax rate in the UK is 28%. Ireland's main rate is 12.5%. If you are a US global corporation looking to set up shop in Europe, which would you choose?

Secondly, Google is not taxed as a single entity - it's subsidiaries are taxed. And these are all separate legal entities capable of selling and purchasing from other subsidiaries (i.e. the UK company can purchase services from an Irish company leaving minimal profits in the UK company capable of being taxed).

Thirdly, do the same between two Irish companies - one is not tax resident (say Bermuda) so it's not taxable under Irish law. The second company is taxable (based in Dublin) but it too must pay the Bermuda company licensing and service costs which reduce the taxable profit, i.e. the Double Irish Arrangement.

All of this results in minimal tax (mostly paid in Ireland at 12.5%) with the bulk of all profits ending up legally in Bermuda or Cayman. Emphasis on "legally"!

So you have two solutions:

1. The UK changes the law around transfer pricing to ensure greater taxable profits are recorded in the UK (same goes for France, Germany, Australia, The Moon ;)).
2. Ireland changes its non-resident corporation tax law. This will never happen since its 12.5% rate should make it clear it's focus is on attractive well paying service jobs for its citizens - not shaking out the pockets of the golden geese supplying those jobs.

So this is really just that - the British PM mouthing off in public. France also likes to mouth about "tax harmonisation" - it charges 34% corporation tax vs the UK's 28%, Germany's 30% and Ireland's 12.5%. You can see the odd one out - Ireland has positioned itself as friendly to US Corporations.

You'll also note that the US has done nothing to upset this either. The US transfer pricing laws are what make all of this tax avoidance possible in the first place since taxes are levied only on repatriated profit (it never is unless there's one of those infrequent tax amnesties).

All legal, above board, and in a world where those who can change the law simply refuse to do so because it suits them as much as it suits Google.

RE: two faced
By mjv.theory on 1/2/2013 1:37:06 PM , Rating: 2
I think politicians, especially those putting themselves forward to be a head of government, should treat themselves as a particularly special case. They should make absolutely sure, right at the beginning of their political career, to pay all due taxes and to avoid all tax avoidance schemes, legal or otherwise. Paying taxes like this would not be a sign of stupidity or lack of financial savvy - it is a demonstration of good moral compass. Mr Romney was not technically in the wrong, but it was not very clever nor impressive on his part.

Government is not about "doing business", it is about defining and providing a social infrastructure; part of which is enabling business to operate such that both companies, and the wider society of which they are a part, can flourish in a fair and sustainable way.

As for international corporations: they are often offered all sorts of tax breaks to set up business in a given country. The onus should quite rightly be on the law makers to close loop holes of which they do not approve and to define the rules under which they wish business to operate.

RE: two faced
By chris2618 on 1/2/2013 2:10:56 PM , Rating: 3
The UK parliament doesn't have legislative power with regards to the internal affairs of Bermuda.

RE: two faced
By nolisi on 1/3/2013 2:00:31 PM , Rating: 2
This is no different from the stink the Dems made over Mitt Romney's finances.

He used a loophole to defer personal taxes on an already lower personal gains tax through the Mormon Church.

Congress changed the law to close the loophole in 1997, but he was grandfathered in.

Part of the problem is the law- you are correct. But when money (and church, in this case) play with politics, people in power can structure laws to their own advantage.

The best example is that we've all been convinced that capital gains should be taxed lower than traditional income because "it encourages investment." And yet we live in a society where we complain that there isn't enough skilled labor for the jobs we insource for, and we outsource what is considered to be unskilled labor. Shouldn't we be encouraging people to work hard just as much, if not moreso than investors? Investors will continue to invest because it's the easiest way to make money work for them.

RE: two faced
By retrospooty on 1/2/2013 12:23:11 PM , Rating: 5
I guess I am evil too... I also make moves to pay as little tax as possible within the law. Dont you do that too Nortel? If not, your not too bright.

Ignoring that I do it for my own personal financial benefit, an easy justification is not NOT have any more of my money wasted on bad govt. Reps, Dems, all of them just waste our money to the point it's almost criminal.

RE: two faced
By homebredcorgi on 1/2/2013 1:03:27 PM , Rating: 5
The difference is that you, as an individual can't buy a PO Box in Bermuda, call that your primary residence and then cut your US tax bill in half - that would be considered tax fraud. Yet as a corporation, it is perfectly legal.

I would be surprised if Google has a single full-time employee in Bermuda yet they get to claim it as their primary headquarters.

RE: two faced
By retrospooty on 1/2/2013 1:13:40 PM , Rating: 2
Can you name a company that doesn't do that? We only pick on Apple and Google because they are a couple of today's top earners and this is a tech site...

It's legal. It's legal because long ago companies paid off the right congressman and senators to not do anything about it. If it ever comes up again, companies pay off the new round of hoods we send to Washington. Google and Apple are just doing what they can because that is how business is done in the USA. Take that away and companies like them may just move their whole business offshore..

RE: two faced
By room200 on 1/2/2013 1:30:09 PM , Rating: 3
It's also legal that members of congress and use insider information to use for their personal gain when making investments; being legal doesn't make it right.

RE: two faced
By menting on 1/2/2013 1:48:58 PM , Rating: 3
then make it illegal then.
and I don't think it's legal anymore for members of congress to use insider information to make investments now. If i remember correctly a law was passed just for that not long ago.

RE: two faced
By xti on 1/2/13, Rating: 0
RE: two faced
By rsmech on 1/2/2013 6:43:07 PM , Rating: 2
I'm not certain either but the law did pass but only when they changed it from being illegal to just being an ethics violation. The last is just a slap on the wrist.

RE: two faced
By euclidean on 1/2/2013 1:50:47 PM , Rating: 2
Technically, it's no longer legal for them either (Insider Trading that is)...

RE: two faced
By ritualm on 1/2/2013 2:28:18 PM , Rating: 1
Does it even matter?

Corporations have more power than the government. Corporations literally have the government in their pockets. The law above does nothing but appease the ignorant public that something is being done - when the truth is it's business as usual.

RE: two faced
By hubb1e on 1/2/2013 6:54:06 PM , Rating: 2
If corporations had as much power as you claim then ObamaCare would not exist, many of the regulations we have today would not exist, unions would not be able to extort money from worker involuntarily and they would pay no taxes at all, perhaps harvesting us for our oily discharges so they could sell them back to us as makeup.

In truth some BIG businesses have some government power and they use that power to push out competition, but so do the people. You may not like what the people vote for but they do have power in our government and most of us are perfectly happy with the status quo.

RE: two faced
By Strunf on 1/4/2013 6:24:13 AM , Rating: 2
lol you really think ObamaCare is bad for big corporations? what if I told the pharmaceutical industry will still get their money regardless of the ObamaCare or not, heck they will probably get even more after all if you were sick and had no health care insurance you would stay at home and give no money to pharmaceutical companies now well you go and enjoy your benefits and the pharmaceutical companies will get their cut.
Be no fool the pharmaceutical industry hope is that even the homeless get health care.

RE: two faced
By wookie1 on 1/2/2013 7:09:53 PM , Rating: 2
Are you sure? The government has guns, and the legal authority to use violence against you, and you're more afraid of a corporation?! Limiting the power of government is the only way to prevent the corporatism that is what I think you actually fear.

RE: two faced
By ritualm on 1/2/2013 7:34:04 PM , Rating: 1
Are you sure? The government has guns, and the legal authority to use violence against you, and you're more afraid of a corporation?! Limiting the power of government is the only way to prevent the corporatism that is what I think you actually fear.

Who actually writes the laws in USA? Big hint: it's not the congressmen and senators on Capitol Hill, they just pass/vote down based on party lines and special interests.

Corporations use the government to enforce unjust laws against you, and you're saying I should be more scared of the government sending its Secret Service agents to my house? I don't think you're paying attention.

RE: two faced
By wookie1 on 1/3/2013 12:51:54 PM , Rating: 2
Actually, you just reinforced my argument. If the government was limited in its power as it is supposed to be, there would be no opportunity for the corporations, as well as special interest organizations to bend the ear of sympathetic lawmakers. As you say, it's the government enforcing these laws.

RE: two faced
By room200 on 1/2/2013 6:53:16 PM , Rating: 2
Thank you for that information. I try to be "up" on my stuff, but I didn't know that the bill had passed.

RE: two faced
By KCjoker on 1/2/13, Rating: 0
RE: two faced
By half_duplex on 1/2/2013 1:51:44 PM , Rating: 2
People (human beings) who profit from Google can't do that either.

Google is not a person, enjoys no mansions or super charged Porsches.

The more money Google makes, the more money its share holders and employees make, the more income tax revenue the government can impose.

Why don't people understand this?

RE: two faced
By Rukkian on 1/2/2013 3:58:49 PM , Rating: 2
While I personally think there should be no corporate tax rate, I do not agree completely with what you mention, as that would be investment income that is taxed much, much lower than wages (ex: Mitt Romney).

My personal opinion is to get rid of corporate taxes, and just have 1 flat tax with no deductions on all income from any source where you pay no taxes for the first say 30k. Stop all entitlements, stop all deductions, shelters, etc.

Wont ever happen because too many people loose their power in Washington and bribes (I mean campaign contributions) would dry up as it would not be neccessary from corps.

RE: two faced
By half_duplex on 1/2/2013 5:16:17 PM , Rating: 2
But slow down and think about what you are suggesting.

-Investment income is taxed at a lower rate because it requires investors assume a risk.
-At some point, money invested was once income, and taxed as income.

If there's no difference between earned and investment income, there'd be no incentive to take on the risk of investment. Without investment, you can kiss the whole thing goodbye.

RE: two faced
By BZDTemp on 1/3/2013 3:57:12 AM , Rating: 2
If there's no difference between earned and investment income, there'd be no incentive to take on the risk of investment.

Wrong. There may be less incentive if the tax is higher but as long as the tax isn't 100% then there is still an incentive.

RE: two faced
By Rukkian on 1/3/2013 3:51:52 PM , Rating: 2
You really think nobody would invest if they actually had to pay taxes?

You opposition is indicative of the attitudes of a great majority in this country. Lets make everybody else pay their "fair" share, but what is fair only means what helps you and hurts others.

We need to change things across the board. Make all income equal, does not matter where it comes from. Lets get everybody paying the same, no more loopholes, no more entitlements, no need for much IRS, as the tax code would be simple.

RE: two faced
By Lonyo on 1/2/2013 2:12:15 PM , Rating: 2
Set up a company in Bermuda then, and get your employer to pay the company.

RE: two faced
By arazok on 1/2/2013 1:08:40 PM , Rating: 5
Oh please. The real evil here is governments that can never, ever, suck enough money from the economy to satisfy themselves.

Google is one of the very few companies in the world that are actively pushing the envelope and transforming the way we live for the better. People should be outraged that the government is trying to hobble that progress so it can piss the money into oblivion through the government machine.

RE: two faced
By Cheeseavatar on 1/2/13, Rating: 0
RE: two faced
By wookie1 on 1/2/2013 7:05:12 PM , Rating: 3
It would be wonderful if the scope of government was more limited to that, but in addition to safety and security, they also want to be involved with almost every other aspect of your life. Not to mention taking money from you to dole out to their political friends and prop up crappy, wasteful programs.

RE: two faced
By arazok on 1/3/2013 9:18:34 AM , Rating: 2
Police and the Military are about the only services the government provides that I cannot provide myself. Everything else is simply a monopolized service that costs more and provides less then it would in the free market.

I can assure you, I’ll never forget that.

RE: two faced
By jharper12 on 1/5/2013 1:08:39 PM , Rating: 2
Agreed. We should all aim to maximize, not minimize our tax burden, in the name of the state. Good businesses shouldn't aim to minimize their expenses by legally gaming the system that politicians created, politicians who later decided the system they created is unfair. Businesses should be demonized for this insane action, not the politicians who created the system and later disliked the system they created.

Get real. Google is very much open about their tax advantaged planning. They want to make money, and make as much as possible, which is what a business aims to do. If governments want more of that money, the LEAST they could do is to create a loophole free system to collect it.

Politicians complaining about tax loopholes to me is equivalent to a boat maker building boat after boat with holes in it and complaining about the sea sinking all of his/her ships.

"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997

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