[governance] Telecom TV on Google and Taxes

Wed Dec 12 10:48:16 EST 2012

Somehow it feels that there is a targeted media campaign out against the
likes of Google and other mncs - the timing of the release is almost
impeccable with the WCIT.

Source:
http://www.telecomtv.com/comspace_newsDetail.aspx?n=49763&id=e9381817-0593-417a-8639-c4c53e2a2a10

Google “can make money without doing evil” (as it evades $2bn in taxes)
Posted By TelecomTV
One<http://www.telecomtv.com/go/?ct=9&id=e9381817-0593-417a-8639-c4c53e2a2a10>
 , 12 December 2012 | 1
Comments<http://www.telecomtv.com/comspace_newsDetail.aspx?n=49763&id=e9381817-0593-417a-8639-c4c53e2a2a10#comments>
 |    (0)
Tags: *Google <http://www.telecomtv.com/results.aspx?tag=122&tagname=Google>
* *corporate<http://www.telecomtv.com/results.aspx?tag=6972&tagname=corporate>
* *tax <http://www.telecomtv.com/results.aspx?tag=434&tagname=tax>*
*Finance<http://www.telecomtv.com/results.aspx?tag=365&tagname=Finance>
*

As the net closes around the multinationals that avoid paying corporation
taxes, Google is accused of saving $2bn by routing income through a “Double
Irish Dutch Sandwich”, paying tax of just 3.2 per cent on its overseas
profits. Guy Daniels reports.

Three questions. One; where do you stand on the subject of tax avoidance?
We at TelecomTV believe that individuals and corporations have a duty to
pay their fair share of tax. By fair, we mean whatever respective
governments rule to be the legal requirement (after all, in most countries,
we voted the politicians in to office). By all means try and mitigate the
amount of tax you have to pay, using whatever accepted mechanisms are
available. But avoidance? That just means somebody else (with far less
access to expensive and clever advisors) has to contribute to your share as
well.

Second question: how do you define evil? The Oxford English Dictionary
defines evil as “profoundly immoral and wicked” or “something which is
harmful or undesirable”. In my book, that means tax avoidance is evil,
simple as that.

Third and final question: Is Google evil? If you believe that avoiding tax
is wrong (especially through aggressive and mind-boggling complicated
avoidance schemes) and if you believe that depriving society of tax
revenues is wrong (and so reducing the level of available State support for
the most needy) and could be described as an evil act, then surely you must
conclude that Google is acting in an evil manner.

An investigative report by
Bloomberg<http://www.bloomberg.com/news/2012-12-10/google-revenues-sheltered-in-no-tax-bermuda-soar-to-10-billion.html>
has
discovered that Google avoided about $2 billion in worldwide income taxes
in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company –
almost double its total from three years ago. The information was disclosed
in a November filing by a Google subsidiary in the Netherlands, which was
discovered by reporters from Bloomberg.

It appears that Google legally routed profits from overseas subsidiaries
into Bermuda, which doesn’t have a corporate income tax, thereby enabling
it to cut its overall tax rate almost in half. Bloomberg says the amount
moved to Bermuda is equivalent to about 80 per cent of Google’s total
pretax profit in 2011.

Tax evasion and avoidance costs the European Union a staggering €1 trillion
a year. That’s worth dwelling on for a moment longer…. €1 trillion. No
wonder politicians are now acting to try and prevent this financial loss
and branding such acts as scandalous and immoral.

Bloomberg has a good quote from a UK-based tax accountant, which pretty
much sums up the feeling in Europe at the moment. According to Richard
Murphy of Tax Research:

“The tax strategy of Google and other multinationals is a deep
embarrassment to governments around Europe. The political awareness now
being created in the UK, and to a lesser degree elsewhere in Europe, is:
It’s us or them. People understand that if Google doesn’t pay, somebody
else has to pay or services get cut.”

Just look what happened to Starbucks. When the public discovered the US
coffee giant paid zero taxes in the UK (yes, absolutely nothing at all), it
started to boycott the chain.
Advertisement
As a result, Starbucks was forced to “volunteer” to pay taxes…

The UK is Google’s second-biggest market, responsible for about 11 per cent
of its sales. Of the $4 billion it turned over last year, it paid UK
corporation tax of less than $10 million. Bloomberg says Google avoids tax
by using an Irish subsidiary to collects revenues from ads sold in the UK,
which then pays royalties to another Irish subsidiary whose legal residence
is in Bermuda. Payments are then sent to yet another subsidiary in the
Netherlands (with no employees, note) before finally reaching the tax haven
of Bermuda.

Sounds pretty ‘evil’ to me. And if so, then that’s against the internet
company’s guiding principles. Stated clearly on the “Ten Things We Know to
be True” page on Google <http://www.google.com/about/company/philosophy/>’s
website is the following:

“You can make money without doing evil.”

I’m sorry, Google, but I don’t see how avoiding tax is anything but evil.
Of course you – and all companies – have a duty to shareholders to maximise
profits. But there are rules. Some of these are merely ethical, whilst some
are legal. There is no indication or suggestion that Google has acted
illegally, but there is every suggestion that it has acted unethically.

And who said you can’t have ‘ethical companies’? Of course you can. I don’t
buy the ‘extreme capitalist’ viewpoint that corporations will only act in
self-interest and never “do the right thing” or pay their fair share. If
their customers start to boycott their services, then they’ll change. It
happened with the sudden emergence of all the so-called ‘corporate
responsibility’ positions that all featured heavily in annual reports. I
don’t see why it can’t happen with fair tax positions.

Other ICT companies reported in the media to be using this complicated tax
evasion (sorry lawyers, of course I mean ‘mitigation’…) structure include
Apple, Facebook, Microsoft and Oracle. Unfortunately, Google – and all the
others, who no doubt will soon be named and shamed – will continue their
sharp practices until they are forced to make a change. If governments
can’t do that through the legal process, then it’s up to customers to vote
with their feet and walk away from Google services. As Richard Murphy said,
consumers are beginning to get the message that it’s “us or them”, and
we’re already being squeezed by the many austerity measures that are in
effect to drag us out of recession.

Come on Google, time to step up to the plate and show some leadership. Pay
your fair share. And then the rest of the ICT industry can do likewise. Or
else remove that fatuous and out-dated “don’t do evil” slogan from your
website once and for all.

*Further reading: *The Pearse
Trust<http://www.pearse-trust.ie/blog/bid/86105/US-Companies-Their-Use-Of-The-Double-Irish-Dutch-Sandwich>
blog
has a detailed explanation of the so-called “Double Irish Dutch Sandwich”
tax scheme. Please don’t try and implement it.
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