[governance] Re: Telecom TV on Google and Taxes

[parminder]

Dear Carlos

I agree that any position that IGC takes should follow an informed 
discussion. I will try to contribute to it.

A few points. (below)

On Thursday 13 December 2012 05:24 PM, Carlos A. Afonso wrote:
> Dear Parm, unfortunately (again) I am unable to follow up closely on 
> the thread. But one point intrigues me: taxes are determined by 
> governments within their geopolitical boundaries. Why don't 
> governments charge appropriate taxes (if any) on services such as 
> Google's?

Governments have general tax laws and structures and obviously not 
specific  to a company. The problem is that google builds a complex web 
of operations and entities to make their tax liabilities move to some 
tax havens (in this case, Bermuda). While non networked-digital 
businesses also do such things, it is so much easier for 
networked-digital businesses like google because the transactions 
themselves take place in the cyberspace.

Such a situation requires (1) national laws to be reformed to deal with 
the new situation, (2) international taxation treaties, and norms (model 
tax codes like OECD has) which can harmonise tax laws enough to enable 
countries to collect their tax dues and disable, or reduce, illegitimate 
tax haven systems. Point (2) becomes even more important, and perhaps 
central, in a globally distributed businesses like that of google which 
are conducted in cyberspace.

I quoted an EU document in an email to Adam which makes the problem as 
well as the needed solution quite clear....

    “E-commerce is, by its nature, a truly global process and no tax
    jurisdiction, acting in isolation, can resolve all the issues it
    raises. ... The successful administration and application of taxes
    will to a great extent depend on, inter alia, achieving an
    international consensus...”

In fact EU and OECD have been working on inter-country agreements, and 
model tax codes, to make sure thatthe  right tax goes to the right 
place.... Since the digital space is almost seamlessly global, and 
developing countries lose the greatest proportion of tax, it is only 
appropriate that such agreements, norms development etc is done at a 
global level, involving them. (This issue also figured at WCIT.)

It is therefore a core IG issue that needs global resolution. Loss of 
tax is loss to the more marginalised people whom the state serves on 
priority. We cannot ignore this issue.

In UK recently, when Starbuck was found to systematically avoid taxes, 
civil society groups <http://www.bbc.co.uk/news/uk-20650945> boycotted 
Starbuck outlets and also picketed them. (This has made Starbuck made 
new tax commitments.) The situation is so much worse with Google, not 
only on the scale of tax avoidance, but only the greater globalness of 
the issues, because of the very globalness of the cyberspace...

Why should, correspondingly, the global IG CS /not/ take action, as 
groups in UK did, now when cases of very huge tax avoidance by google 
have surfaced in so many countries...

We need to also demonstrate that we are ready to take action when 
economic and social rights and entitlements of people are involved, and 
not only in case of a narrow range of civil and political rights. That 
is my principle contention.


>
> The point is: I do not think a corporation of that size just evades 
> taxes and keeps an eye for what may happen. The certainly know about 
> tax legislation in the countries they have operations.

Yes, they keep a very keen eye on tax legislation and find international 
loopholes around them... (1) making use of their international 
operations (and cyberspaces based jurisdictionally fuzzy transactions) 
and (2) (this being the important point) /*absence of international 
agreements or norms in this area*/, which is new and thus challenges are 
new.

Campaigns against any kind of global regulation, agreements, norms 
creation with regard to the Internet (not only at WCIT but also 
elsewhere) directly serves the interests and agenda of google in this 
regard.... It for this reason that while civil society may rightly side 
with google to resist the wrong kind of things that are proposed at the 
WCIT,/*the world watches keenly what would the CS do when similar issues 
and processes of global Internet governance are implicated, where by far 
Google is on the wrong, and money that should be spent to welfare 
regimes in developing countries is being,  well, to use advocacy 
language, 'stolen' by it. */

And there is a clear connection between the two kinds of issues - Google 
spends money on one, and earns/saves (lots lots more) on the other..... 
And the overall issue about whether Internet needs any kind of 
democratic global governance and regulation at all or not connects the 
two sets of issues.... Civil society therefore needs to nuance its 
position, to be on the right 'public interest' side on both the sets of 
issues. It is for this reason important that we address this letter to 
Google. It will greatly raise our credibility.

parminder


>
> What is the proper way to define a policy on this for us?
>
> frt rgds
>
> --c.a.
>
> On 12/13/2012 02:33 AM, parminder wrote:
>>
>> Rather shameful that google paid 3 percent tax on its overseas profit!!
>> It surely leaves it with a lot of money to spend in lobbying and
>> advocacy efforts to keep global markets free for its unlettered
>> operations... Like organising campaigns against ITU, German legislature,
>> and so on.
>>
>> Would IGC write an open letter to Google that its tax evasion policy is
>> anti people, and it should pays its taxes where it makes its profit. (Or
>> is it that the IG civil society does not go into such re-distributional
>> questions )   It is not rhetorical but a real question to the list, and
>> its coordinator.
>>
>>   parminder
>>
>>
>> On Wednesday 12 December 2012 09:37 PM, Salanieta T. Tamanikaiwaimaro 
>> wrote:
>>> More on Bloomberg:
>>> http://www.bloomberg.com/news/2012-12-10/google-revenues-sheltered-in-no-tax-bermuda-soar-to-10-billion.html 
>>>
>>>
>>> On Thu, Dec 13, 2012 at 4:48 AM, Salanieta T. Tamanikaiwaimaro
>>> <salanieta.tamanikaiwaimaro at gmail.com
>>> <mailto:salanieta.tamanikaiwaimaro at gmail.com>> wrote:
>>>
>>>
>>>     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 people rated this an average of 3/5] [0 people rated this an
>>>     average of 3/5] [0 people rated this an average of 3/5] (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.
>>>
>>>
>>>
>>>
>>> -- 
>>> Salanieta Tamanikaiwaimaro aka Sala
>>> P.O. Box 17862
>>> Suva
>>> Fiji
>>>
>>> Twitter: @SalanietaT
>>> Skype:Salanieta.Tamanikaiwaimaro
>>> Tel: +679 3544828
>>> Fiji Cell: +679 998 2851
>>>
>>>
>>>
>>
>

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