Why can a super successful company like Google not take open pride in doing a bit of civic duty? The fact that they have to be cajoled into doing what is pretty much standard fare to make society function does NOT enamour me as a customer towards their long term well being in any way whatsoever - quite the opposite: I would happily jump ship if a transparent civilly minded alternative emerged (mostly thinking gmail/google-search here).
That's cute. Why don't you set a good example for Google by sending the government double what you owe in income taxes this year? Just call it a gift, because you couldn't correctly call it a "civic duty."
In fact, you're in a better position than Google to do so. Any publicly-traded company like Google would be immediately sued for dereliction of duty to shareholders to minimizing taxes if they decided to start giving away extra money (shareholders' money) to the government.
By the way, in 2010 Google paid $2.3 billion federal tax on income of $10.8 billion.
I do, pretty much. I'm a freelancer with my own limited company. I could pay myself pretty much entirely from dividends (=lower tax rate) rather than wages subject to income tax. Many people do. Instead, I pay myself a living wage with standard PAYE income tax/National Insurance, and only use the dividend if I've made a profit in the year.
Am I minimising my tax bill? No. But being a decent human being who contributes to a civilsed society is more important to me. Some of us actually believe in this "don't be evil" stuff.
ahh but you can't pay yourself entirely from dividends. at least, if you are speaking form the standpoint of a US citizen/tax payer. there is a vague but very well litigated stipulation that your wages must be "fair" and commensurate with the work you do for the corporate entity you own. if not, they'll just say your dividends were wages and you owe back taxes + interest and penalties.
I'm in the UK (hence the reference to National Insurance). The (roughly) equivalent legislation here is IR35 [1]. But it's not too onerous and there are plenty of people who successfully pay fairly minimal tax while complying with IR35.
In the UK you pretty much can pay yourself entirely in dividends. What many people do is pay themselves over the National Insurance threshold (£8064, which nowadays essentially matters only for being able to claim a state pension eventually) but below the personal allowance (£10600, below which you don't pay any income tax), and then the remainder in dividends. Note as of the 2015 UK Budget the law relating to dividends has changed which makes the tax due far closer, and that comes into effect for the 2016/2017 tax year.
How's that different from any other freelancer? They all pay themselves a salary until they get to the higher income tax bands, then they pay a dividend. That's the most tax efficient way of doing it usually due to the presence of the personal allowance on income.
The government will then spend that money on dropping bombs on people in Iraq and Syria, propping up the housing market with dubious schemes and helping already wealthy pensioners.
You might be better optimising your affairs for lower tax, then spending the money you gained on something more ethical.
I wouldn't disagree on the specifics, but in the round I believe in a tax-funded government. Our county council is closing children's centres, removing rural bus subsidies, cutting back education support, and a thousand other cuts. The more people that avoid tax, the more cuts there'll be.
The tax receipts from individuals are a tiny fraction of those paid/due from large entities. The cuts are not due to individual tax dodgers, they are politically motivated.
In general Tory governments cut taxes, Labour increase them. As we swing back and forwards between parties the tax take oscillates backwards and forwards. This is all about political ideology rather than the actual budget.
If your tax preparer tells you that, thanks to deductions written into tax law, you only need to pay half as much tax, do you tell them "no, leave the deductions off, I want to do my civic duty"?
In this case, the UK government disagreed with the interpretation of those deductions, leading to a dispute that this article reports the resolution of. But that doesn't seem like any reason to claim that it's the "civic duty" of anyone, person or corporation, to pay more tax than they absolutely have to.
The fallacy here is that when you look at the numbers, they're not just using ordinary deductions - they can't because then they couldn't arrive at these results.
These kind of things work by deliberately setting up perverse virtual organizational structures to take advantage of complex loop holes. It is abusive, in the strict term of the word.
Using your analogy, would what you say if your tax preparer told you that if you proforma-married a woman in country X and used her name to set up a non-existing company in country Y, because then you'd qualify for certain deductions?
Comparatively in terms of size of the commitment you example would be more like an accountant telling Google that they could make big savings if they moved 10k employees across to a tax haven.
A better comparison for what is happening would be your accountant telling you you could pay them 1% of your yearly earnings extra and they could set you up to save many times that in tax.
Any publicly-traded company like Google would be immediately sued for dereliction of duty to shareholders to minimizing taxes
There is no such duty in law. What they have to do is operate in accordance with the mission statement in the annual report and this is decided by the shareholders at the AGM.
If this said "we will pay maximum taxes in host countries where we operate" then shareholders could sue them for not doing that.
I don't know about the "we pay taxes" specifically.
But there are examples like Google and Facebook "don't expect any dividends" [1]
Then there are a whole host of Corporate Social Responsibly activities [2] where companies promise to spend income on social programmes and other nice things.
CSR is a growing movement.
You can participate in ISO 26000 [3] which has a section on involvement in the community and other activities which potentially eat into raw profit.
Companies can also get certified as SA 8000 [4] compliant but that is aimed more at the treatment of workers.
What would you think of a tax accountant who didn't try to save you money on your taxes (legally)? Probably you'd wonder why they have that job if they're not good at it.
For this sort of professional, their customers come first.
>What would you think of a tax accountant who didn't try to save you money on your taxes (legally)?
It wouldn't be up to the tax accountant to make this type of decision. It would be the CEO going to them and saying, "hey guys, I know you have tried to minimize taxes in your past jobs, but we do things a bit differently here..."
re: downvotes. You gotta understand that tax accountants' job is more than just to minimize taxes.
Because they are a US publicly-traded company. By law, Google only exists for the benefit of its shareholders. Everything else Google does, good or evil, is simply a means to that end. That's how US corps work.
Comments
Why can a super successful company like Google not take open pride in doing a bit of civic duty? The fact that they have to be cajoled into doing what is pretty much standard fare to make society function does NOT enamour me as a customer towards their long term well being in any way whatsoever - quite the opposite: I would happily jump ship if a transparent civilly minded alternative emerged (mostly thinking gmail/google-search here).
That's cute. Why don't you set a good example for Google by sending the government double what you owe in income taxes this year? Just call it a gift, because you couldn't correctly call it a "civic duty."
In fact, you're in a better position than Google to do so. Any publicly-traded company like Google would be immediately sued for dereliction of duty to shareholders to minimizing taxes if they decided to start giving away extra money (shareholders' money) to the government.
By the way, in 2010 Google paid $2.3 billion federal tax on income of $10.8 billion.
I do, pretty much. I'm a freelancer with my own limited company. I could pay myself pretty much entirely from dividends (=lower tax rate) rather than wages subject to income tax. Many people do. Instead, I pay myself a living wage with standard PAYE income tax/National Insurance, and only use the dividend if I've made a profit in the year.
Am I minimising my tax bill? No. But being a decent human being who contributes to a civilsed society is more important to me. Some of us actually believe in this "don't be evil" stuff.
ahh but you can't pay yourself entirely from dividends. at least, if you are speaking form the standpoint of a US citizen/tax payer. there is a vague but very well litigated stipulation that your wages must be "fair" and commensurate with the work you do for the corporate entity you own. if not, they'll just say your dividends were wages and you owe back taxes + interest and penalties.
I'm in the UK (hence the reference to National Insurance). The (roughly) equivalent legislation here is IR35 [1]. But it's not too onerous and there are plenty of people who successfully pay fairly minimal tax while complying with IR35.
[1] https://www.gov.uk/guidance/ir35-find-out-if-it-applies
In the UK you pretty much can pay yourself entirely in dividends. What many people do is pay themselves over the National Insurance threshold (£8064, which nowadays essentially matters only for being able to claim a state pension eventually) but below the personal allowance (£10600, below which you don't pay any income tax), and then the remainder in dividends. Note as of the 2015 UK Budget the law relating to dividends has changed which makes the tax due far closer, and that comes into effect for the 2016/2017 tax year.
How's that different from any other freelancer? They all pay themselves a salary until they get to the higher income tax bands, then they pay a dividend. That's the most tax efficient way of doing it usually due to the presence of the personal allowance on income.
The government will then spend that money on dropping bombs on people in Iraq and Syria, propping up the housing market with dubious schemes and helping already wealthy pensioners.
You might be better optimising your affairs for lower tax, then spending the money you gained on something more ethical.
I wouldn't disagree on the specifics, but in the round I believe in a tax-funded government. Our county council is closing children's centres, removing rural bus subsidies, cutting back education support, and a thousand other cuts. The more people that avoid tax, the more cuts there'll be.
The tax receipts from individuals are a tiny fraction of those paid/due from large entities. The cuts are not due to individual tax dodgers, they are politically motivated.
In general Tory governments cut taxes, Labour increase them. As we swing back and forwards between parties the tax take oscillates backwards and forwards. This is all about political ideology rather than the actual budget.
Amazingly the government has a form that you can visit to make a gift to the US treasury, should you so please:
https://www.pay.gov/public/form/start/23779454
More amusing is that the FCC has started calling their fines "voluntary contributions to the US treasury".
Why would he pay double his income taxes to set an example? No doubt he is already paying the government what he legally owes in that respect.
Google on the other hand aren't, are they?
If your tax preparer tells you that, thanks to deductions written into tax law, you only need to pay half as much tax, do you tell them "no, leave the deductions off, I want to do my civic duty"?
In this case, the UK government disagreed with the interpretation of those deductions, leading to a dispute that this article reports the resolution of. But that doesn't seem like any reason to claim that it's the "civic duty" of anyone, person or corporation, to pay more tax than they absolutely have to.
The fallacy here is that when you look at the numbers, they're not just using ordinary deductions - they can't because then they couldn't arrive at these results.
These kind of things work by deliberately setting up perverse virtual organizational structures to take advantage of complex loop holes. It is abusive, in the strict term of the word.
Using your analogy, would what you say if your tax preparer told you that if you proforma-married a woman in country X and used her name to set up a non-existing company in country Y, because then you'd qualify for certain deductions?
Comparatively in terms of size of the commitment you example would be more like an accountant telling Google that they could make big savings if they moved 10k employees across to a tax haven.
A better comparison for what is happening would be your accountant telling you you could pay them 1% of your yearly earnings extra and they could set you up to save many times that in tax.
There is no such duty in law. What they have to do is operate in accordance with the mission statement in the annual report and this is decided by the shareholders at the AGM.
If this said "we will pay maximum taxes in host countries where we operate" then shareholders could sue them for not doing that.
Are their any good examples of large multinationals who have taken a stance similar to this?
I don't know about the "we pay taxes" specifically.
But there are examples like Google and Facebook "don't expect any dividends" [1]
Then there are a whole host of Corporate Social Responsibly activities [2] where companies promise to spend income on social programmes and other nice things.
CSR is a growing movement.
You can participate in ISO 26000 [3] which has a section on involvement in the community and other activities which potentially eat into raw profit.
Companies can also get certified as SA 8000 [4] compliant but that is aimed more at the treatment of workers.
[1] http://www.fool.com/investing/general/2014/11/06/why-google-...
[2] https://en.wikipedia.org/wiki/Corporate_social_responsibilit...
[3] https://en.wikipedia.org/wiki/ISO_26000
[4] https://en.wikipedia.org/wiki/SA8000
What would you think of a tax accountant who didn't try to save you money on your taxes (legally)? Probably you'd wonder why they have that job if they're not good at it.
For this sort of professional, their customers come first.
And, as a shareholder, what would you think of a CEO who didn't hire a tax accountant to make sure you paid as little tax as possible?
It's not like shareholders don't have to pay taxes on capital gains and dividends.
It wouldn't be up to the tax accountant to make this type of decision. It would be the CEO going to them and saying, "hey guys, I know you have tried to minimize taxes in your past jobs, but we do things a bit differently here..."
re: downvotes. You gotta understand that tax accountants' job is more than just to minimize taxes.
Because they are a US publicly-traded company. By law, Google only exists for the benefit of its shareholders. Everything else Google does, good or evil, is simply a means to that end. That's how US corps work.
But since its management own a large amount of google shares, this argument is not very convincing.
Because these managers put personal preferences above shareholder value? They won't remain managers for very long at that rate.
Companies like Google should be taxed on revenue, if they hide their profits.