[rayiner]

I see a lot of talk about "tax loopholes" but not any specifics about exactly what those loopholes are. It's easy to blame the law (a process which is mostly just a self-reinforcing talking point), but has it occurred to anyone that maybe neither the law nor Google are "crooked?"

You can take the most straightforward law and it still won't withstand a company putting all their IP in a tax haven and then attributing most of their revenues to their tax haven subsidiary. That's not taking advantage of a "loophole" that's taking advantage of the fact that: 1) accounting for revenue is inherently complicated, regardless of the tax laws, especially for service businesses and software services businesses at that; and 2) multi-national corporations must have some way to attribute income to the various countries in which they operate; it wouldn't be fair for every country to individually tax all the company's income separately.

It's instructive to try and figure out a tax law that would allow say the U.K. to reach some portion of Google's income. It's harder than it seems. For example, is it relevant that Google has customers in the U.K.? It shouldn't be--there is no sales tax on search services. If someone in the U.K. for example calls up their accountant in the U.S. for advice, as a general rule the accountant isn't liable for income taxes in the U.K. Is it relevant that Google has servers in the U.K.? Sure. But how relevant? How much of the value of Google's service derives from the servers in the U.K. versus the code and algorithms that were developed in California? I think most people would agree that the servers are just incidental--the real value of Google's services is the algorithms and data. So why should the mere existence of servers in the U.K. entitle the country to tax some substantial amount of Google's income?

[ars]

> I see a lot of talk about "tax loopholes" but not any specifics about exactly what those loopholes are.

See here: https://en.wikipedia.org/wiki/Double_Irish_arrangement

The "cheating" accusation comes because you have to be very large to be able to make use of this. If everyone could use this tax arrangement people wouldn't complain. (Well, they would complain that it exists, but not that people use it.)

[rayiner]

The double Irish arrangement isn't a loophole, or if it is its a loophole that's the fault of the Irish by not taking account of US transfer pricing rules. The basic problem is that transfer payments within multinational corporations makes it hard to account for income, and rules to attempt to achieve that accounting are easily undermined by tax haven jurisdictions.

[gamblor956]

The double-Irish is definitely a loophole. The basic premise of the loophole is that Irish-incorporated companies don't owe Irish income taxes on their business activities if they are not managed in Ireland.

This is a relatively recent change to the Irish tax code (based on the pace of tax law development)--and was introduced only after the development of transfer pricing rules (assignment of income to/between subsidiaries of multinational companies). In other words--the loophole was deliberately designed to get around U.S. and European transfer pricing rules and make Ireland "competitive" for multinational corporations.

[DanBC]

> So why should the mere existence of servers in the U.K. entitle the country to tax some substantial amount of Google's income?

This is wrong.

UK customers buy ads to be shown in the UK to UK viewers, from UK staff at Google's UK offices. They pay in UK pound sterling, from UK bank accounts. So far everything is in the UK. It is only at the very end of the process that someone in Google's Ireland office pushes a button to close the sale, thus taking the sale out of the UK (and our tax system) and into Ireland and their tax system.

This is a transparent dodge to avoid paying tax. It might be legal, but it's sleazy.

> but not any specifics about exactly what those loopholes are.

You don't know what you're talking about, which is fine, but why go to all that effort to create scenarios that aren't happening rather than just asking what is happening?

[rayiner]

> K customers buy ads to be shown in the UK to UK viewers, from UK staff at Google's UK offices. They pay in UK pound sterling, from UK bank accounts. So far everything is in the UK. It is only at the very end of the process that someone in Google's Ireland office pushes a button to close the sale, thus taking the sale out of the UK (and our tax system) and into Ireland and their tax system.

Except, arguably, the most important thing: the search algorithm and database that brings those UK customers to view those ads in the first place.

In any case, my point isn't that what Google is doing is the right answer. My point is that its quite debatable even from our armchairs how much tax revenue the UK is entitled to from Google's activities in the country. Google is just taking advantage of that complexity.

[DanBC]

Well, if you're tying tax to the algorithm then all the money should go back to the mothership. I have no idea what the rates of tax in Ireland vs California are.

It's not that debatable - we'll see unified tax codes across the EU. Some companies (not just Google) pushed things too far and set up weird schemes that exist only to reduce tax to a minimum.

> Google is just taking advantage of that complexity.

"Taking advantage of" also has negative connotations. Exploiting.

[polshaw]

Google doesn't sell searches, it sells advertising. They do much of that sales process for UK advertisers (effectively all of it according to one whistle-blower) in the UK, and 'close' them (and declare them) in Ireland.

Nobody is suggesting double taxation, but google does a substantial amount of (profitable) business in the UK, and (at least morally) that portion should be taxed in the UK.

[rayiner]

But that's doesn't make things any clearer. Google might do the sales process in the UK, but how much should that count when the ads are shown internationally and the platform that brings in the eyeballs is developed outside the UK? Clearly they should pay some taxes in the UK, but how to divvy it up? And how to achieve that process when there is nobody with overarching jurisdiction over the whole entity?

[markvdb]

How can a Bermuda google subsidiary be the owner of the intellectual rights? Where do these funds come from?

I guess the biggest loophole, even more than the double Irish, is non-existing or very lenient transfer pricing rules...