Surprised there’s no thread on this yet…from Bloomberg.com Google 2.4% Rate Shows How $60 Billion Is Lost to Tax Loopholes - http://noir.bloomberg.com/apps/news?pid=20601087&sid=aujAc626t9WY&pos=4 But I guess that’s what CFA curriculum preaches anyway, tax evasion bad, tax avoidance alright… have to give credit to these guys in google though…smart in all aspects.
So, you think tax avoidance is evil? Are you one of the people that donates extra money to the IRS every year?
ahh Transfer pricing welcome to my world. Great article, and very interesting read for me, thanks. Google has probably sold most of its technology to offshore companies now, so with current TP regs, they can keep on shifting those profits!!!
Google is full of Jackassery!
Actually after reading the full article now. It seems the intangibles are in a bermuda company for offshore usage. So its only for all foreign sales that google is avoiding taxes. It would be interesting to know what sort of royalty rate is charged for the technology, then it could be known how much revenue the IRS is missing out on.
What I don’t get is this part - “The IRS gave its consent in a secret pact known as an advanced pricing agreement.” Huh? I didn’t know you could sit down with the IRS over coffee and make secret pacts. Isn’t this “evil” on google’s part? Or is it legal to have “secret pacts” like this?
APPL and MSFT, as other non-tech big companies, have hoards of cash in offshore non-taxable locations. That’s why the recent talk of a tax holiday as come to light recently. Some companies (like GOOG) need less than others (APPL) to bring those dollars back home, as they spent billions in foreign based R&D facilities. The big question is, however, is it evil to use current tax world wide rules to avoid paying taxes as much as possible? What do you think the shareholders will think if you didn’t?
Well, its legal because the system allows it and then the system cribs about how they don’t get enough money back. Unfortunately, with the powerful lobby groups, it’s hard to change it as well. But it’s amazing that the system has gone to such an extent that its practically helping the companies in not paying any tax at all. That’s what is shocking to me. System here refers to overseas governments as well.
I thought you were going that way, sparky419, but was not sure. I fully agree. I think the system itself is evil. A better functioning system, more transparent and with less loopholes, would probably help lowering the overall tax rate, increasing revenue needed to pay for budget deficits.
Without the loopholes companies and people etc have less incentive if the tax department starts taking so much of their profits. Its a catch 20-20 here. And with regard to advanced pricing agreements’ being a secret pact, that is just some sensationalism by the media. Most tax offices in western countries do this. It is basically agreeing before hand for a defined period what the intercompany pricing will be. And most tax offices will be sure to ensure the pricing is fair (ie at market prices, that independent parties would pay for such). However the IRS may have got screwed by google because the intangibles priced may have been difficult to price and the IRS not sophisticated enough to price properly, at that stage anyway. Thats why if any of you guys have some good ideas that are sure fire money makers, be sure to get them offshore now before they are known to be profitable and you can save some big $$$$'s!!