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Sunday, May 19, 2013

A whistle, blown

A certain corporation has been actively avoiding British taxes:
A FORMER Google executive has blown the whistle on a massive and “immoral” tax avoidance scheme that has “cheated” British taxpayers out of hundreds of millions of pounds over the past decade.

Barney Jones, 34, who worked for the internet search giant between 2002 and 2006, has lifted the lid on an elaborate structure which diverts British profits through Ireland to the Bermuda tax haven.

Although Google’s London sales staff would negotiate and sign contracts with British customers, and cash was paid into a UK bank account, deals were technically booked through its Dublin office to minimise its liabilities here. Jones, a devout Christian and father of four, is ready to hand over a cache of more than 100,000 emails and documents to HM Revenue & Customs (HMRC), detailing the “concocted scheme”. 
My father was sentenced for twelve years of prison for a similar avoidance scheme that amounted to $2 million.  Granted, that was in the USA and not the UK, but I tend to doubt that Google only used this sort of scheme to divert British profits. I wonder how much prison time the influential and politically connected Google executives will see?  About as much as John Corzine saw for failing to return hundreds of millions of dollars on deposit with MF Global to its depositors, I expect. 

Some versions of this sort of structure are perfectly legal, of course.  If the sales staff had been in Dublin and the cash paid into Ireland, there wouldn't be an issue; the business would be legitimately Irish.  But the more influential corporations become, the more they expect to be permitted to not have to bother with petty matters such as sovereign nations and national law when it doesn't suit them to do so.

This should suffice to demonstrate that corporatism is manifestly not capitalism, and moreover, that it is intrinsically hostile to national interests.  Never forget that corporations are artificial creations of the State.

Labels:

62 Comments:

Anonymous Earl May 19, 2013 4:41 AM  

corporations Are Constructs of The State, And Intellectual Property Is A Delusion Of The State.

Anonymous Adsignatos D. May 19, 2013 5:28 AM  

Even as a child, the notion of a corporation being a legal person made my BS alarm go off. And you know, even if there were many people of good intent that believed in that phrase, "Don't be evil", it is clearly not enough just to chant mantras and have dedicated Ethics Departments. I am sure the Ilk knows this well enough, but of course there are many that have an incredibly naive, ignorant, and absurdly high view of human nature.

Anonymous Roundtine May 19, 2013 5:31 AM  

Google is the government.

Anonymous zen0 May 19, 2013 6:03 AM  

The whistle-blower will get audited.
Correction: His Estate will get audited, after the unfortunate accident.

Since when did being a devout Christian mean one must be an agent of the State?

Anonymous Outlaw X May 19, 2013 6:10 AM  

This should suffice to demonstrate that corporatism is manifestly not capitalism, and moreover, that it is intrinsically hostile to national interests. Never forget that corporations are artificial creations of the State.

Besides prosecutors do not like cement shoes, they prefer leather.

Anonymous Outlaw X May 19, 2013 6:14 AM  

Notice the Kaufman county Texas Prosecutors deaths have left the news cycle.

Anonymous Stilicho May 19, 2013 6:31 AM  

but, but, but we had to pay all of our local revenue to our offshore subsidiary as licensing fees and royalties, so we didn't really make any money here you see..all of the profit was made in this low tax jurisdiction...

It's a highly lucrative business model, but I don't recommend anyone not named Apple, Google, GE, etc. try it. It's continued use illustrates several absurdities: U.S. corporate tax rate, U.S. tax structure in general, the idiocy of an income tax in the first place, the foolishness of allowing groups/associations/corporations/unions, etc. to contribute to political campaigns, and last, but not least, the generally accepted pretense that mere legality equates to proper conduct (although it is difficult not to cheer for the revenuers being hoist on their own petard, it is also difficult not to see that they treat massively wealthy corporations different from citizens; just imagine what the IRS' response would be if Joe the Plumber paid the bulk of his U.S. earnings over to his Bermuda corporation as a "licensing fee" for use of "plumbing techniques" copyrighted and owned by his Bermuda sub).

Anonymous Just Mark May 19, 2013 6:43 AM  

I wonder why none of Corzine's victims have sought him out and taken away his breathing privileges. I guess the devil takes care of his own. Then again perhaps investing in personal security company stocks. What am I thinking ... the elite would just steal the investment.

Blogger tz May 19, 2013 6:56 AM  

This is at least 4 years old

Why now? Socionomics mayve.

Apple does it too. I suspect more Microsoft detraction, or desperation as the EU is about to collapse. And not unlike Amazon first threatening to move their fulfillment centers then supporting the internet tax.

As to Corzine, the devil still has him as a useful tool - remember the temptation - ALL the kingdoms of the earth. Corzine's freedom just shows who ultimately runs the country.

As to "don't be evil", it can only have meaning if morality is objective, and I see no evidence Google is either monotheistic, generic natural law, or Ayn Rand ovjectivist.

Corporations (undead monster bodies animated by the Frankenstate) are persons with 1st amendmendment rights (citizens united), but unborn human beings aren't. Nor are those the Prez declares "terrorists".

You can't have immigration and national sovreignity.

Anonymous DrTorch May 19, 2013 7:02 AM  

This is Google's fault? Corps set up all sorts of cost centers to deal with various government (fed and provincal) regulations...just to do business with the government!

And how is the only time newspapers laud a person for being a Christian is when he actively serves state interests?

Blogger tz May 19, 2013 7:03 AM  

We are a nation of the lesser evil. Google has to play the SAME games everyone else does, or their board would fire them - the law is also specific that they work for the shareholders, so must maximize profits so they can pay dividends or buy back stock. So if it means oppressing your workforce, gouging your buyers, squeezing your vendors, they must.

(Ignacio Lopez was the cost-cutter at GM and did evil things, then there's the intermittent wiper, so it is not even recent or confined to tech)

Note Apple did something criminal in their pricing ofnstock options (David Cay Johnston, "Free Lunch") - the IRS whistleblower that noticed was fired, but this was a clear, open and shut prosecutable case. This was under Steve Jobs.

Blogger tz May 19, 2013 7:18 AM  

OT, sort of ,but reason #576 to homeschool. Watch out for those bus drivers (~4 min in).

Anonymous Andy May 19, 2013 7:20 AM  

Google has not evaded any taxes. Tax evasion being the problem cos it is illegal.
Google has avoided paying lots of tax which is legal and easy due to the idiot tax rules in the UK.

This is driven by idiot left wing politicians who wish more money for their idiot plans.

Anonymous Salt May 19, 2013 7:24 AM  

You can Google the story. Now, that's funny.

Anonymous cmc May 19, 2013 7:45 AM  

An email release war with Gmail? This should be fun.

Anonymous The Master Cylinder! May 19, 2013 8:21 AM  

"a scheme that has “cheated” British taxpayers out of hundreds of millions of pounds"

Just think, they could have imported even more hundreds of thousands of extra hostile, violent Muslim rapists and their endless families and put them on the dole, but Google **cheated** them out of all that enrichment. That money belonged by right to mooching rapist foreigners, not to Google.


Anonymous The other skeptic May 19, 2013 8:35 AM  

None of that is important compared to the resurrection of detroit through the power of black innovation.

Anonymous wcu May 19, 2013 8:38 AM  

Sorry about your dad vox...everyone it seems have their favorites. The older I get, the more it seems its high school extended out...if your with the in crowd, untouchable...if not, no damn soup for you.

Blogger Jamie-R May 19, 2013 8:46 AM  

Always fascinating, your posts, Vox. A modern genius.

Blogger Nate May 19, 2013 8:58 AM  

you create a means for people to insulate themselves from the legal liabilities normally associated with their trade...

Then you shouldn't be surprised when they abuse it.

Anonymous Will Best May 19, 2013 10:44 AM  

you create a means for people to insulate themselves from the legal liabilities normally associated with their trade...

On the other hand energy costs would be double what they are now if we didn't allow protection from legal liabilities unless we decided to modify our tort system to be remotely sane.

The other bit is we regulate trillions of dollars of compliance costs onto industry, which is nothing more than a tax that exclusively benefits lawyers, accountants, and bureaucrats. Big Bus prefer that tax because its anti-competitive.

Anonymous Noah B. May 19, 2013 11:28 AM  

This tax avoidance structure is fairly widespread among major corporations -- Apple and GE are employing similar ones. And Google seems to be using the same scheme to avoid paying US taxes, too.

This is the essence of tyranny: ordinary citizens are punished harshly for conduct that the politically well connected engage in openly.

Anonymous Gunn May 19, 2013 11:51 AM  

This is an interesting case due to the sheer hypocrisy involved. Margaret Hodge, chair of the committee going after Google and similar US firms is a big shareholder in Stemcor, which prima facie appears to have arranged its tax affairs (legally) to pay very little UK tax vs. its total (global) revenue figures (it pays a far lower absolute profit to HMRC vs. Google, Starbucks etc, despite having a broadly similar turnover). What is telling in this is that the state media outfit (BBC) seems unwilling to dig more deeply into the Stemcor arrangements, perhaps due to their anti-US bias, or perhaps due to their pro-labour bias (Hodge being a labour MP).

Ultimately, the politicians involved don't really have a leg to stand on - they make the laws, and if they could have brought Google to book on the law they would have done so already (and I doubt Google's lawyers would be so stupid to brazenly break such laws in the first place).

We'll have to see where the evidence leads on this case, but cases like this generally happen because over time legal codes have become so byzantine that legal loopholes to avoid tax are baked into the structure. It would be far better for legislators to scrap existing tax laws and redraft a much simpler 'one-size-fits-all' with no provisions for special interest groups. This won't happen of course, as there are too many snouts in the trough who would lose from such changes, so instead we have these show trials (usually conducted in the public arena rather than the courtroom) from time to time to show us the little people that our great politicians are trying to make the world a better place by rooting out the 'corruption' that they themselves have created.

Blogger tweell May 19, 2013 11:52 AM  

Don't be evil - unless it pays! Google just doesn't mention the last three words.

Remember, rules are for the 'little people'.

Blogger RobertT May 19, 2013 12:01 PM  

Joint stock companies, the precursor to today's corporation came into existence when the British were having trouble funding their overseas trading companies and the crown wasn't interested. It served a legitimate purpose. Limited liability may sound evil but how many of you would be invested in mutual funds if that put you on the hook for corporate debt? That being said, I personally believe the whole system would run better if investors had 'skin in the game'. In my state, professionals are excluded from the limited liability feature of corporations, and most professionals conduct themselves accordingly.

Blogger RobertT May 19, 2013 12:07 PM  

The difference between an illegal tax scheme and a legitimate business process is adequate planning around "valid business purpose." They have to prove intent to put someone in jail and if they run up against a valid business purpose they are up against the wall. You can track this concept all they way back to the legislative history of the 16th amendment, Supreme Court Case Glenshaw Glass and into the code in section 162. Obviously, tax avoidance is not a valid business purpose.

Blogger RobertT May 19, 2013 12:10 PM  

I will bet Google's defense will center on valid business purpose. Never underestimate the ability of clever people to mount a spirited defense.

Blogger RobertT May 19, 2013 12:15 PM  

Google should be running separate corporations in every country and even multiple corporations to avoid this kind of thing. For all the smarts everyone thinks they have, they aren't that smart.

Anonymous The other skeptic May 19, 2013 12:56 PM  

If Stan has the courage to change then so do you!

Anonymous David May 19, 2013 1:03 PM  

I would argue avoiding taxes is not doing evil. So Google is consistent. But their technical brilliance isn't matched by their legal savvy.

Anonymous rubberducky May 19, 2013 1:09 PM  

Twelve years for your dad, Vox? Damn, that's hard. I bet you're right nobody will see jail time at Google. This will underscore the long emerging fact that a class system is emerging again in Western governance. We have aristocrats and peons, all laws meant to bind only the latter.

Anonymous Gen. Kong May 19, 2013 1:46 PM  

There's nothing surprising in this. The only folks who would be titillated are those who continue to believe in the absurd mythology that there is some sort of "rule of law" in western "liberal democracies". There is no such thing. The only rule operating is the Goldman rule: He who has the gold makes the rules.

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Anonymous Will Best May 19, 2013 2:00 PM  

That being said, I personally believe the whole system would run better if investors had 'skin in the game'. In my state, professionals are excluded from the limited liability feature of corporations, and most professionals conduct themselves accordingly.

In your state professionals limit their liability by trusting their spouse and keeping everything not related to the business in her name. He then gets eviscerated when she divorces.

Alternatively they hide assets in trusts. There are ways to limit liability it just costs more money than the state granting it.

My state allows professionals to limit liability if they are adequately funded which it then defines. You just buy malpractice insurance up to the cap and you are set.

And the skin in the game is whatever you paid for the stock. General liability is a cluster @#$@ thanks to pay your own attorney's fees and joint & several liability.

One solution might be to grant liability but make it defined and limited. Such as $X per share related to some valuation of the company. That way you don't have somebody suing you for $2 billion dollars personally because Exxon crashed a tanker. They could sue you personally but it would cap out at $100 a share or whatever.

I think we shield the C-level execs too much though. Given their ballooning compensations they should also face ballooning risks.

Blogger Scott May 19, 2013 2:06 PM  

tax avoidance scheme that has “cheated” British taxpayers out of hundreds of millions of pounds over

Taxpayers... Somehow I don't get the idea the payers are benefitting from the British tax system. The ever growing heap of British taxtakers, yes, they probably feel cheated out of their fair share of the fruits of Google's labor.

Blogger ajw308 May 19, 2013 2:46 PM  

(Ignacio Lopez was the cost-cutter at GM and did evil things, then there's the intermittent wiper, so it is not even recent or confined to tech)
Are you talking about when GM had the guy who ran the 'process improvement' team that would go around to parts suppliers, move some equipment around in an effort to make for a more efficient process, tell the supplier that the changes result in a $800K savings and after paying $500K for their services have a $300K profit. The guy was feared and hated by suppliers and there were stories told about him a decade later when I heard them.
"Do what thou whilst" and "Let me make you an offer you can't refuse" are two guidelines for companies to live by, but only if they are big enough to get away with it.

Blogger Nate May 19, 2013 3:08 PM  

"On the other hand energy costs would be double what they are now if we didn't allow protection from legal liabilities unless we decided to modify our tort system to be remotely sane."

You say this like executing 80% of all the lawyers in the country would be difficult...

**BOOM**

Tort reform solved.

Anonymous David of One May 19, 2013 3:33 PM  

It seems to me that evasion of taxes is one thing, within the constructs of British Tax code/law ...

I am hard pressed to understand how any UK taxpayers were "cheated". Would the common British taxpayer have paid anything less had Google paid these taxes? Very doubtful.

It is even questionable that UK welfare receiptants where even "cheated".

The only real cheating of the taxpayers would be through their own government and/or representatives that constantly waste and abuse monies collected through taxes.

Google still warrants considerable scrutinity ... but again, as Roundtine has already stated, "Google is the government".

Anonymous David of One May 19, 2013 3:37 PM  

Yes ... I just noticed scrutiny and recipients. I hate when I press "Publish" before spell checking.

Anonymous John Regan May 19, 2013 3:44 PM  

I don't understand the hostility to corporations. They're just organizations that provide a sensible blueprint for doing business, and the way they are treated legally means that they can attract capital because the investors - the shareholders - are not personally liable for corporate conduct.

There can be honest or dishonest corporations, of course. And the law might be tightened up in any number of ways to ameliorate the transnational abuses that seem to take place.

But overall it's hard for me to see corporations as being anything other than a Good Thing.

Anonymous The Master Cylinder! May 19, 2013 4:38 PM  

Google pays its employees money, and then the employees pay income tax based on their income. Google pays a dividend to their shareholders, and presumably that too is taxes. Google buys equipment and pays sales tax on it.

Everyone doing business with Google, each human element of the corporate "body" of Google, pays taxes in one sense or another. Why should this entity then also pay taxes? It's already been taxed.

Anonymous The other skeptic May 19, 2013 5:08 PM  

Since he is only half black does it mean the Mocha Messiah only has to work half as hard?

Anonymous TheExpat May 19, 2013 6:24 PM  

O/T, but flash crash happening in silver early Monday morning in the world spot (Globex/Asia) market, with silver down over 8% to under $20.50 at one point. Other metals not affected (-1% or less).

http://www.kitco.com/charts/livesilver.html
http://www.zerohedge.com/news/2013-05-19/silver-plunges-yen-stop-surge-triggers-margin-liquidation

Anonymous scoobius dubious May 19, 2013 7:01 PM  

I don't know what Britain is so concerned about. At the rate that they're importing immigrant savages and assaulting the native populace, in about another ten years there'll be nobody left in the UK who even knows how to use a computer, so Google will simply stop doing business there, problem solved.

Anonymous Azimus May 19, 2013 7:06 PM  

OK Earl, I'll bite on the intellectual property statement - doesn't intellectual property protect the little guy as much as the big guy, or even more? It strikes me its the only way small companies can compete directly with big ones. Otherwise the big guys could just reverse engineer/steal all intellectual property, which would eventually stifle innovation. Would it not? I don't have a horse in this but it seems like avid believers in property rights in general would have at least some sympathy for intellectual property.

Anonymous The other skeptic May 19, 2013 7:17 PM  

Outlawing plastic bags is a way to reduce the cost of ObamaCare.

Why? Well, as people say, those reusable bags harbor lots of bacteria.

Who is more likely to be unable to wash them regularly or smell the decay in the bags? The elderly.

Problem solved. The elderly die at a higher rate than today.

Progressive politics are grand, aren't they.

Anonymous DT May 19, 2013 7:37 PM  

tz - Corporations (undead monster bodies animated by the Frankenstate) are persons with 1st amendmendment rights (citizens united),

I don't believe corporations should be treated as legal persons. But even if they were stripped of this it would not justify laws limiting the speech of corporations. The First Amendment reads "Congress shall make no law...abridging the freedom of speech..." It does not read "Congress shall make no law...abridging the freedom of speech of individual persons...". Big difference there.

Note that campaign contribution != speech. Lately I lean towards the idea that campaign contributions should only come from citizens eligible to vote for the politician receiving said contributions in the current election.

wcu - The older I get, the more it seems its high school extended out...if your with the in crowd, untouchable...if not, no damn soup for you.

That's to be expected considering most people lock their children up in an artificial school environment for 12 of the critical early years of life. School doesn't even begin to approximate real life. The institution with the closest structure and behavioral norms is prison. But that's where children are expected to form their personalities and social skills.

The lofty ideals of a nation where men are ruled by laws and not by other men, and where everyone stands equal before the law, are not ideals you learn in public school. You learn the exact opposite.

Anonymous The other skeptic May 19, 2013 9:37 PM  

Isn't diversity great

Blogger James Dixon May 19, 2013 10:09 PM  

> ...doesn't intellectual property protect the little guy as much as the big guy, or even more?

Not unless the little guy has enough money to fight the court battles, no. And most little guys don't.

Anonymous David of One May 19, 2013 10:59 PM  

Bored? Yep, me too ... it is a slow but nice Sunday.

I just found this site ... fascinating compliation of articles just for the month of May!

http://diversityischaos.blogspot.com

Cheers!

Anonymous The other skeptic May 19, 2013 11:38 PM  

Even the cops think diversity is great

You are more likely to be killed by cops than bad guys it appears.

Anonymous Azimus May 19, 2013 11:46 PM  

@ James Dixon

Does this flaw make the concept of intellectual property wrong to you? It strikes me that your comment is more a reproach of lawyering than rights.

Anonymous The other skeptic May 19, 2013 11:46 PM  

RIP Posse Comitatus.

Anonymous Daybreaker May 20, 2013 12:24 AM  

Don't be evil.

Anonymous David of One May 20, 2013 12:42 AM  

Thanks The other skeptic ... RIP Posse Comitatus ... I'm surprised that I haven't heard about this sooner but I don't frequent prison planet or infowars.

What I found most interesting about the link you provided is that I didn't see much for congressional approval, authorization or oversight.

Anonymous The other skeptic May 20, 2013 12:45 AM  

I didn't see much for congressional approval, authorization or oversight.

Yeah. That's how it happens. We shall see.

Anonymous The other skeptic May 20, 2013 12:50 AM  

The administration says Law is irrelevant

Anonymous nick digger May 20, 2013 1:07 AM  

re: Posse Commitatus
Anxiously awaiting all the kneejerk "Our troops are God-fearing patriots who would never obey those kind of orders" comments...

Blogger James Higham May 20, 2013 5:43 AM  

Yes, the thought that it is just in the UK is a bit ludicrous.

Blogger James Dixon May 20, 2013 6:40 AM  

> Does this flaw make the concept of intellectual property wrong to you?

First, intellectual properties broadly consists of three categories: copyright, patent, and trademark. The three are completely different and grouping them into on category is a mistake.

That said, no. It makes it ineffective in it's stated purpose, but not wrong. What makes it wrong is it's continual expansion into areas where it should not apply.

Examples: Microsoft should never have been able to trademark Windows. It's a generic term. Apple should never have been able to use the title Mac OS9. OS-9 had already existed for something like 20 years. Copyright has now been extended far past it's original intent and shows no signs of every again being limited. And patents are granted for things which should never have been patentable in the first place (rounded corners on the iPhone). The examples are endless.

The entire system is broken. It's reached the point that as a society, we'd be better off without it.

Anonymous Gen. Kong May 20, 2013 6:34 PM  

Azimus:
OK Earl, I'll bite on the intellectual property statement - doesn't intellectual property protect the little guy as much as the big guy, or even more? It strikes me its the only way small companies can compete directly with big ones. Otherwise the big guys could just reverse engineer/steal all intellectual property, which would eventually stifle innovation. Would it not? I don't have a horse in this but it seems like avid believers in property rights in general would have at least some sympathy for intellectual property.

As with all statutes, IP in theory affords zeks and proles as much protection as the in-crowd but in practice only the in-crowd is allowed to enjoy its benefits. The big guys reverse engineer and outright steal things all the time and get away with it - which is no surprise considering that the legal profession and the courts who decide are all populated by fellow members of the cathedral. Farmers who tried to use older non-IP seed cannot obtain it any longer because the few operators of seed-separation machinery were sued out of exiistence for IP violations by Monsanto and other members of the cathedral - even though the pollen from the GM crops had blown onto adjacent land not owned by their licensee. As stated above - there is no rule of law, only the law of rule.

When corporate entities can obtain patents upon genes, there no reason they cannot claim IP rights on water and air as well. The law has become a total joke - a very bad one at that.

Anonymous A Visitor May 20, 2013 10:23 PM  

Google is the government. That article on ChiCom hacking of Google and making off with, among other tantalizing megabytes of data, FISA warrants on suspected MSS officers' Gmail accounts backs up that claim.

Either that or Google's idea of security when liaisoning with the federal government is absolutely abhorrent. Like Dr. Evil said, "He's the snake to my mongoose or the mongoose to my snake. Either way, it's not good."

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