Why so many now say that taxes paid by US tech firms are 'not acceptable'
In the wake of Google鈥檚 to pay $185 million in back taxes, pressure appears to be mounting on American tech firms that do business overseas.
The companies 鈥� particularly Apple and Google, which reorganized last year as holding company Alphabet 鈥� have long faced questions about whether they were engaged in complex schemes (such as the one known fancifully as the Double Irish) to avoid paying taxes on their international profits.
In the US, lawmakers in 2013 on at least $74 billion in sales over three years by moving the company鈥檚 intellectual property overseas. Both companies have repeatedly said they are not breaking any laws and pushed to revamp the US tax code.
But on Thursday, anger at the companies appeared to bubble over during a parliamentary committee hearing over a simple question posed to Matt Brittin, the president of Google鈥檚 European arm: how much do you get paid?
鈥淚鈥檒l happily disclose that if it鈥檚 a relevant matter for the committee,鈥� he from Meg Hillier, chair of the Public Accounts Committee.
Ms. Hillier again demanded to know his pay, prompting Mr. Brittin to say he didn鈥檛 know the figure but could later disclose it to the MPs 鈥減rivately.鈥�
鈥淵ou don鈥檛 know what you get paid, Mr. Brittin?鈥� she responded, to laughter in the hearing room.
She had asked the Google head if he understood the anger that Britons felt about the deal, which has raised a debate about multinational companies that operate in the country but have their tax bases elsewhere.
Google now has more than 4,000 workers in Britain, up from 160 a decade ago, , with more than 5,000 based in Ireland, where many multinational tech firms have made their tax bases, drawn by its low corporate tax rate.
鈥淥ut there, our constituents are very angry,鈥� Hillier continued. 鈥淭hey live in a different world, clearly, to the world you live in, if you can鈥檛 even tell us what you are actually paid. I wonder if you鈥檝e got tin ears. You went out there publicly to parade this tax deal.鈥�
鈥淭otal political crap鈥�
Despite serious questions about Apple鈥檚 tax practices in the US, chief executive Tim Cook鈥檚 testimony before the Senate in 2013 proved to be far less contentious.
Many critics had pointed to the company鈥檚 use of a maneuver called the Double Irish, which involves setting up one tax headquarters in Ireland that collects a company鈥檚 profits and then routes it through a second entity headquartered elsewhere with lower tax rates, such as Bermuda, which has no corporate taxes.
While former Sen. Carl Levin had characterized the company鈥檚 creation of what could be considered stateless entities that paid no taxes on parts of the company鈥檚 profits as 鈥渢he Holy Grail of tax avoidance,鈥� other lawmakers seemed wowed by Mr. Cook鈥檚 celebrity and charmed by his soft-spoken manners. He reportedly addressed many of his questioners as 鈥渟ir,鈥� .
鈥淥ver the next three hours, Cook spun a tale worthy of Mark Twain and emerged not only intact but unscathed,鈥� wrote Bloomberg鈥檚 Joshua Green of the hearing before the Senate鈥檚 Permanent Subcommittee on Investigations. "No one laid a glove on him."
Cook also seemed to successfully reframe the hearing as a larger discussion about the US tax code, noting that Apple did not violate any laws. He has maintained that stance since, though a different side of the Apple head seemed to emerge in December 2015, when Cook dismissed the Senate committee鈥檚 findings as 鈥渢otal political crap,鈥� in a with Charlie Rose.
鈥淎pple pays every tax dollar we owe,鈥� he added, telling the host, 鈥淭his is a tax code, Charlie, that was made for the industrial age, not the digital age, it鈥檚 backwards.... It should have been fixed years ago.鈥�
His dismissal of questions over the company鈥檚 tax practices doesn鈥檛 seem to have ruffled many feathers among the company鈥檚 passionate fanbase.
鈥淭hat's like saying I am avoiding taxes by not dying. As long as Apple leaves their earnings overseas, they don't owe the government anything on those earnings,鈥� on the Apple-focused site MacRumors just after a clip of the interview was released. 鈥淣ot bringing those earnings into the US economy is not tax avoidance.鈥�
International debates
Outside the US, the debate has prompted some changes. Ireland outlawed the use of the Double Irish in 2014. Michael Noonan, the Irish finance minister, that he was 鈥渁bolishing the ability of companies to use the Double Irish,鈥� by requiring all companies registered in Ireland to pay taxes there. The maneuver is now banned for all new companies, with existing companies that use it required to phase it out by 2020.
Last fall, however, lawmakers that would let companies pay a greatly reduced tax rate of 6.25 percent on profits from patents and other intellectual property, a proposal that鈥檚 also been discussed in the US.
In Britain, Google鈥檚 into its tax practices 鈥� which also requires the tech giant to bear a larger tax burden in the future 鈥� has divided lawmakers.
George Osborne, the Chancellor of the Exchequer, for the government鈥檚 policies after a long-running investigation, while John McDonnell, the Labor Party鈥檚 shadow chancellor, described it as a 鈥渟weetheart deal鈥� for a 鈥渞elatively trivial amount of money鈥� that deserved further scrutiny.
Companies in the UK currently pay corporate taxes of 20 percent. But in 2014, Facebook paid 拢4,327 despite reporting revenues of 拢105 million.
German Klimenko, Russia鈥檚 recently-appointed Internet czar, has been pushing for a tax increase on US companies, saying that could help Russian competitors such as the search engine Yandex and Mail.ru.
鈥淲e are breeding the cow and they are milking it,鈥� , referring to American tech firms. One lawmaker is sponsoring a bill to add an 18 percent value-added tax to as much as 300 billion rubles ($3.9 billion) earned by foreign companies each year.
French authorities have lodged a $1.1 billion claim against Google, with Fran莽ois Hollande, the prime minister, lobbying President Obama to rein in the tax practices, which he
Perhaps anticipating the bruising he would take in Parliament, Brittin, the European Google head, argued in a column on Wednesday that the company had been 鈥渇ully transparent鈥� with the UK鈥檚 tax authority in its six-year investigation.
鈥淲e agree that the international tax system needs reform. We have long been in favour of simpler, clearer rules, because it is important not only to pay the right amount of tax, but to be seen to be paying the right amount,鈥� he wrote. 鈥淏ut changes to the tax system are not Google鈥檚 call. Reform must come from governments, not from the companies who are subject to their rules.鈥�
