"There are no such things as bugs in code; the computer always executes the code as written."

Loopholes and bugs are differences between intent and effect.

What about a software bug that was actually a deliberate "backdoor"? Or what about a tax statute that was written with warnings that it was ripe for abuse (e.g. the pass through income tax cut)?

That some bugs are deliberate has no bearing on the non-deliberate ones.

That supposes that there was no intent to leave the loopholes in. "It's not a bug, it's a feature"

It's rather difficult to determine the intent of legislators, especially after some time has passed. Courts sometimes look at Congressional debate transcripts when deciding complex issues of federal law. But different congresspeople often have different conflicting intents even when they vote the same way.

Sure, especially with respect to some edge cases, and that may be an argument for not throwing people in prison that exploit certain loopholes.

On the other hand, there are certainly cases where a loophole is obviously not the intent of the legislators, and regardless of the legality of exploiting it, one could justly view exploiting it as immoral.

For example, sticking with the analogy of computer bugs, a multiplayer videogame that has an obviously unintended glitch, which lets you cheat against your fellow players.

If there was no intent to allow companies to get away with this, then these tax escapes would have been closed once they were abused. But they are not closed, because they were left there intentionally due to lobbying.

Exactly.

Do you think shareholders would stand for a company paying $19.2B more in taxes than they should? That would be absurdly negligent on the part of everyone leading the company.

Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government?

Don't indict corporations for following the tax code, change the laws.

> Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government?

I've done it. I also let the shopkeepers make "mistaken" change when I visited Nepal. Sometimes I tip $5 even when I buy less than $25 worth of food at a restaurant. Maybe I'm a moron, but I think of money as a tool and when I can afford it I am happy to help others accomplish their goals. In the case of taxes many of the government's goals are aligned with mine so I'm even happier to contribute.

I think disposable income is great! I like having it as much as the next person, but gosh do I waste it! If I saved all the cash I’ve “donated” in tips and excessive spending I’m certain I’d have a couple $1000 more in the bank and would be much closer to building that track car I’ve been fantasising about.

I notice you give direct person to person examples, but you never talk about how you paid more in taxes than you needed to.

Do you think $500 extra to the federal government will do as much good as you directing that $500 to specific individuals or families that could really use it?

> Don't indict corporations for following the tax code, change the laws.

Sure, don't indict them, just please, please recognize them for exactly what they are: soulless, inhuman, profit maximizers that will take every inch afforded to them by the law (and sometimes more). You gotta watch them like a hawk and don't believe their statements to the press.

"please recognize them for exactly what they are: soulless, inhuman, profit maximizers that will take every inch afforded to them by the law"

Let me know when you invest your savings in a company that returns lower profits because they refuse to pay lower taxes, even if they legally could.

And let me know when you find a tax deduction that could save you money, but you decide to not take the deduction and pay more taxes.

That didn't sound like a criticism, but a statement of the obvious: corporations are legally obligated to do anything they legally can to generate more money.

My takeaway from that comment was, to expect that behavior and ensure legislators write and enact laws that establish effective corporate governance.

> That didn't sound like a criticism, but a statement of the obvious: corporations are legally obligated to do anything they legally can to generate more money.

This isn’t a “statement of the obvious”, it’s a somewhat popular misinterpretation of the fiduciary duty owed by a corporation to that corporation’s shareholders.

>soulless, inhuman, profit maximizers

Do you feel the same way about every person that takes an income deduction?

Humans are by definition not /in/human, though they can sometimes /act/ inhuman. However, by definition, corporations /are/ /not/ /human/, and they mostly act accordingly.

They didn't pay $19.2B less taxes, they just didn't pay local income taxes on those $19.2B. They would still need to pay US taxes on those $19.2B if they repatriate it.

Apple, for example, have most of their cash offshore and can’t bring it home without being subject to a large tax bill. There is a great write up about it here https://www.aboveavalon.com/notes/2017/12/12/the-end-to-appl...

No, they would not pay $19.2B. If they could not use the tax loophole, most likely they would reduce their taxable profit by raising wages and R&D.

So closing the loophole will force companies to raise wages and invest in R&D, instead of keeping it in offshore accounts or giving to the government.

There is no law that says you must set up Bermuda, Dutch and Irish subsidiaries, and use your IP to shuffle profits, or other methods, to evade tax in territories where that revenue is earned. Most companies aren't wealthy enough to do this; and in fact they don't do it. Many of them are public corporations. Their shareholders don't sue or demand such actions.

> There is no law that says you must ...

Isn't there? I thought shareholders has a legal remedy if they believed companies weren't maximising return?

No, the fiduciary duty the company has to shareholders is vague in this regard and practically speaking they can define the shareholders interest broadly, for example maximising returns at some indeterminate point in the far future. Shareholders can try to sue over this but almost certainly would lose the suit unless real malfeasance is uncovered. IANAL though.

>Don't indict corporations for following the tax code, change the laws.

I wouldn't have done in the past before Google hired lobbyists, but if they're sending people to Washington to "help" draft laws then pretending that they are not culpable is simply dishonest.

Don't know about you, but I tend to vote for politicians that enact my policy preferences.

You're probably also the sort of person that donates time/money to candidates whose positions align with yours, rather than their opponents.

Yes, but I'm a person, Google is not. Government runs (ostensibly) for the benefit of the people, so people get to have a say in it.

Obviously the law should be changed. But your comments are otherwise incorrect.

> Do you think shareholders would stand for a company paying $19.2B more in taxes than they should?

What do you mean, 'should'? They 'should' pay the amount that is expected of them - the amount proportional to their profits. Each corporation should pay what is expected of them in full. This would produce is vastly more stable economy which would then let those corporations earn more money. It would benefit the shareholders of every corporation to have a stronger and stabler US consumer base than to have a crippled middle class like they create by not paying their taxes.

Yes, of course Google should have paid that $19.2B.

> Would an individual pay $500 more in taxes than they are required to out of the goodness of their heart and belief in the American government?

Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes.

> What do you mean, 'should'?

I read it as something like 'are required to by law.'

> Sure they would. Why not? I've done this. Canadian government and US government. It doesn't make sense not to do this sometimes.

I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that?

> I read it as something like 'are required to by law.'

I would have said 'have to' to be required by law. 'Should' implies a moral code, a desire to do right and good. In this case, Google absolutely 'should' pay those taxes.

> I'm curious, what was your reasoning for paying $500 more than expected? And in what way did it "not make sense" to not do that?

If you have more money than necessary, and you know that others don't, and you know that a good portion of your taxes goes to helping others, the rational thing to do could be to help out and not attempt to claim every tax break and benefit you could. I'm not saying that's always right, I'm saying it can be rational for people to do it.

Paying as little taxes as possible to avoid jail is absolutely not the rational move for people or corporations. This is a classic tragedy of the commons: if people and companies paid taxes as due, we would all be better off for it. The rational move is to fully pay all expected taxes, not use offshore secret hideouts to avoid improving your own country.

I have never paid more taxes (that I'm aware of) than I am legally obligated to and I never will.

Your list of conditions for rationally paying more taxes hinges on so many assumptions that it's a moot point. You might as well say it's rational to burn money in a fire.

If you have more than you need, and you know that others don't, and you know that the government is not efficient enough to use it properly, and you know that corporations will keep it instead of paying higher wages to workers, and you know that non profits will eat the majority of it in overhead before it helps people, and you know that decreasing the amount of money in circulation will cause the value of all money to increase, you should rationally set fire to your extra cash.

>If you have more than you need, and you know that others don't, and you know that the government is not efficient enough to use it properly

You don't pay taxes so that governments can spend money. Governments can spend as much money as they like - they print the damn stuff.

The economy would function precisely as it does now if every dollar paid in tax were burned and every dollar spent by the government were printed.

Taxes paid to extinguish money. It is supposed to be deflationary - a transfer of wealth to everybody else spending money in the economy.

None of that is remotely true.

Even discounting local and state governments, which use tax dollars to fund themselves and can't print money like you describe, even the federal government doesn't work like that.

> the rational thing to do could be to help out

Sure, it's just that some might prefer charities.

> The rational move is to fully pay all expected taxes

The difficulty is in defining "expected." If the tax authorities give your return the green light, in what sense did they "expect" more? If your definition of expectation isn't about the letter of the law but the spirit, then whose spirit (amongst the many lawyers, accountants, and executives) should be followed? This doesn't even touch the issue of fiduciary responsibility, covered elsewhere in the thread.

The definition of 'expected' comes from the tax code and the government. The article itself states that the governments are expecting more revenue than they are receiving from these companies. Why are they expecting more? Because the companies spend more money finding ways to stash it offshore than the current employees at the government offices can spend to find and estimate the losses that will incur from a company creating its own loopholes for the future.

It messes up government planning and spending by cheating them out of money that they were expecting based on the profits from the company.

It's clear cut.

> Sure, it's just that some might prefer charities.

Charities don't build roads or other infrastructure, or test food for safety concerns, or build other large scale useful works that life people out of poverty at scale.

>It messes up government planning and spending by cheating them out of money that they were expecting based on the profits from the company.

>It's clear cut.

See, that's the thing; it's obviously not clear cut to other people.

There's a very reasonable (IMO) position that a taxpayer is merely obligated to comply with the law, but is not similarly obligated to structure their affairs in such a way as to maximize the government's take.

> Charities don't build roads or other infrastructure, or test food for safety concerns, or build other large scale useful works that life people out of poverty at scale.

Also, charities don't bomb the living shit out of strangers around the world.

>Paying as little taxes as possible to avoid jail is absolutely not the rational move for people or corporations.

Of course it is, and then both individuals and companies have the option to make voluntary payments as charitable contributions or to support local institutions--as many universities to to their municipalities.

Charities are no replacement for a functioning democratic government. Charities do not build large scale infrastructure or keep populations safe or anything as powerful as a functioning government can do to lift citizens out of suffering and poverty.

The US economy lifted scores of millions of people up from poverty into the middle class in the 1800's, long before government entitlement programs, welfare, and wars on poverty.

You can see it in the statistics on life expectancy, infant mortality, and average height.

As an aside, I'm sad to see downvotes being used as a "I disagree with this post" (a la reddit) instead of a moderation tool to punish offtopic/rulebreaking, as they were intended.

Loopholes exist, because language is imprecise and imperfect. Laws have loopholes like code has bugs.

In this particular case, it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails to tax overseas income of corporations.

In many cases, tax law says or (implies) "you pay $X to us, but you get credit for tax paid to other countries".

> Loopholes exist, because language is imprecise and imperfect.

That's one way for loopholes to exist. Another way is for companies to pay/lobby politicians to write loopholes into tax laws.

> Laws have loopholes like code has bugs.

Sure. And software also has backdoors placed there intentionally by developers.

Yes language is imprecise and imperfect and that is why we have tax courts to clarify it.

If a company misinterprets tax code, they will eventually have to pay the price for it.

And I feel like "loophole" doesn't do justice to the authority the US gov't has.

If Congress can't get their act together enough to write clear tax law, then they should go back and fix it. Don't blame the company for imperfect and imprecise language - they didn't write it.

>it's probably not a loophole, since the behavior in question has been known for many years, and the US government has made no effort to change how the law fails

They did change the law, and this workaround will stop working around 2020

> the US government has made no effort to change how the law fails to tax overseas income of corporations

Of course they have made an effort to fix this -- the recently passed tax reform bill makes this a thing of the past by dropping the tax rate for foreign profits to 0%.

It is not at all that cut and dried.

Engaging in sham business activity for the specific purpose of tax avoidance is not legal. Many of these tax schemes could be declared invalid at the discretion of the IRS (or other governments - the EU already has in some cases).

These companies are not complying with tax law. They are cheating and paying bribes or doing favors to get away with it, and everyone knows it.

These companies are paying the minimum amount of taxes that they can make a reasonable legal case to pay for. They have armies of lawyers that check and recheck the scheme.

Yes, there are many judgement calls, and as with all judgement calls, there may be differences of opinion. But you can bet that they all believe that they can make a strong case that they are within the law.

Right, that would be non-compliance as the OP already pointed out.

LOL saas_co_de accuses Google of engaging in a sham business.

We've banned this account for repeatedly violating the HN guidelines.

https://news.ycombinator.com/newsguidelines.html

Laws are interpreted by the courts.

Congress might write a law with some expectations.

A well paid accountant and lawyer team might interpret the law differently.

The company employing the team is trying to obey the law, so this isn't illegal tax evasion. But it is tax avoidance, and the use of loopholes may be found to be illegal by the courts, or the law might change to make it illegal.

"Loophole" is just short hand for "unexpected use of law that hasn't been tested by the courts".

Sometimes I wonder if all those laws could just be distilled into a few universal truth laws or something.

The amount of legal gymnastics going on in court cases and things like this... It never ceases to amaze me. It all seems so inefficient.

Sure, but there are also ways for governments to close these loopholes as well. It's not necessarily on tech companies to solve, but it is up to the government and its citizens to ask for change (if this does not follow the spirit of the law).

My economics teacher actually used the word loophole but explained to us:

You are allowed to use any loophole: if there is a tax break for doing x and you normally do y then you are allowed to do x to save tax.

You are not allowed to lie: If you didn't do y after all you should not pretend you did.

I feel the revulsion is aimed mostly at our corrupt Congress that made this possible, but also at the corrupting companies who are benefiting.

Blame here lies with the Netherlands as well (I am Dutch). The politicians here want a nice "business establishment climate" (direct translation). The reasoning being that dodging taxes here gets us office jobs and perhaps whatever is left of the taxes.

The U.S. has threatened to put us on the list of tax havens, and we've made some moves to fix things, but apparently we are dragging our heels. According to this source [1] we talk the good talk, and behind the scenes do our very best to slow down as many of these new procedures as possible. Supposedly this is in the name of "Ensuring proper implementation".

The new government is going to abolish the tax on dividends. I don't know the details, but it's a controversial move. The opposition parties are really against it.

I guess a small country needs to make some moves to stay relevant.

[1] https://nos.nl/artikel/2206095-nederland-ligt-nog-altijd-dwa...

You're wrong. There are such things as tax loopholes; and this fact is acknowledged by lawmakers, lawyers, tax experts, corporations.

People don't like judgment so they say we're keeping with the law. Yes, they are, but by abusing tax loopholes.

Corporations have come up with a lot of banned phrases; and encouraged phrasing to hide the true nature and psychological, social, and material impact of their actions.

Where does it say in the tax code to go set up Bermuda corporations and launder revenue earned in various territories through Ireland and Netherlands to avoid taxation in those territories?

definition of loophole: legal tax condition I don't approve of.

Yes, there is such thing as the "spirit of the law" vs the "letter of the law". OJ got away with murder but that doesn't make him any less guilty.

That’s like claiming that you there’s no such thing as hacking someone. The exploit just follows the rules of the code. And code has pretty clear-cut semantics, while law is up to interpretation to a certain point.

Laws are buggy like code and using loopholes is just hacking the law.

Incorrect.

Loopholes are the side effect crappily written laws. And in many cases, loopholes are unearthed by an army of high-paid law firms. Unintentionally created, but very intentionally exploited.

As these loopholes are closed(again, because they're unintentional), these mega corporations are moving around their money from tax haven to tax haven; they're actively exploiting these loopholes in various countries.

It is depriving these countries of very real income. Ya know to pay for the roads, emergency systems, mental health clinics, etc. of ordinary people.

So, sure, it's legal in the same way the many multitudes of immoral things of history were legal.

Companies pay low tax in one country for money they earned in another country. Almost every multinational does that, there are buildings in The Netherlands in which a dozen of international firms have a postbox just so they can redirect their revenue and pay the lowest tax on it.

Being Dutch, I am ashamed that our government does not do anything to change the laws which allow for this to happen.

Poor countries use tax havens as well.

Those countries are the most hurt by the use of tax havens. Many people in poor countries depend on tax dollars to survive.

https://www.theguardian.com/commentisfree/2013/may/14/tax-ha...

It's a disgusting practice, that many on this forum seem to have no problem defending. Astounding.