Tax Avoidance is not an Unequal Evil: On Google’s Side.

Google does something entirely rational.

Google has been taking the money that it earns in its overseas subsidiaries and “funnelling” it into its Bermuda holding/shell company. About $9.8 billion in revenue, thereby avoiding $2 billion in income tax (as calculated by the journalist who first wrote the article).

Of course, there are all kinds of legal ways to transfer profits from one jurisdiction to another. And I have no doubt that Google has enough awesome lawyers to have accomplished all this above board.

Only now there is general outrage that the US is not getting a share of income taxes earned in foreign countries. And the foreign countries are upset that they are not getting a share of income taxes earned in their countries. As though somewhere in all of this, there is a moral imperative on multinationals to not pay taxes efficiently.

The morally outraged are not being reasonable.

If we’re to talk about principles here, taxation operates as a type of rent for living in a country and getting to benefit from the public amenities it provides (defense, social security, healthcare). Surely we should be saying that those getting the greater share of those benefits should be paying the larger amount of tax? I don’t see Google getting social security and healthcare. Google gets to benefit from a legal system and relatively efficient financial markets, but it can also get some of those benefits in Bermuda. So forcing it to carry the burden for America’s middle class and the now-infamous 47% is, well, outrageous.

Secondly, companies like Google provide jobs, pay salaries, and stimulate investment. That, in itself, has a tax multiplier effect that would not be there if Google moved itself elsewhere. If you really want to compare these things, you should be including Google’s indirect impact on the tax revenue top line.

Finally, if Google has a moral imperative not to take advantage of the tax options available to it, then the American middle class has a moral imperative not to take any deductions, and to pay for its own medical costs…

Fair’s fair.

Comments

Caustic Pop December 11, 2012 at 09:11

If I wash your car without your permission should you be obligated to pay me for it? Because that’s the logic of taxation as a form of recompense for government “service” provision…

Jayson Coomer December 11, 2012 at 10:12

If I stay in your hotel, then the car wash is probably part of the service you offer. If the general requirement by visitors is that their cars get washed, then the hotel is going to include the cost in the price of the room. Whether or not I have a car, and whether or not it gets washed, I have to pay for it. If I decide that I don’t want to, then I am welcome to stay elsewhere?
Reply

Caustic Pop December 11, 2012 at 10:54

But you’re not staying in my hotel. You were just in my general vicinity, and I provided a service without your express consent or knowledge so would you be obligated to pay me under these circumstances? Could it be considered just? Why or how can it become just when an organisation called government does it?

“Love it or leave it” deals with pragmatism; it evades from addressing these fundamental issues.

Jayson Coomer December 11, 2012 at 18:42

I receive a service. I benefit from it. If it’s a public good that’s offered to everyone, then the obligation to pay depends on what everyone else wants. If everyone else wants it, then the question should be reframed as: is it fair of me not to pay for it? Am I not obligated in some sense to go with the crowd and contribute?

In any case, I think that the fundamental issue is a pragmatic one. Whatever form democratic governance takes, it is idealistically there to serve the wishes of the community. If I wish to be part of that community, then that must come with a cost – which is ostensibly the price of a car wash that I didn’t expressly want. I could complain about the car wash I didn’t consent to, or I could see it as the price I pay to live in my society. The second is actually a product that I want. Why should I get to have that product for free by right of birth or immigration?

As a final word, I would just say that the Greeks have been using tax evasion as a tool of political protest since the Turkish occupation of the mid-1800s…
Reply

Caustic Pop December 12, 2012 at 10:53

Heh, collectivizing my analogy is more evasion, but I don’t think you mean it intentionally. I think you’re making a relatively common mistake, well-highlighted by Bastiat, how people confuse “society” with government and vice-versa. It’s usually the more socialist-inclined who fall for this where they mishear aversion to government provision to mean aversion to provision at all.

Anyways, let me restate my previous comment with some elucidations (Apologies if any of this comes across as condescension, but I’m taking a sort-of Socratic approach and it can come off as being patronizing under these circumstances. It’s hard to get tone across in this format):

You were just in my general vicinity, and I provided a service without your express consent or knowledge so would you be obligated to pay me under these circumstances? (I’m being specific about the circumstances because I’d like to expose the divergence between private expectations and standards of morality/justice versus governments’)

Could it be considered just? (The whole aim of the analogy is to get people to ponder whether coercion and expropriation are really “fair” in spite of being in recompense for an apparent benefit, and stripping the scenario down to a simple individual level demystifies the usual collectivist misconceptions)

Why or how can it become just when an organisation called government does it? (And this one is framed to expose the flaw in viewing government action as “societal” action. If it’s not okay for the individual, why would it be okay for a community or a government?).

—

Your view of being part of the community coming with a cost is interesting, especially in light of the aforementioned Bastiat insight. None of my neighbours have ever asked me to pay them anything (whether under the auspices of me having benefited from something they’ve done or otherwise). Sure, there are broader societal expectations, typically surrounding conduct, behaviour and respect of the rights of others, but none of these require me exert myself or bear material cost- precisely the opposite, actually! See, as far as I can tell, it’s a government, a wholly separate organisation of individuals, who demand my obedience and lucre. As I often like to point out, if coercion and expropriation are such noble and just endeavors when committed by a large, powerful, monopolistic organisation across a vast geographic scale, then why isn’t the same true down to the individual level? Why don’t these same noble-minded folk attempt to coerce and expropriate us individually instead of institutionalizing and bureaucratizing the process to be wholly depersonalized?

Anyways, hope it’s clear I’m not arguing for the sake of some final acquiescence, just a broader discussion with some questioning 🙂

Jayson Coomer December 12, 2012 at 12:56

There is never a need to apologise for condescension. If the opponent is misguided – it’s almost required!

First off – I am not a socialist. I have far too much self-interest for that. But at the same time, I would argue that government and society coincide. I can tell them apart, and yet I believe that they are mostly the same coin. All societies end up governed, in whatever form that governance may take. I’m not saying that the governance is always good – just that the governance is inevitable. The family has a patriarch, the community has its elders, the club will have its committee, the company will have a board.

What gives rise to the need for governance? If I’m to be trite: I think that the answer is “individualistic bias”. I like instant gratification and winning and I’ll save for my retirement tomorrow. The minute we are no longer alone; we are prisoners in a dilemma; with one of us choosing his short-term satisfaction over the best outcome for all parties. This Lord of the Flies scenario needs to be redressed, so society recognises a collective need to curb those individualistic short-comings by creating a governance structure to command those obligations that one would not otherwise choose to undertake. Survival of the species, and all that jazz. Let’s call it: someone to give us strategic focus.

Can this be abused and result in coercion and expropriation? Absolutely. In fact – that’s probably inevitable as well. But I would argue that even that is part of the cost. As is the institutionalisation and the bureaucracy. And until that imperfect governance structure results in Lord of the Flies, it is the better alternative.

An alternative argument for the general vicinity rule… I am nice to you without you asking. Are you obligated to be nice back? My parents fed and clothed me without my asking. Am I obligated to return the favour in their old age? The neighbours collectively mow their lawns and perform upkeep to make the suburb desirable and increase the value of the houses therein. Is the new homeowner not obligated to incur the cost to do the same? In all those situations – I think a third party to the situation would agree that an obligation has arisen.

Of course, I can choose to ignore that obligation, and save myself the exertion and material cost. But there’d probably be some shunning and general discomfort. And on a grander scale, what are fines and jail but formal expressions of communal disapproval?

And to close with a question about the Bastiat argument – is he against taxes as a finance source for the provision of public goods, or is he against taxes as a socialist tool to redistribute income between the classes? Because if it’s the latter, then I agree with him. Which I think is mostly my point – if the middle class is going to be the primary recipient of the public goods, then it should pay the most tax.

By condemning Google’s legitimate tax avoidance as a moral evil, the implication is that we should use the tax system to redistribute the income from Google to the middle class. I’d call that “legal plunder” any day. 🙂
Reply

Caustic Pop December 11, 2012 at 09:11

If I wash your car without your permission should you be obligated to pay me for it? Because that’s the logic of taxation as a form of recompense for government “service” provision…
- Jayson Coomer December 11, 2012 at 10:12
  
  If I stay in your hotel, then the car wash is probably part of the service you offer. If the general requirement by visitors is that their cars get washed, then the hotel is going to include the cost in the price of the room. Whether or not I have a car, and whether or not it gets washed, I have to pay for it. If I decide that I don’t want to, then I am welcome to stay elsewhere?
Caustic Pop December 11, 2012 at 10:54

But you’re not staying in my hotel. You were just in my general vicinity, and I provided a service without your express consent or knowledge so would you be obligated to pay me under these circumstances? Could it be considered just? Why or how can it become just when an organisation called government does it?

“Love it or leave it” deals with pragmatism; it evades from addressing these fundamental issues.
- Jayson Coomer December 11, 2012 at 18:42
  
  I receive a service. I benefit from it. If it’s a public good that’s offered to everyone, then the obligation to pay depends on what everyone else wants. If everyone else wants it, then the question should be reframed as: is it fair of me not to pay for it? Am I not obligated in some sense to go with the crowd and contribute?
  
  In any case, I think that the fundamental issue is a pragmatic one. Whatever form democratic governance takes, it is idealistically there to serve the wishes of the community. If I wish to be part of that community, then that must come with a cost – which is ostensibly the price of a car wash that I didn’t expressly want. I could complain about the car wash I didn’t consent to, or I could see it as the price I pay to live in my society. The second is actually a product that I want. Why should I get to have that product for free by right of birth or immigration?
  
  As a final word, I would just say that the Greeks have been using tax evasion as a tool of political protest since the Turkish occupation of the mid-1800s…
Caustic Pop December 12, 2012 at 10:53

Heh, collectivizing my analogy is more evasion, but I don’t think you mean it intentionally. I think you’re making a relatively common mistake, well-highlighted by Bastiat, how people confuse “society” with government and vice-versa. It’s usually the more socialist-inclined who fall for this where they mishear aversion to government provision to mean aversion to provision at all.

Anyways, let me restate my previous comment with some elucidations (Apologies if any of this comes across as condescension, but I’m taking a sort-of Socratic approach and it can come off as being patronizing under these circumstances. It’s hard to get tone across in this format):

You were just in my general vicinity, and I provided a service without your express consent or knowledge so would you be obligated to pay me under these circumstances? (I’m being specific about the circumstances because I’d like to expose the divergence between private expectations and standards of morality/justice versus governments’)

Could it be considered just? (The whole aim of the analogy is to get people to ponder whether coercion and expropriation are really “fair” in spite of being in recompense for an apparent benefit, and stripping the scenario down to a simple individual level demystifies the usual collectivist misconceptions)

Why or how can it become just when an organisation called government does it? (And this one is framed to expose the flaw in viewing government action as “societal” action. If it’s not okay for the individual, why would it be okay for a community or a government?).

—

Your view of being part of the community coming with a cost is interesting, especially in light of the aforementioned Bastiat insight. None of my neighbours have ever asked me to pay them anything (whether under the auspices of me having benefited from something they’ve done or otherwise). Sure, there are broader societal expectations, typically surrounding conduct, behaviour and respect of the rights of others, but none of these require me exert myself or bear material cost- precisely the opposite, actually! See, as far as I can tell, it’s a government, a wholly separate organisation of individuals, who demand my obedience and lucre. As I often like to point out, if coercion and expropriation are such noble and just endeavors when committed by a large, powerful, monopolistic organisation across a vast geographic scale, then why isn’t the same true down to the individual level? Why don’t these same noble-minded folk attempt to coerce and expropriate us individually instead of institutionalizing and bureaucratizing the process to be wholly depersonalized?

Anyways, hope it’s clear I’m not arguing for the sake of some final acquiescence, just a broader discussion with some questioning 🙂
- Jayson Coomer December 12, 2012 at 12:56
  
  There is never a need to apologise for condescension. If the opponent is misguided – it’s almost required!
  
  First off – I am not a socialist. I have far too much self-interest for that. But at the same time, I would argue that government and society coincide. I can tell them apart, and yet I believe that they are mostly the same coin. All societies end up governed, in whatever form that governance may take. I’m not saying that the governance is always good – just that the governance is inevitable. The family has a patriarch, the community has its elders, the club will have its committee, the company will have a board.
  
  What gives rise to the need for governance? If I’m to be trite: I think that the answer is “individualistic bias”. I like instant gratification and winning and I’ll save for my retirement tomorrow. The minute we are no longer alone; we are prisoners in a dilemma; with one of us choosing his short-term satisfaction over the best outcome for all parties. This Lord of the Flies scenario needs to be redressed, so society recognises a collective need to curb those individualistic short-comings by creating a governance structure to command those obligations that one would not otherwise choose to undertake. Survival of the species, and all that jazz. Let’s call it: someone to give us strategic focus.
  
  Can this be abused and result in coercion and expropriation? Absolutely. In fact – that’s probably inevitable as well. But I would argue that even that is part of the cost. As is the institutionalisation and the bureaucracy. And until that imperfect governance structure results in Lord of the Flies, it is the better alternative.
  
  An alternative argument for the general vicinity rule… I am nice to you without you asking. Are you obligated to be nice back? My parents fed and clothed me without my asking. Am I obligated to return the favour in their old age? The neighbours collectively mow their lawns and perform upkeep to make the suburb desirable and increase the value of the houses therein. Is the new homeowner not obligated to incur the cost to do the same? In all those situations – I think a third party to the situation would agree that an obligation has arisen.
  
  Of course, I can choose to ignore that obligation, and save myself the exertion and material cost. But there’d probably be some shunning and general discomfort. And on a grander scale, what are fines and jail but formal expressions of communal disapproval?
  
  And to close with a question about the Bastiat argument – is he against taxes as a finance source for the provision of public goods, or is he against taxes as a socialist tool to redistribute income between the classes? Because if it’s the latter, then I agree with him. Which I think is mostly my point – if the middle class is going to be the primary recipient of the public goods, then it should pay the most tax.
  
  By condemning Google’s legitimate tax avoidance as a moral evil, the implication is that we should use the tax system to redistribute the income from Google to the middle class. I’d call that “legal plunder” any day. 🙂

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