17 December 2013

How corporations avoid paying income taxes

As reported in The Register (UK):
Facebook has reportedly swerved a huge corporation tax bill by paying its Ireland-based parent company - Facebook Holdings Limited - €1.75bn in “admin costs” for its intellectual property.

According to the Financial Times (£), Facebook recently reported a pre-tax loss of €626,000 after it paid out those expenses.

In 2012, Facebook Ireland Ltd had 382 staff on its books in Dublin, and reported a gross profit of €1.75bn and sales of €1.79bn for the year...

The practice of avoiding tax in that way – known as Double Irish – is used by other internet giants such as Google, which shifts some of its money through a Bermuda shell company...

Facebook defended its actions by saying it "complies with all relevant corporate regulations including those related to filing company reports and taxation.
This would be a good time to quote U.S. president Rutherford B. Hayes on the matter:
The real difficulty is with the vast wealth and power in the hands of the few and the unscrupulous who represent or control capital. Hundreds of laws of Congress and the state legislatures are in the interest of these men and against the interests of workingmen. These need to be exposed and repealed. All laws on corporations, on taxation, on trusts, wills, descent, and the like, need examination and extensive change. This is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations.
Diary (11 March 1888]). 
Of course we should also point out that the "presidential election of 1876 had been thoroughly corrupted by fraudulent vote counts in favor of each candidate (the Republican Rutherford B. Hayes, the Democrat Samuel J. Tilden, both of them held captive by the banks)."


  1. How can you change laws when the very politicians who can do that are in the pockets of the corporations gaining from the laws that need changing? Moreover, how can you restrict politicians from corruption when they willingly give away money that isn't theirs to garner votes to stay in power?

    1. Excellent questions. Now we need to answer them and do something about the situation. Corporations are NOT people. This tax evasion has to stop.

    2. Part of the problem with the answers is that it isn't easy to do anything about when the system enters a feedback loop. In the end, it's the people (literal people, not corporations) who are responsible for the governments they have. In some ways, Claire Wolf was right: "America is at that awkward stage. It's too late to work within the system, but too early to shoot the bastards."

  2. I'm reminded of the post "The Monty Hall Problem Explained". The solution in the "choosing one of 3 doors" is counterintuitive there. The same here. And it is for the same reason: not thinking outside of the preconceptions and presumptions and biases we come with when approaching the problem.

    Here the rational is that big corporations profit and working class people suffer.

    Yet that is untrue. The working class work for these corporations, and there is nothing more equitable than earnings tied to profits, or at the very least, a corporation that remains afloat because it pays less taxes and thus has more liquidity with which to exist.

    The problem -- and I am no economics savant -- is that liberals, certain tax reformers, anti-capitalists and socialists -- many of whom are extremely well-educated -- fail to recognize that what they know is only part of the puzzle, not the whole of it.


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