Bloomberg has an excellent article describing how Google saves billions in taxes. Besides showing how Google constructs its international network of tax dodges (similar to what other high-tech companies use), the article discusses how taxes helped to create the company and how the federal government gave its blessing to the Google racket. I assume that I will also see the article tomorrow when my BusinessWeek arrives.
The article has too much in it to cull snippets. Here is the source so that you can read it for yourself:
Drucker, Jesse. 2010."Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes." Bloomberg (21 October).
http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html
2 comments:
I will get ahead of myself and ask: WHO enforces the rights to royalties from intellectual property? Who being what sovereignty. The reason for that question is that this is the sovereignty that should receive the bulk of the tax proceeds form such royalties. It matters not where the "invention" was created or who created it. The cost of supporting the ownership rights is what matters.
In an asset tax system, the market capitalization is the value of whatever corporation owns the IP rights. That asset value should be the basis for an asset tax, and the tax proceeds belong proportionally to the sovereignties that ENFORCE the ownership rights that make the realization of royalty income possible. It does not matter where the income is realized or where the costs are encountered.
Government enforcement of property rights is the mainstay of the income. Without it, there is no income or the cost of keeping secrets dramatically reduces any profits/rents.
Mark Thoma featured this. My comment over at his blog:
If section 482 (transfer pricing) were properly enforced, the US parent of Google would have received nearly $200 billion for transferring its intellectual property to Google Ireland if one relies on the market value of Google. Something tells me that this APA program accepted a much lower value. The IRS initially tried to put forth a market value approach in the Veritas case but the Court decision decided the value was less than 10 cents on the dollar. the IRS has let itself get outgunned by Big Four "economists" that would make Larry Kudlow look smart by comparison. The law is not the problem - it's the inept enforcement of it led by weak attorneys and even weaker economists. In their defense - their pay is weaker still. Oh but our Congress would balk at the idea of bringing in and paying for smarter economists!
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