Tax Accounting Evil at Google? 261
theodp writes "In its annual report, Google said it's done no tax-accounting evil, but the search giant acknowledged that both the IRS and SEC are taking a look at the way in which it accounts for income tax. Google is one of a number of U.S. companies that have come under fire for allegedly practicing 'profit laundering', i.e., moving book profits offshore to evade millions and even billions in taxes to the country where it really operates. In past SEC filings, Google has credited its Irish subsidiary for reducing its effective tax rate."
Google no differnt than the rest (Score:3, Insightful)
Here in Denmark we have this huge shipping company Mærsk or A.P. Møller as it also known.
They have lots of other activities also, the company has always been somehow very attached to Denmark and many Danes are proud that Mærsk is a Danish company.
The thing is that the government here in Denmark have been proposing to change how the taxing system works for companies. The general idea is to lower the tax rate but to remove many of the things that companies can withdraw from their incomes when taxes are to be calculated, in part to prevent what Google is being accused of doing here, namely putting all their income in countries where they have lot's of losses and expenses also.
Mærsk have been threatening the Danish government that if these tax changes are done as proposed then they may be forced to move many of their activities to other countries. I see no evil in this, companies have to look at the bottom line and for most businesses generating income for their shareholders or who ever gets the money in the end.
I would not consider Google to be evil if they did something similar to this, they would just be acting like pretty much any other multinational company does these days.
I feel pretty sure the Irish doesn't see Googles way of doing their accounting as evil
If something has to be done about this, it can't be done at the national level, I guess that is also what some of these movements like Attack (spelled?) and other have been talking about. I doubt there is ever going to be any real changes in this any time soon, there are far to big interests at stake for countries and big companies.
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You hit the fundamental problem with tax systems on the head. Their complicated nature and rules allows the system to be gamed (or, in a sense, bugs to be exploited). Perhaps this is not by intent, just like complexity in code makes bugs harder to find. Under US law it is perfectly legal to interprit and use the tax law to your advantage. (If the IRS differs - they *might* let you know if you're one of the precious few that get audited.) In fact, if you don't exploit the law you're not doing all you ca
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The biggest problem for the people in NY is that they can't take their job with them. Corporations, not being individuals, can be in multiple locations at once. Moving where they pay taxes from one locatio
Yeah, that's a horrible idea. (Score:3, Insightful)
First, the income tax is progressive. This would be impossible to achieve with sales tax. The only people that would benefit from a "flat" tax (sales or income) are those at the highest tax brackets. In order to replace the income lost from dropping taxes on the top 5%, taxes would have to be raised on the bottom 50%.
Second, a sales tax puts a disproportionate burden on the lowest income families. Those with low incomes--even up to $50k/yr for a s
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I'm no maths wizz but you seem to be saying that 53% of wage earners pay ~150% of income taxes. Does that mean the other 47% get back more in tax rebates than they paid in tax? If so then that really is "free money"!
Comment removed (Score:4, Interesting)
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>Hook. line, sinker, rod, reel, basket, boots, and copy of Angling Times.
>John Kerry's exceptionally rich wife pays about 10% of her income in taxes. What's your rate?
I'm sorry, were you arguing against an income tax? It seems to me the problem with John Kerry's wife and her taxes isn't the income tax, it's the numerous loopholes that the rich politicians have put in the income tax for the benefit of themselves and their rich buddies. Isn't it ominous tha
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C//
not such a horrible idea afterall... (Score:2)
Should have known this would come up. For the record, I support the fairtax [fairtax.org] idea. It's also progressive, though maybe not as much as currently. Sure, there are some issues with it, but I believe those issues to be less than the issues with the current system, which is massive fraud, complexity, and inefficiency. I happen to believe that it shouldn't take more than an hour for the average family to calculate their taxes.
In summary, the only people that want a sales tax are those that don't unders
It's not really double taxation (Score:2)
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The point being is that the taxes in NYC outweight the money to be made in NYC. Until the advent of digital cameras, I believe Kodak did very well in upstate NY. Both Kodak and Xerox benefitted from (what I understand) are good schools and a local University. I don't think NY taxes had anything to do with the advent of digital photography (and buggy-whipping of film), or the lack of business accumen at Xerox.
I think that we need to partake in the global economy but we can't just tell a city like Roche
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New York City's economy is going quite strong, thanks.
NYC's politicians already sucked the rest of the state dry and its only a matter of time before they go down the tube with us.
That's a complete and utter fabrication. New York City pays substantially more in taxes than it receives in funding. If y
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If NY is so autonomous, please join me in asking for the state to be divided into two states. The triangle contained between Sullivan County, Albany County and Long Island
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There is more to this than it may seem. Under US tax law, a US company can be taxed on all its operations, both those in the US and those outside. Many other countries, however, only tax a multinational on its domestic operations. Why should a company like Ford or
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But, there's a big difference between the US and overseas. We are much less restrictive of how foreign corporations can operate in the US. For example, China often requires you to partner with a Chinese company to form a joint-venture. Europe makes firing damn near impossible. Closing a factory in France can shut down Paris with protests.
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The problem is that Google claims to be different (Score:3, Insightful)
That's part of their schtick. They aren't like other corporations, or so they say.
Turns out when money is on the line, oh yes they are just like other corporations.
So if they're like everybody else, why do they deserve geek community support?
Re:The problem is that Google claims to be differe (Score:2)
Re:The problem is that Google claims to be differe (Score:2)
So if they're like everybody else, why do they deserve geek community support?
Do you even realize what you just said? Christ, if this is how the "geek community" behaves then count me out... You can go support your nearest hippy organization, I'll support whom I want.
definitions (Score:4, Insightful)
Unlawful, certainly. But evil?
Re:definitions (Score:5, Insightful)
Because the taxes that cash-rich google doesn't pay are paid for by the rest of us.
Re:definitions (Score:5, Insightful)
Re:definitions (Score:5, Insightful)
Okay, all of this is paid for by incoming taxes. If the taxes aren't sufficient to cover the expenses, then we borrow, adding to the debt. So, the amount we pay in interest on the debt goes up, further reducing the ability we have to make decisions about how much money to spend on which program. Eventually, if there's no fiscal discipline and companies are allowed to avoid paying taxes, the rest of us will have to pitch in more money. So, in the short run, you're right in that your taxes are not a function of Google's taxes. However, in the long run, the more companies game the system to avoid paying taxes, the more likely we will have to raise taxes on individuals in order to meet payment on the debt and obligatory expenditures. In addition, these companies benefit from operating in the US. They are protected by our military, when their CEO has a heart attack the ambulance comes an picks him up, and the police stop the "G-8 protesters" from throwing trashcans through their plate glass windows. They use the same public services we all use, shouldn't they pay their fair share?
Not just businesses (Score:2)
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1. Simplify the tax code and close loopholes like the ones that allow Google and other mega-corps to move things around and minimize taxes.
2. Spend less.
History shows that taxes rarely, if ever, go down as a net. Once a politician has your money, they don't give it back. They get addicted to the spending and when the time comes, lo and behold there are more "necessities" that can't be cut from the budget. Necessities that were lived withou
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Re:definitions (Score:4, Informative)
"A taxpayer need not arrange its affairs so as to maximize taxes as long as the transaction has a legitimate business purpose." --
Judge Cornelia G. Kennedy in the Sixth Circuit Court of Appeals, April 20, 1992, aff. of the Tax Court holding in Proctor & Gamble v. Commissioner
Or...
"There is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor; and all do right, for nobody owes any public duty to pay more than the law demands." -- Justice Learned Hand
The government wrote the law, Google is just playing by the rules. Don't like it? Change the rules, but don't whine about companies (or individuals) that do what is legal to minimize taxes.
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There is nothing wrong with structuring your income to pay the minimal amount REQUIRED BY LAW. You seem to be in the Elvis camp, being proud to pay a ton in taxes.
2 logical fallacies and one red herring (Score:3, Insightful)
This is a double logical fallacy, and a red herring. First, you are presuming that the government isn't already trying to get the maximum amount of taxes from us anyhow. Second, you are presuming that the government would actually spend that money to our benefit. Finally, "cash rich", is a red herring. The government never has taxed net-worth and never will, they tax income. That means that the business man who busts hi
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Inflation is essentially a tax on net worth. And governments are the sole cause of inflation in their fiat currencies [bloomberg.com].
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Since we are in such a rapid growth cycle, we have been advised this year by our accountant, due for clearance by our lawyer, to become an actual corporation. Then the corporation pays taxes on profit, and re-investing in the business is NOT income.
Once growth levels out it's moot either way, but you might want to ask a tax attorney or accountant about this. Looks like it should save us about half of our current ta
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Not sure exactly why that changes if you're a corp, but who am I to argue?
Deductions (Score:3, Informative)
I'm getting my balls ripped off. Why? I started my small company on a shoestring 5 years ago, and have invested every cent that I don't spend on food and a rat-hole apartment back in my business (created 10 full time jobs with health insurance in the meantime). I still get taxed on all of that re-investment. What does that mean? It means that literally I pay out more in "income" taxes than I actually take home and spend (I pay about 4 times more in taxes than I actually pay myself). I (and people like me) get raped for re-investing in our businesses. Before I ran into this problem, I always wondered why some small businesses (and large) simply don't re-invest back in the businesses. You know the kind of place... if it's retail, then they don't even change the lightbulbs, or re-paint the building... ever. Now I understand why. If you're gonna get taxed anyway, it makes more sense from a comfort standpoint to spend the profits on a stupid HDTV than it does on lightbulbs for the business.
As a business owner also, I sympathise with your damaged anatomy, but I disagree with your conclusion. IRS form 1040 schedule C has a line labeled 'maintainence'. Anything on that line is subtracted from the pre-tax total. I have no problem buying paint or bulbs or other materials because the majority of the cost is essentialy paid for by the IRS and state income tax agency.
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Well, I've never seen a 1040...
*THUNK* ( That sound is my jaw hitting the floor. ) You have never seen your own 1040???
It's really in your best interests to understand your taxes. Let the accountant do the paperwork for taxes and offer you advice, but you should be making the final decisions about how your taxes are structured.
Ok, ok, if you're like me, you don't have the time because you're too busy running the business. At least get a second opinion from another accountant.
...every time I need to buy more (new) inventory that isn't a replacement for stuff already sold, that's not deducted from taxable earnings.
Yeah, I have the same problem. It truly sucks.
A par
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Because the taxes that cash-rich google doesn't pay are paid for by the rest of us.
That's like being mad at your neighbors for installing a security system that causes your house to be burgled instead of theirs.
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Perhaps evil is a contentious word, but if you approve of the uses to which at least some tax money is put - education, welfare, trading standards, hospitals, public transport etc then by deliberately evading that simply to make a bigger profit could be argued to be immoral. On the other hand, not paying taxes to some governments could be seen as the only moral thing to do, given their poor track record of sponsoring terrorism, for instance.
Re:definitions (Score:5, Interesting)
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Taxation is theft. Even if the government is dedicated to giving that money towards good causes, they're still taking it from you at the point of a gun.
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Of course, the word "evil" d
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And as for democracy, what if that "willing electorate" made an "informed decision" that society would be better without Jews? Or without black people? I'm not saying democracy isn't capable of making good decisions, but you shouldn't automatically label it as "good" any more than you should label avoiding taxes as
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As far as I can tell, what the government calls "Profit laundering" is perfectly legal. It's no different than my corporation paying out year end bonuses so we don't have to report a profit. (It's not my fault if the bonus getters want to reinvest that in the company.)
If the US wants to keep its tax revenue they're going to have to be more competitive. The only thing that's keeping many large
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Well, please enlighten us, what is "evil"?
Google's motto is (was?) "Do No Evil". Which most people took to mean they would actively try not to behave like every other giant, rich, corporation.
So far, every time Google has done something questionable, like censoring Chinese search results, or evading taxes (legally or not), the Google fanboys of Slashdot have been quick to point out that Google isn't being evil, they're simply behaving like every other company. Google isn't out sacrificing virgins t
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Which most people took to mean they would actively try not to behave like every other giant, rich, corporation.
Which is retarded. Seriously. Most corporations aren't *evil*. Avoiding taxes (not evading) is not *evil*. We all do it. I drive to NH to purchase some items due to no sales tax, I claim what I can on my income taxes to keep more of my money. Am I evil? Now, if Google is funneling money to African guerrillas to mine diamonds, then you'd have a point...
The definition of "evil" on Slashdot
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Hey, I like it when big companies tell the government to fuck off. Eventually, the government will run out of money, and they'll be forced to cut back on bullshit like "The Department of Homeland Security", "The War On Drugs", and "Operation Liberate Iraq OMG commie terrists". Less income will force the government to downsize, and the effects on society as a whole will be wonderful.
google++.
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FairTax! (Score:3, Interesting)
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Support the FairTax, bring corporate headquarters back to the US and end this ridiculous waste of everyone's time.
I'm cautiously in favor of replacing the income tax with a national sales tax (though, it's not the overwhelmingly RAH RAH GREAT IDEA!! that proponents sell), but it'll never, ever happen. Because: 1) You would shut down a huge number of businesses (e.g., tax accountants), 2) they'd have to fire a large number of Federal Employees, 3) it's not progressive, therefore a huge segment of society
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I agree with the sibling AC, and also wish to point out that the FairTax is the only plan which completely removes all tax obligation from the poor.
Even when their income tax rate is zero, there's plenty extra they're having to pay for everything because of the income tax on everything else. When it's a sales tax, after their prebate, they have paid $0 in tax.
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While this is true, the FairTax goes a step further (as far as progressive taxing goes) - if you are below the poverty line (or if your spending on new items is below the poverty line), you actually end up with cash in your pocket from the FairTax.
Personally, I'm not in favor of most government-ran welfare, as it can often provide incentives to _not_ work. Doing better financially typically results in less eligibility for financial progra
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National CPA associations are not behind it.
It is not progressive. It is flat. Period. A token prebate does not change that. What is the marginal rate on someone under proverty level? What is the marginal rate on someone at poverty level? What is the marginal rate on someone that makes $10,000,000,000 per year? They are all the same because it is a flat tax.
It is not progressive. It is regressive enough to be supported by conservatives, and it can be confused with progressive (li
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It is not progressive. It is flat. Period. A token prebate does not change that. What is the marginal rate on someone under proverty level? What is the marginal rate on someone at poverty level? What is the marginal rate on someone that makes $10,000,000,000 per year? They are all the same because it is a flat tax.
Currently, people (in the US) pay taxes of roughly 14% on the first dollar of wage income for social security and medicare. Then, once they get enough income to get past exemptions and deductions, they pay about 23.5%. This climbs to a maximum of around 43%. Then it drops back to around 35.4% (social security has an income *cap*) before rising to 37.4%. However, since investment income is taxed differently than wage income, the effective tax rate of someone making $10 billion per year is likely to be f
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They are anxious to spend their time on more useful pursuits of their abilities.
You are high. You think the average tax accountant who gets a big income from tax planning laments that they "can't" spend their time on more useful pursuits, instead of taking all that dirty money? What stops them? Please.
Firing federal employees is a GoodThing(tm) and is a check mark in favor of a flat tax.
I didn't say that wasn't a good thing -- I just said it was a reason it Won'tHappen(tm).
It *is* progressive..
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Corporations: No Taxes at All? (Score:4, Interesting)
It's the same sort of hidden tax as the idea of having employers pay for half of your social security benefits. Where do you think the extra revenue comes to do this? Higher prices on products and lower wages. The government loves to obscure the true source of taxes, especially when they can make it appear that someone else is really paying for them. These are two good examples.
Am I missing something in my logic here? I haven't really heard anyone else talking about this (although I haven't looked all that hard). My suspicion is that this would never fly, if only for the huge political target you'd make yourself for even bringing this up.
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You're not missing a thing; it's one of the big reasons the FairTax makes sense: corporations don't really pay taxes, they pass them along to people. There's a whole chapter on this in the FairTax book [amazon.com], I really suggest you read it; it's at least interesting even if you don't end up agreeing (but I think you will).
That's a non-referring link, but I don't know what I can chop out and have it still work, so I left it all in.
This is perfectly normal (Score:5, Insightful)
Google isnt evil for using a perfectly legal accounting system that works within the bounds of the law to pay as little taxes as they can.
Everyone takes as many deductions as they are legally allowed on their tax returns. Would we think that people claiming an exemption for having a kid are 'evil'? Really not much difference.
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The year's take for that system was under $1k. $23 keeps coming into my head.
*Everybody* pays the minimum tax they can. The only cases where they don't is some people will only take some of their more questionable deductions as a form of insurance. That way they have something to fight back with in case an audit happens and dis
Why this isn't evil. (Score:3, Interesting)
Currently the US foreign policy is driven by warmongering and profiteering. The US military has been outsourced to corporate mercenaries and little regard is given to the well-being of the actual force.
We're about to start a navel and air war with Iran, we're ignoring Darfur, we're disregarding our own people in their time of need (Katrina) and we're supporting countries on questionable moral ground.
If anything qualifies as evil, all that does. So if Google is avoiding paying taxes to a government which executes such evil behavior I'd say they're living up to their mantra.
navel and air war with Iran (Score:3, Funny)
Seems a little contrary. (Score:2, Informative)
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When being raped, it is best to save something. (Score:4, Funny)
If anything, we should be proud that Google doesn't put money into the vast wasteland of government spending.
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- Seconds per year ~ Pi * 10^7
You Keep Using that Word (Score:2)
You may or may not have something worthwhile to say in your post. However, your use of the word "rape" leads me to believe that you have no concept of the meaning of that word.
Paying federal income tax code may be burdensome, but it does not involve forced sexual penetration. Might I suggest, if you believe that the services provided by the US government are not commensurate with the taxes they collect, you might use the words "rob", "steal", or "swindle".
International companies considered harmful (Score:2)
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Remember the difference (Score:5, Informative)
TAX AVOIDANCE is a patriotic thing to do. It does no good to give the government money in excess of what it needs to do its job, and what it has been lawfully authorized to collect.
TAX EVASION is illegal. That's what they got Al Capone on when then couldn't nail him for any other crimes.
Axis (Score:3, Funny)
U.S. Tax Code (Score:5, Interesting)
When you have a set of rules as ridiculously long as the U.S. tax codes, it basically makes it impossible to comply 100%, because no matter what you do, there will be a segment SOMEWHERE in that massive wall of text that you unintentionally violate.
The novelty about the deeply complicated tax laws is that loopholes abound - it may be the specific reason the government maintains its complexity.
Google trying to minimize its tax burden is just good business. That they seem to have done it in a way that is suspect doesn't mean they intentionally broke a law, it probably means they did it so well that the IRS isn't sure it's legal or not.
But again, with tax codes as complex as ours, it will probably fall into the realm of ambiguity so that it can either be legal OR illegal, which is yet another governmental advantage of highly complicated tax laws.
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Google THIS. (Score:2, Insightful)
or not.
When driving to the "Googleplex", Google's employees drive on public roads. They drive on roads made safer by law enforcement. They're defended by a brave group of Americans that volunteered to give their lives when necessary. If they have an employee that's been in a car accident, many time a city/county EMS unit will take them to the tax-funded public hospital. If there's a fire at the Googleplex, the local fire department will respond.
Wh
Is it evil to screw the government? (Score:2, Funny)
Damn taxes! (Score:2)
Now I get the enjoyment of having to deal with a mind-blowingly complex tax system, both on the State and Federal level. Complete, reliable information covering everything I need is difficult to find and even more difficult to wade through. So I had to get an accountant.
Then comes the joy of having hard-earned money go to the government.
Actually we should be thanking Google. (Score:2, Insightful)
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I'm open to correction, but my guess is that the bulk of Google's people, physical facilities, and customer base is located in the U.S. That means Google enjoys a considerable set of benefits provided by local, state, and federal governments. Police protect it from being robbed; firefighters protect it from burning down; various agencies pave roads, provide power, etc., etc. Those governments also provide an educated workforce and help secure a style of living that tempts folks to come and stay in the ar
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Multinationals are prone to "evil". Moving your production facilities overseas is evil if you ask the small town that was built around your industry. Buying huge quanities of a product at a required huge volume discount is evil if you as your competition or you supplier. Undercutting small business is evil if you ask small business. Having an annual income higher than the GDP of many small countries is a money/power behemoth that begs for
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The issue is that when the factory moves out, the low-skill jobs are gone. People that could work in a knowledge industry or one that required above-average skills already did that when they left college. The high-school graduates that could work in a factory and make decent money did what they could do.
You cannot take a 30-year-old factory worker that knows how to operate industrial machinery
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I never said anything about the idea that some-one with a lower Iq can do a job that requires that of a higher one. That would be silly. But you are trying to tell me that
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Does the EU have such vast abuses of the VAT system?
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As for the Google case,
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Fair Tax (Score:2)
You then pay most of your income to the foreign subsidiaries as cost of goods. Not much tax there.
Anyone not in this game isn't very big and is paying taxes out the wazoo. Therefore, their costs are higher than someone with a foreign subsidiary and when Wal-Mart comes calling their prices are too high.
Yes, there are some boutique shops th