Google's Tax Bill

| Fri Oct. 22, 2010 1:17 PM EDT

After reading a recent Bloomberg article about how Google reduces its corporate tax rate by shuttling money between Ireland, the Netherlands, and small Caribbean islands, Tim Fernholz wonders if this betrays Google's "Don't Be Evil" motto:

So is this action evil? If Google's definition of not being evil is 'doing more than the average corporation to support the public interest,' then sure it is. It's one thing to take advantage of legitimate tax law, but exploiting these loopholes for the sole purpose of paying less tax violates the spirit of the law, if not the letter. That would be fine if Google was content as a typical business, relentlessly pursuing profit with no thought to the public interest. They simply shouldn't pretend they're somehow better than the Exxons and Goldman Sachs of the world.

Put me down on the "not evil" side. There are, obviously, some tax dodges that are egregious enough to qualify as pretty close to evil. But declaring revenue in whatever country gives you the best tax treatment? No matter how many clever names we make up for this, the fact is that virtually every company with foreign operations does this. It's just routine. Google's motto is "Don't Be Evil," not "Don't Be An Idiot."

More generally, I think that taking full legal advantage of tax laws is rarely unethical. We all do it. I think that the mortgage interest deduction is bad policy, for example, but I never miss an opportunity to declare it. Ditto for any other deduction I can get away with, regardless of how I feel about it from a philosophical point of view. I'd be happy to see the tax code changed, but in the meantime I certainly don't feel bad for refusing to be a high-minded sucker while everyone else follows the actual existing law.

The scandal here isn't that Google is doing what it does. The scandal is that our tax laws allow it. Articles like the Bloomberg piece on Google serve a purpose, but that purpose shouldn't be to pretend that Google is doing anything wrong. The purpose should be to wake people up to how our tax code works. Answer: not very well. If there's any evil here, it's in Congress, not Silicon Valley.

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