K-12 Tax & Spending Climate: Google's Low tax Strategy, Relations with President Obama and Anti-Intellectualism

Lisa O'Carroll:

Take Google, for example - like WPP it has sited its European headquarters in Dublin although it most of its European revenues are generated outside Ireland - from the UK and other large EMEA economies such as Germany.

The internet giant doesn't pay 12.5% corporate tax in Ireland, it pays 20%. But that figure is not the interesting one. The interesting figure is the gargantuan "administrative expense" that reduces its gross profit from €5.5bn to just €45m.

Grant Thornton tax accountant Peter Vale, who works with multinationals in Dublin says the corporate tax rate of 12.5% may not be a critical factor for companies like Google.

The search engine is using Ireland as a conduit for revenues that end up being costed to another country where its intellectual property (the brand and technology such as Google's algorithms) is registered. In Google's case this country is Bermuda, according to an investigation by Bloomberg last year.

Vale points out that Bermuda is likely to be happy to receive tax revenues from such a huge company, saying: "To them, the 12.5% probably doesn't matter."

The 2009 Google Ireland Limited accounts show the company turned over a phenomenal €7.9bn in Europe for the year ending 2009 - up from €6.7bn the previous year.

Jeremy Bowers @ ycombinator

Part of the problem is that the American distrust of intellectualism is itself not the irrational thing that those sympathetic to intellectuals would like to think. Intellectuals killed by the millions in the 20th century, and it actually takes the sophisticated training of "education" to work yourself up into a state where you refuse to count that in the books. Intellectuals routinely declared things that aren't true; catastrophically wrong predictions about the economy, catastrophically wrong pronouncements about foreign policy, and just generally numerous times where they've been wrong. Again, it takes a lot of training to ignore this fact. "Scientists" collectively were witnessed by the public flipflopping at a relatively high frequency on numerous topics; how many times did eggs go back and forth between being deadly and beneficial? Sure the media gets some blame here but the scientists played into it, each time confidently pronouncing that this time they had it for sure and it is imperative that everyone live the way they are saying (until tomorrow). Scientists have failed to resist politicization across the board, and the standards of what constitutes science continues to shift from a living, vibrant, thoughtful understanding of the purposes and ways of science to a scelerotic hide-bound form-over-substance version of science where papers are too often written to either explicitly attract grants or to confirm someone's political beliefs... and regardless of whether this is 2% or 80% of the papers written today it's nearly 100% of the papers that people hear about.

I simplify for rhetorical effect; my point is not that this is a literal description of the current state of the world but that it is far more true than it should be. Any accounting of "anti-intellectualism" that fails to take this into account and lays all the blame on "Americans" is too incomplete to formulate an action plan that will have any chance of success. It's not a one-sided problem.

In The Plex: How Google Thinks, Works, and Shapes Our Lives by Steven Levy:

"Google was Obama territory [during the campaign], and vice versa. With its focus on speed, scale, and above all data, Google had identified and exploited the key ingredients for thinking and thriving in the Internet era. Barack Obama seemed to have integrated those concepts in his own approach to problem solving. Naturally, Googlers were excited to see what would happen when their successful methods were applied to Washington, D.C. They were optimistic that the Google worldview could prevail outside the Mountain View bubble. ... [A]nyone visiting the Google campus during the election year could not miss a fervid swell of Obama-love. While some commentators wrung hands over the Spock-like nature of the senator's personality, Googlers swooned over the dispassionate, reason-based approach he took to problem solving. ... 'It's a selection bias,' says Eric Schmidt of the unofficial choice of most of his employees. 'The people here all have been selected very carefully, so obviously there's going to be some prejudice in favor of a set of characteristics - highly educated, analytic, thoughtful, communicates well.' ...

"[O]ne of the company's brightest young product managers, Dan Siroker [the Chrome browser], ... got permission to take a few weeks off. ... At [Obama] campaign headquarters in Chicago, Siroker began looking at the web efforts to recruit volunteers and solicit donations. ... [H]e returned to Google to help launch Chrome. But over the July 4 weekend, he went back to Chicago to visit the friends he'd met on the campaign. Barack Obama walked through headquarters, and Siroker was introduced to him. He told the senator he was visiting from Google. Obama smiled. 'I've been saying around here that we need a little more Google integration.' That exchange with the candidate was enough to change Siroker's course once more. Back in Mountain View, he told his bosses he was leaving for good. He became the chief analytics officer of the Obama campaign. ...

"Just as Google ran endless experiments to find happy users, Siroker and his team used Google's Website Optimizer [tool for testing site content] to run experiments to find happy contributors. The conventional wisdom had been to cadge donations by artful or emotional pitches, to engage people's idealism or politics. Siroker ran a lot of A/B tests and found that by far the success came when you offered some sort of swag; a T-shirt or a coffee mug. Some of his more surprising tests came in figuring out what to put on the splash page, the one that greeted visitors when they went to Obama2008.com. Of four alternatives tested, the picture of Obama's family drew the most clicks.

"Even the text on the buttons where people could click to get to the next page was subject to test. Should they say, SIGN UP, LEARN MORE, JOIN US NOW, or SIGN UP NOW? (Answer: LEARN MORE, by a significant margin.) Siroker refined things further by sending messages to people who had already donated. If they'd never signed up before, he'd offer them swag to donate. If they had gone through the process, there was no need for swag - it was more effective to have a button that said PLEASE DONATE. ... There were a lot of reasons why Barack Obama raised $500 million online to McCain's $210 million, but analytics undoubtedly played a part."

Via Mike Allen.

The FTC on Google's "deceptive tactics" and violation of its own privacy rules.

Google Inc. has agreed to settle Federal Trade Commission charges that it used deceptive tactics and violated its own privacy promises to consumers when it launched its social network, Google Buzz, in 2010. The agency alleges the practices violate the FTC Act. The proposed settlement bars the company from future privacy misrepresentations, requires it to implement a comprehensive privacy program, and calls for regular, independent privacy audits for the next 20 years. This is the first time an FTC settlement order has required a company to implement a comprehensive privacy program to protect the privacy of consumers' information. In addition, this is the first time the FTC has alleged violations of the substantive privacy requirements of the U.S.-EU Safe Harbor Framework, which provides a method for U.S. companies to transfer personal data lawfully from the European Union to the United States.

"When companies make privacy pledges, they need to honor them," said Jon Leibowitz, Chairman of the FTC. "This is a tough settlement that ensures that Google will honor its commitments to consumers and build strong privacy protections into all of its operations."

According to the FTC complaint, Google launched its Buzz social network through its Gmail web-based email product. Although Google led Gmail users to believe that they could choose whether or not they wanted to join the network, the options for declining or leaving the social network were ineffective. For users who joined the Buzz network, the controls for limiting the sharing of their personal information were confusing and difficult to find, the agency alleged.

Finally: Massive Offshore Tax Giveaway supported by Senators Kohl & Feingold:

As mentioned here, I, too, would like the 5.25% tax rate that our good Senators Russ Feingold and Herb Kohl supported (to repatriate foreign profits via a one year tax break). Timothy Aeppel looks at the results:

But it's far from clear whether the spending has spurred the job growth that backers of the break touted.

A law signed by President Bush shortly before the 2004 election allows companies to transfer profit from overseas operations back to the U.S. this year at a special low tax rate of 5.25%. Businesses often keep such funds outside the country in part to avoid paying taxes in the U.S., where the effective rate on repatriated profit for many companies is normally closer to 25%. Backers said the measure would provide an incentive to companies to invest those funds in U.S. operations.

Most companies using the break have offered only broad outlines for how they intend to use their windfall. For the most part, they say they are using the bulk of the money for tasks such as paying down debt and meeting payrolls. Direct job creation rarely appears on the list.

Tom Foremski:

Why do countries and cities and states try to attract tech companies such as Google when they don't want to support the local community tax base?

Twitter, for example is trying to get out of paying San Francisco payroll taxes.

Yet the Obama administration believes that innovation from companies like Google and Twitter will help build jobs and provide the wealth to eliminate US deficits. Other governments have similar hopes.

That's a highly optimistic view and one that's not supported by the actions of those companies who seek the best deals they can get, and use every loophole to get out of paying a share of their profits to the communities where they live and work.

Well worth Reading: John Mauldin: The Plight of the Working Class and Ed Wallace: What's that Whining Sound?

This influence peddling at the highest levels is not unique to Google, or to the private sector for that matter. MG & E's lobbying is another example where funds, generated from a large rate base (the general public), are spread to a few politicians. Facebook's privacy problems and cellular user tracking are also worth following.

Posted by Jim Zellmer at April 4, 2011 1:37 AM
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