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back to article Bill Gates: Corporate tax is not a moral issue

Microsoft founder Bill Gates says he gladly paid a whopping $6bn in personal tax, but added that he reckons corporate tax is a legal issue and not a matter of morality. Gates spent 14 hours in Australia on Tuesday suggesting to Australian politicians that they devote more of the nation's budget to foreign aid. He gave several …

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Bill is right this time.

People running corporations have a *duty* to maximize shareholder value. To the extent that they do not, the corporation's viability is affected. Corporations that are reckless enough to take shareholder money and send it away unnecessarily are ultimately doomed. They will be out-competed by corporations that behave more rationally.

For many years I have called corporations 'evil robots' because in my opinion that is what they are. More to the point, as currently laws are structured, that is what they *must* be if they are to survive.

I do not think that corporations should be able to come close to the excesses we currently allow. However, the solution is, as Bill Gates has said, to change the rules. Unless you level the playing field, you guarantee that only the most ruthless of corporations will survive. I have, as I write this, in mind a particular Biotech company that sets an astonishing standard for corporate Evil.

Like government, we get the corporations we deserve. If we set up rules to allow non-human entities to ride roughshod over human beings, guess what happens?

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Re: Bill is right this time.

Forget corporate law, there's no particular reason to return more than what the law requires of personal income either. Giving to the state is not a moral issue and corporations are just legal fiction - they can't have morals.

Corporation profit is just a convenient and efficient place to identify and collect tax - at least it was.

One way to put a damper on things would be to only allow one set of books. Stop allowing companies to tell the tax office one thing and shareholders another.

Then you could deal with IP - all payments sent abroad for the use of IP will be credited as profit on imported units in which that IP is used, pro-rata.

It's late and I may not be thinking straight.

There is, of course, a moral obligation on people to help those in need.

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Anonymous Coward

Re: Bill is right this time.

"People running corporations have a *duty* to maximize shareholder value. To the extent that they do not, the corporation's viability is affected. Corporations that are reckless enough to take shareholder money and send it away unnecessarily are ultimately doomed. They will be out-competed by corporations that behave more rationally."

And this is the problem, no one knows what SHAME is anymore, or they don't care!

Everyone/corp have a DUTY to pay the tax due of them and not weasel their way out of it!

Avoiding your responsibilities makes you a "Jeremy Kyle" dad and shame and scorn should be piled onto them. Tax the corporation then TAX TAX TAX the shareholders.

People should shut up and pay up or be thrown in the nick.

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Re: Bill is right this time.

Similarly every parent has a duty to squeeze as many benefits out of the welfare system as they can.

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Holmes

Re: Bill is right this time.

The government didn't create those laws. The corporations did.

Never forget this.

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Anonymous Coward

Re: Bill is right this time.

"Similarly every parent has a duty to squeeze as many benefits out of the welfare system as they can."

Kind of get the sentiment - but one is taking more than you need from the collective pot, the other is giving extra to it.

Company A makes widgets and pays 100% of their tax

Company B makes widgets and pays 120% of their tax

Which one is going to expand and survive, and which is going to get bought out by the other at best.

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@Obviously

And this is the problem, no one knows what SHAME is anymore, or they don't care!

You mean like those politicians who will easily organize a going away party for 100 people, estimated costs are approximately E75.000,-, even when the country they claim to be serving is in a very rough financial climate, to such an extend that taxes had to be raised and government spendings (where it matters of course) had to be cut.

Because that is the other side of the medal; people need to pay taxes but also see that taxpayer money wasted and thrown away as if it was nothing.

This isn't saying I don't agree with you perse, but it works both ways.

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Re: Bill is right this time.

It's more like -

Company A pays 100% of the assessed tax on their profits in country A because they're based with country A.

Company B pays 2% to various accountants and 10% to country B, even though the profits were generated in country A.

Firstly this skews the market in favour of incumbent multinationals and away from competitive local business, and secondly it effectively puts the tax rates on individuals in country A up as the government is denied funds from business.

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Re: Bill is right this time.

And this is the problem, no one knows what SHAME is anymore, or they don't care!

Everyone/corp have a DUTY to pay the tax due of them and not weasel their way out of it!

I don't think I'd call paying the taxes required by law and not one penny more 'weaseling' their way out of taxes, and that's what Bill is talking about. If nations are so concerned about big multinationals using legal loopholes to pay lower tax rates then those nations need to close those loopholes, end of story. You can't craft your tax law so that it allows corporations to pay less taxes and then complain when they use it.

The US is a perfect example of this. We have all sorts of tax loopholes intentionally put it place so that the business owners in Congress and their cronies can pay less taxes, but whenever some company without Congressional connections use those same loopholes they get hauled before the Senate to explain why they're using those perfectly legal loopholes, as Google was recently. Schmidt did the right thing telling them off. If you don't like company's using the loopholes you set up to pay less taxes then you need to close those loopholes.

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Re: Bill is right this time.

@ecofeco - "The government didn't create those laws. The corporations did. Never forget this"

You state that as though there were a clear distinction. There isn't. Never forget this.

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Unhappy

Re: Bill is right this time.

@sisk - "If nations are so concerned about big multinationals using legal loopholes to pay lower tax rates then those nations need to close those loopholes, end of story"

You're right of course, there's just 1 more detail to consider. Legislators who introduce legislation to remove loopholes and catch more of corporate profit in the tax net will see their campaign funding dwindle as the multinationals redirect their campaign contribitions / *cough* bribes *cough* towards those legislators who will vote for the tax loopholes that they desire, and against tax reforms that will negatively affect their bottom lines.

Of course not all legislators are thusly influenced, not all companies give campaign contributions based only on that etc etc... but the net effect in the long run is the current mess

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Devil

Re: Bill is right this time.

"You can't craft your tax law so that it allows corporations to pay less taxes and then complain when they use it."

The problem isn't that simple. Tax laws start simple and become a convoluted mess in an attempt to encourage foreign business.

Say, McBurger comes to the UK but is based in the US and complains that they're paying tax on what they sell in the UK and their profit in the US. They see this as unfair (rightly so), so the government (on both ends) agree to change the tax rules to be fairer to how the company operates across borders. This works great until some shrewd/immoral/cunning/evil (delete as applicable) accountant realises that there is a way to misdeclare or offset the money taken in one region in order to pay less tax.

As the rules around how companies operate across borders expands to cover other scenarios, the number of loopholes increases. (As a developer, I want to say "due to poor unit testing")

Take a look at how Starbucks reduced their tax bill by renting their UK property from a foreign company (themselves) based in a country with lower tax. Perfectly legal, but clearly not what the system was designed for.

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Re: Bill is right this time.

Not all nations follow the US model of "pay your campaign". Most (West)European countries have a finance system and access to TV time during elections "for free". So they are less restricted there (in theorie)

This sometimes is abused by "4.95 percent" parties in germany - you get money based on the percentage/number of votes as soon as you go over IIRC 0.5 percent and you do not have to work unless you get 5 percent (or 3 direct mandates).

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Re: Bill is right this time.

"People should shut up and pay up or be thrown in the nick."

I don't know why but this comment reminds me of the old bearded convict in Life of Brian, who has just been turned the right way up after 20 years by his Roman jailers and who is full of praise for the Roman race.

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Re: Bill is right this time.

Except that government in most of the world doesn't need funds.

It's that misconception that causes most of the problem. The causality is actually the other way around - government spending creates the liquidity with which taxes are paid. Government spending is actually limited by the amount of free stuff and resources its currency can command.

Taxation is a distributional issue. It is unfair that Company A pays less than Company B all other things being equal.

But it has no effect of the ability of government to do stuff - however much the politicians spin the line that it does.

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Pirate

Re: Bill is right this time.

4 thumbs down?

Did I strike a nerve?

And yes, the American gov/corps is hardly distinguishable from textbook fascism these days.

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Re: Bill is right this time. @Obviously! 28May 14:02

"Everyone/corp have a DUTY to pay the tax due of them and not weasel their way out of it!"

And just what exactly is the tax due of them?...

I think you'll find that all the companies being investigated in the UK, US and EU do pay the tax due of them - as defined by the various national laws.

Likewise the many contractors who pay themselves small salaries and large dividends...

In my opinion it is an anomaly that a company's annual accounts give no real information on the taxes actually paid. Given the current debate it would be interesting to see a full breakdown of taxes paid (eg. VAT, NI, PAYE, Corp tax etc.).

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Re: Bill is right this time.

It's more like -

Company A pays 100% of the assessed tax on their profits in country A because they're based with country A.

Company B pays 2% to various accountants and 10% to country B, even though the profits were generated in country A.

Firstly this skews the market in favour of incumbent multinationals and away from competitive local business, and secondly it effectively puts the tax rates on individuals in country A up as the government is denied funds from business.

Absolutely, David.

Adam Smith would be turning in his grave at this (although of course the twats down at the Adam Smith Institute like to pretend otherwise).

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Thumb Up

Re: Bill is right this time.

Obviously!: "People should shut up and pay up or be thrown in the nick."

I really don't disagree with you, I really don't, but have you ever asked yourself....Pay up for what? Also, is it really that they should pay up on the taxes, or stop hoarding the money and put it back into the countries economy?

Our (U.S.A.) EMT services seem strong. When a tornado or hurricane hits, there is help and obvious attention. Police forces seem to be everywhere, it seems hard not to see a cop on a daily basis. As far as the firefighters go, well I'm not sure why there is so many volunteer units, but they all seem to do a great job. Our healthcare isn't outrageous, and it surely will remain privatized for the majority no matter what laws come.

I don't disagree that companies should "Pay up", I just feel they should do it directly with return investments and jobs, but sadly, they almost never do. Now, would companies paying more to the government benefit anything? Do we need to give even more military equipment away (fighter jets, tanks, basically anything) to foreign countries and give them training on operations as well? Our government gives away billions already, and puts not so much back in. So would more money in the hands of our current government do great things, or just further proportional spending down the wrong path?

What our government could do (very ballsy though), is to force companies to put the money directly back in the U.S.A. economy, here land side, instead of hoarding it and filtering it internationally. That way our fumbling government can't waste it away, and companies can create new jobs and investments. However, sitting here right now, it looks like the fumbling and hoarding will continue as normal. S.N.A.F.U.

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Re: Bill is right this time.

"If nations are so concerned about big multinationals using legal loopholes to pay lower tax rates then those nations need to close those loopholes, end of story."

No, the story *starts* with an entire economic establishment - q.v. the Chicago School and the Austrians - which was created deliberately and knowingly as a propaganda exercise to promote the idea that corporate taxation is bad, public spending is bad, and tax should be as low as possible for rich people because they 'create jobs', etc.

Basically everything in mainstream economics and corporate policy is a tissue of lies and nonsense. None of it works the way it's claimed to work, and all of it is socially and economically corrosive and destructive. You can see the results by looking at Greece and Cyprus.

So what do you do when governments can't change the rules, because they're ideologically unable to imagine better rules, and institutionally corrupted by revolving door appointments that move the same people into and out of corporate upper management and politics + the civil service?

If you can answer that question in a practical make-a-real-difference kind of a way, we can have democracy and real prosperity back again.

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Re: Bill is right this time.

"People running corporations have a *duty* to maximize shareholder value."

I agree entirely, the issue is not the companies behaviour but the rules they are requried to obey, but...

How exactly do they justify the ridiculous salaries that they take for their board members and certain "key" staff (traders for example) when all the available evidence suggests that after a certain point (usually cited as about 20 times the average salary) inflated wages are in no way linked to increased performance?

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Re: Company A and Company B

Insufficient information to answer the question. If Company B makes $1 billion in profits and Company A makes $1 million in profits, I'm guessing it would be Company B. Which might not help Company A's financials.

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Re: Bill is right this time.

This is why the UK loaned loads of money to Ireland. George Osborne might be losing money to Ireland in corporation tax, but Ireland has to pay something like 5 or 6 percent interest on the 6bn or so the UK lent them.

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Mushroom

Re: Bill is right this time.

> People running corporations have a *duty* to maximize shareholder value.

This is a grand excuse for all sorts of anti-social nonsense.

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Devil

Re: Bill is right this time.

> I don't think I'd call paying the taxes required by law and not one penny more 'weaseling' their way out of taxes,

Except this is about shuffling money around bogus corporate entities in order to gain the most favorable status possible. For most people this seems inherently unfair because most of us aren't in a position to do this. This includes a good number of small businesses to. Although governments that set themselves up as havens for tax scofflaws deserve just as much derision as the megacorps that exploit them.

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Re: Bill is right this time.

Well, someone obviously thinks they ARE worth the money. Because unless you are the sole owner of the company someone else writes your contract and paycheck. Maybe they are really good negotiators, maybe they have certain skills in a crisis

And if people get payed by performance - most politicians would be on Dole

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But they are required

The companies are just finding ways to transfer-price their way around it. It's not like the UK tax system was specifically set up with this in mind, it's one of multiple work-arounds.

I agree utterly that the law should be changed, but bleating about how it's not a required amount because that's the way the system was set up to work is more than a touch disingenuous.

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Re: But they are required

Hardly. What the likes of Google and Apple are doing is still (apparently) legal. Only government can make it illegal, and this can only be achieved through better international tax agreements. The politicians can moralise all they want, but unless they show a little backbone, and stand up for the rule of law, through legislation, then all they are doing is surrendering their own legitimacy to the very corporations they criticise.

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Stop

Re: But they are required

Nobody is saying that it's illegal (possible exception of the Google sales taking place exclusively in Ireland, which may be iffy).

But I'm saying its entirely disingenuous for the likes of Bill Gates and Eric Schmidt to say they're playing by the rules and paying a fair amount when the companies structure themselves and do all sorts of financial acrobatics specifically to avoid paying the amount they would usually be assessed.

Bill even says "This is not a morality thing, this is about the law,” he said. If nations set new tax levels “companies will be happy to comply", which is rubbish*. They use loopholes in international law to avoid paying tax in the places they do business.

So again - the solution absolutely is to change the law, but that doesn't change the fact that these statements are disingenuous.

(*hint, what's missing is "and we can't find a way to weasel out of it")

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ACx

Re: But they are required

Oh please. Loop holes exist because governments leave them there, if not put them there in the first place. What is a tax incentive if its not a loop hole?

The real issues is that nations do not co-operate, but compete for business using taxes. Ireland attracts business because of its tax regime. Trust me, its not the weather. Any why invest in the UK and not say Germany? What incentive can we give? UKIP? The Channel? The great UK customer service? The apparently poorly educated population who the government says have been doing dumbed down qualifications for the last 20 years?

If people want this sorted, all nations must have identical tax regimes, which could begin to be achieved by a *more* integrated EU. Heh, like this country would like that.

Still waiting to know why its great news that the Star Wars films will be filmed in the UK in no small part due to a tax deal.

This entire debate is a disingenuous politically motivated joke.

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Re: But they are required

The thing is in some ways things are working like the EU was set up to work.

There is certain things that you have to allow as one of the main points of the EU.

But somehow they can stop tobacco and booze being ordered from the EU. (Perhaps the EU has agreed to ignore it in that instance but it is still illegal if you pay the tax in the country of origin).

Still think legalising all drugs and taxing them in such a way as to make it very difficult for organised crime to compete would solve most budgetary problems overnight. Could make an obscene amount take nearly all the black market money.

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Anonymous Coward

Re: But they are required

In the case of the Star Wars film this was a deliberate policy by the UK government. The jobs created, the employment retained and taxes will ensure a lot of income.

If the makers of Star Wars made the film here but then claimed everyone was actually doing the work in Ireland then that's obviously a lie and that's the sort of trick Google and others are pulling.

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Re: But they are required

>If the makers of Star Wars made the film here but then claimed everyone was actually doing the work in Ireland then that's obviously a lie and that's the sort of trick Google and others are pulling.

That's almost what they did - Star Wars still hasn't made a profit, so some of the English actors involved still haven't received any royalties

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Re: But they are required

Ah yes, Hollywood accounting. Legendary stuff :)

Tip, everything must be negotiated off gross because there will never be a net. By design.

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Re: But they are required

The UK government can't have it both ways though.

On the one hand, they say we are now an IP economy ( ie we have little left to sell) and that IP has considerable value.

On the other, government taxes are hammered when others also recognise the high "value" of IP, especially when they ship that value out to low or non-existent tax economies.

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Re: But they are required

Angered RE legalising all drugs. Huge tax income, huge savings on military expenditure spent on the futile war on drugs.

Of course, the arms companies want the war on drugs to continue - but there's always hope - just see washington state.

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Re: But they are required

Should be agreed not Angered!

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Re: But they are required

Those who payeth piper calleth tune.

Unfortunately we get the political class we are prepared to pay for. And since we are not prepared to pay them, somebody else has.

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What incentive can we give?

The incentive is that they can still profit from the populace, just not as much. Take Starbucks, if they were forced to cease all operations in the UK unless they paid their full tax, rather than use loopholes for tax avoidance, do you think Starbucks would allow all there stores to be closed when there is still a profit to be made?

Probably not, I am sure they would comply. If on the other hand they refused to pay the proper amount of tax and were happy for their stores to close, then this service would be provided by UK businesses, from entrepreneurs to large businesses, as it is a commercially viable service.

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Anonymous Coward

Re: Bill Gates knows nothing about morality

>I look forward to urinating on his grave someday.

Then don't be surprised when someone shits all over yours.

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WTF?

Re: Bill Gates knows nothing about morality

War criminal, WTF??

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Re: As the single biggest war criminal of all time

No. He isn't.

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Re: single biggest war criminal of all time etc.

@ IGnatius T Foobar - Consider my right eyebrow to be raised a tad.

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Re: Bill Gates knows nothing about morality

Eadon, is that you?

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Facepalm

Re: single biggest war criminal of all time etc.

Maybe this is you know who's new alter-ego?

I really do wish sometimes I could see what these people actually look like and where they live.

I'm sure many of them live in medical institutions.

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Anonymous Coward

Re: Bill Gates knows nothing about morality

"As the single biggest war criminal of all time ..."

Really? REALLY? Looking at your past posts as well as this one, you seem prone to hyperbole and irrationality. A winning combination. <slow applause>. Still, keep posting - it's half term so you've plenty of time to try for a badge :)

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WTF?

Re: Bill Gates knows nothing about morality

War criminal?

Is this trolling or did I miss Bill Gates' time in the Khmer Rouge?

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Anonymous Coward

Re: Bill Gates knows nothing about morality

Must be Eadong since he's posted something that doesn't make sense.

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Re: Bill Gates knows nothing about morality

Oooh. We've all collected a downvote for our puzzlement.

Here you, gimme another.

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