Curt Verschoor on Ethics

CHAPTER 11TAX AVOIDANCE ISSUES

Maximizing Returns or Unethical Tax Avoidance?

The furor over the extensive tax-avoidance measures used by technology companies such as Google and Apple has reached new heights in both the United Kingdom and the United States. Government members from both countries recently accused the two tech giants of scheming to avoid paying taxes. When this kind of news breaks, most companies respond by saying they must do everything possible to maximize net profits for shareowners, but the countries that miss out on the tax revenue based on profits they believe were generated within their borders argue that these companies are being unethical and possibly skirting the law. Critics maintain that high taxes on repatriating profits to the U.S. exacerbate the problem and encourage overseas investment to the detriment of employment at home.

During a Parliament committee hearing in the U.K., Margaret Hodge, chair of the Public Accounts Committee (PAC), accused Google of “devious, calculating, and unethical” behavior. Hodge alleged that the company marketed its product in the U.K. but used “smoke and mirrors to avoid paying tax” there. “You are a company that says you do no evil, and I think that you do do evil,” Hodge told Matt Brittin, Google’s vice president for sales and operations in northern Europe.

Google vigorously denied it avoided taxes by disguising the real nature of its business in the U.K. The company asserted that it did pay tax on profits from its ...