Your latter quote is actually from Helvering v. Gregory, which was the 2nd Circuit case.

Here's a quote from the case actually named Gregory v. Helvering, which was the SCOTUS case[1]:

"In these circumstances, the facts speak for themselves, and are susceptible of but one interpretation. The whole undertaking, though conducted according to the terms of subdivision (B), was in fact an elaborate and devious form of conveyance masquerading as a corporate reorganization, and nothing else. The rule which excludes from consideration the motive of tax avoidance is not pertinent to the situation, because the transaction, upon its face, lies outside the plain intent of the statute. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose.

Judgment affirmed."

In short, business transactions must have a business purpose, and the substance of the transaction is much more important than the form.

[1] http://supreme.justia.com/cases/federal/us/293/465/case.html

And that's how law quotes work. Sometimes the facts of the case bear on obiter dicta. Sometimes they don't. That doesn't change their degree of persuasiveness.

> because the transaction, upon its face, lies outside the plain intent of the statute. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose.

...to the weird accounting used by Starbucks where their profitability (or otherwise) is chosen to please the people they talk to.

And, again, the courts will not help the tax man. That is, they will not read the laws in a way that places the onus of maximising the tax revenue on the tax payer.

Judge Learned Hand is, in this case, concisely explained that principle before going on to explain that it doesn't apply because the respondent didn't obey the law.

Legal reasoning is actually very simple. The first step is to be consider separate things separately.

Every single day judgements are written where a principle is outlined and then, when the principle has been breached, the judge says so.

Does that change the principle? No. Because it is the principle.

Certain obiter dicta are taken as "persuasive" by other courts because they form such a concise statement of a legal principle that they can't really be improved on.

The two quotes I gave above are widely used in tax law in multiple countries because they elegantly state the general principle that a taxpayer has no legal obligation to help the tax man raise more money.

I doubt much 1930's money was being filtered through Bermudan or Lichtensteinien shell companies.

Countries who want to make money via a territorial nexus usually use VAT or GST ... which the UK already does.

Exactly, they have run into fundamental problems with income tax which is simply a bad tax scheme. From being counterproductive to easy to game (at a certain scale).

On the other hand, I receive no ability to offset my own GST collections against GST expenditures.

Every tax has problems. That's why every major economy has a bunch of different taxes that collect money in different ways for different kinds of economic events -- purchases, income, sale of capital/equity and so on.

http://en.wikipedia.org/wiki/William_Vestey,_1st_Baron_Veste...

But the question is not:

    Should taxes be levied?

    Is it immoral to pay only what the law requires?

That depends on how hard you're trying to work around it.

If you're shifting profits around the globe deliberately to avoid taxes in the places you generated those profits - yes. Other people will draw the line in different places, as demonstrated by the comments here!

Is that categorically different?

I consider it very different to using accounting tricks to make profits disappear out of the country entirely, based on bogus internal charging.

The point is that you have to define "where" the profit was made. In an international environment that's pretty close to insensible (especially since the naive interpretation of profit to the lay person is gross profit).

And I still think that morally there isn't a categorical difference between minimising tax by spending money and minimising tax by ... spending money.

Not in the case of a bricks n' mortar business like Starbucks it ain't!

"And I still think that morally there isn't a categorical difference between minimising tax by spending money and minimising tax by ... spending money."

And I don't see what 'by spending money' has to do with anything.

Well, two things. First: VAT is designed to capture tax from this exact scenario.

Secondly:

1. The beans are bought from Switzerland.

2. The sale is made in High Street.

Now, to calculate gross profit, deduct Cost of Goods Sold from the Sales.

But: COGS was established in Switzerland.

Sales in Britain.

If you calculate profit as if COGS was established in Britain, you beggar Switzerland.

If you calculate it the other way around, you beggar Britain.

Switzerland has more favourable tax rates. So Starbucks, completely legally, arrange their affairs so that the COGS is done in Switzerland. Otherwise they'd buy from British bean middlemen.

Why is it Switzerland's problem that Britain has the higher tax rates?

It comes down to this - Starbucks operate a chain of coffee shops in the UK. They report to their shareholders that their UK division is a profitable enterprise, they report to the HMRC that it's a loss-maker. Somewhere in between there is probably the truth, and it's that truth the UK should be taxing on.

Why should Starbuck, simply because it is a multinational, enjoy tax breaks that a local/national business does not get?

--edit-- I realise that that isn't a moral question for starbucks, but one for the res of us. The question for Starbucks is 'What is the limit of reasonable behaviour?' and many people consider they've gone far beyond that.

I know you think the limit of reasonable behaviour for a corporation is the same as the limit of the law, so I'll pose the same question to you I posed to someone else downthread -

If it's not (yet) illegal to dump industrial byproducts into the water supply in the country you're operating in, is it moral to do so?

You have to attempt to justify it. Other people will see if they agree with your justifications.

Most justifications are reasonable and the person is correct to make them.

Sometimes justifications shift from being acceptable to being unacceptable. (Free parking spaces for employees is now a taxable benefit in England.) There's a bit of a kerfuffle while people transition.

Sometimes foolish people will make justifications that strain credulity.

Sometimes unscrupulous people will invent justifications.

It feels that Amazon and Starbucks (and probably Google) are straining credulity with their weird systems.

They wouldn't do it if those were actually illegal systems of tax minimisation.

That you or I would like massively profitable companies to pay more tax in our respective countries is one matter. Whether they are obliged to do so by law is a different.

The question I'm raising is: if I am obliged by law to pay X, is it moral that I pay only and exactly X?

Starbucks needing to pay Starbucks so that they can use the Starbucks brand (and thus - co-incidentally we're told) syphoning off profit from Starbucks UK to Starbucks cupboard in tax haven is an example of something that might be legally correct but is morally wrong.

I think it's pretty clear that we disagree, so feel free to have the last word.

The intent of tax law is everywhere the same: maximise revenue. Full stop.

In the USA, the UK and Australia we live in a society of laws, not a society of personal judicial discretion. Judges give regard to the intent of the lawmakers insofar as it illuminates how to apply a piece of legislation. It is not their job to simply decide that something is "right" or "wrong" according to their personal views of what is a sensible policy setting for taxation.

The point is that if you take the view that minimising tax is wrong, you need to explain why. The logical contrapositive (or is it converse? I always get them mixed up) is that maximising the tax you pay is morally correct, which opens up an embarrassing slippery slope argument that even I, as a recovering libertard, am not keen to go a-whooshing down.

It is always important in discussion moral questions to distinguish between what is moral conduct and what are desirable outcomes. What humans do and what humans intend to come about are frequently very different, but we all have a habit of smooshing them together in discussions such as these.

I realise that I have tremendously muddied the waters by insisting on reverting to first principles, but well ... principles matter.

If I may create a false dichotomy: given the choice between a government of laws and a government with maximised revenue, I would prefer to live under a government of laws.

I don't care what the courts think. I agree with you - the law exists; judges interpret that law; these companies don't appear to be breaking any laws. My accusations of them not being moral isn't based in law, nor in them trying to reduce their tax bill.

I think it's fine for people to reduce their tax burden. I even think it's fine for people to employ lawyers to scour the laws and find vigorous ways to reduce their tax burdens.

But then there are tricks that are legal now, but which appear to flaunt the intent of the law, and which will get fixed at a later point.

And, in my opinion, sometimes these tricks go so far as to be dishonest. And that's the bit where morality comes in. Companies that reduce their tax bills are not immoral, unless they are telling borderline lies in order to do so.

When a UK company sells goods in the UK to UK citizens, making over £3bn per year in sales, and then say that their company is actually in Luxembourg and the UK business is just a delivery business to reduce their tax bill - well, that feels slimy. It might be legal.

Some behaviour is not illegal, but that doesn't mean it's acceptable.

The other thing about laws is that they are not fixed. They get refined over the years. And there are some grey areas until the law is tested by whoever enforces it.

A remarkably naive view of corporations.

My point being that from the perspective of pure greed, breaking tax laws is dumb. The IRS, HMRC, the ATO and their ilk all have amazing powers to obtain compliance from taxpayers.

But only up to the boundaries of the law. Which is why the smart thing to do is to ... work up to the boundaries of the law.

Corporations and governments are fundamentally the same thing - groups of people - and aiming to shrink the power of one by giving even greater power to the other is no solution at all.

The more effort people spend avoiding taxes, the more complicated the tax system will get as it attempts to close those loopholes. The more complicated it gets, the harder it is to form a social contract that represents the best interest of the nation.

Which is orthogonal to whether it is moral to arrange your affairs to pay only what is legally owed.

> The more effort people spend avoiding taxes, the more complicated the tax system will get as it attempts to close those loopholes.

Which is also orthogonal to whether it is moral to arrange your affairs to pay only what is legally owed.

This is the framework under which I consider tax avoidance to be unethical -- obviously if you do not support the society in the first place, you might disagree.

Then change the rules. We have a mechanism for that purpose.

It is not the courts.

>The more effort people spend avoiding taxes, the more complicated the tax system will get as it attempts to close those loopholes. The more complicated it gets, the harder it is to form a social contract that represents the best interest of the nation.

Also, I hadn't mentioned the courts once, and in fact stressed multiple times that I'm not talking about the legality of the situation.

This is an absurdity; what binds a society together is people forming actual relationships of mutual benefit with one another. Complex, formal institutions are an afterthought, and even more of an afterthought is paying some precise percentage of your income to the specific people who operate one of those institutions, so they can can pay others to construct roads (as though no other means could be found to facilitate the pouring of asphalt), or build prisons for the incarceration of people who ingest particular chemicals that some think are per se bad.

If anything, empowering excessively centralized institutions creates intense factional polarization which undermines societies, inhibiting the formation of substantive relationships and communities instead of sustaining them. Our present "culture war" is a clear example of this.

The sole substantive basis for functional societies is the willingness of people to participate in them. Theoretical doctrines of "social contracts" and "nations" are just post-hoc rationalizations.

No judge will ever make a ruling on the basis of "the spirit of the law". They may try to divine the intent of Parliament or Congress according to agreed interpretive rules.

But it's still about rules. Predictable, and precise.

Even the law of Equity, which is the closest to being the law that is about the "spirit" of the law ... relies on rules.

Otherwise you no longer have a government of law, you have a government of men. Those don't work very well.

The closest we can come to having a true government of law is for the process that generates law to be rooted entirely in natural law theory, where the law is "discovered" instead of created. Common law and equity are at least traditionally an attempt at this, but any system that makes room for positive law, or contains any sort of legislative institution, can't even be described as an attempt at a government of law.