US blocks crackdown on tax avoidance by net firms like Google and Amazon
guardian.co.ukSo, let me see if I understand this: the US is going to bat for the big software companies who don't want to pay taxes in other countries, and yet I, an expat American, am expected to file an income tax return with the IRS every single year for my foreign earnings, which may be subject to dual-taxation if I make "too much."
What a crock of shit.
Well I agree with you that the foreign earnings things completely crazy. Using one bad policy to argue against a good one is just as bad. This is a good move on the part of the US, what we also need is the ability to move corporate profit from foreign subsidiaries back into the US without facing tax.
You're missing a step though - which is that these corporations do everything possible to avoid paying the due tax on those foreign profits. I'm all in favour of getting to repatriate profits then - but taking the profits through a tax haven needs to be stopped first.
Take Google in the UK for instance. They don't "sell" anything in the UK according to their tax returns, so claim every deal is actually finalised through Ireland and therefore subject to lower Irish taxes. So their UK tax is minimal despite making large profits from there.
It provides a massive competitive advantage to companies large enough to full off these kind of operations. Google have possibly been caught out actually selling in the UK, but in most cases their conduct is legal - which is why the law needs changing.
If you want to make money in France, the UK, Germany or wherever you should pay local taxes to those countries. It would be grand if those situations could be simplified and made accessible for digital goods (which are more likely to be sold cross border).
For those who'd like to know more about Tax Havens, how corporations use them and the effect they have, I can thoroughly recommend Nicholas Shaxon's book, Treasure Islands [1]. For example, I never really considered why all my Amazon purchases mention Luxembourg.
[1] http://www.amazon.com/Treasure-Islands-Uncovering-Offshore-B...
(Disclaimer: That's an affiliate link via my college library. Feel free to strip it if you don't like such things)
The problem with preventing the use of 'tax havens' is that there's no non-arbitrary way to decide if a company is truly using another country as a tax haven, or that they are actually using developers from another country. In the Google example, Google UK is clearly benefiting from the developers that work outside UK, therefore they should be able to pay 'brand fees' or whatnot to the 'main Google'.
Of course in this case most of the development is not happening in Ireland, but how can you decide if the fees are reasonable or not? You'll either end up with a very complex tax code with loopholes (which is non-desirable), or you'll give arbitrary power to tax bureaucrats to enforce arbitrary taxes to certain companies (and this will in practise create non-just tax decisions and corruption).
Of course in this case most of the development is not happening in Ireland
I'd say that very little (probably zero) development is done in Ireland, but I get the impression you think that development is the taxable activity (I don't know if it is or not). However, there are 1,700 people doing something in Ireland (from http://www.idaireland.com/google/index.xml, 1/2 way down):
A site reliability/engineering team supporting Google’s European hosting and search activities; Multilingual customer support for Google’s AdWords advertising product; On-line relevancy testing and Google product support; Shared Services to support Google’s EMEA operations.
As an Irish person, I'm getting a little weary of the constant references on HN implying that Ireland is little more than a tax haven. There is a significant number of jobs attached to the US multinational presence here, viz:
- Apple: 4000 employees (http://venturebeat.com/2013/05/22/ireland-were-no-tax-haven-...)
- eBay: 3000 (http://www.irishtimes.com/business/sectors/retail-and-servic...)
- Google: 1700 (see above)
- Facebook: 500 (http://www.irishtimes.com/business/sectors/technology/facebo...)
I could go on, but I have stuff to do, and I feel like I've already done more research than most journalists commenting on this area. For those interested, there's a list of foreign ICT companies operating in Ireland at http://www.idaireland.com/business-in-ireland/information-co...
Edit: Removed woe-is-me comment following a trigger-happy downvoter.
Google does not pay tax in Ireland either, even at low Irish rates. So while it is great that it employs people there and it might anyway, Ireland is integral to its tax evasion strategy, as is the Netherlands.
It doesn't pay very much (corporation tax), but it does pay: http://www.irishtimes.com/business/economy/ireland/google-de... - it took me 3 seconds to find this.
Sorry I didn't mean none but nowhere near what you would expect given this is the entire revenue from Europe.
Google was possibly a poor example as they aren't just using the brand fees but claiming they don't actually "sell" anything in the UK at all. Despite having lots of people in their London officer with sales type titles on LinkedIn...
I think the issue is that companies are currently able to get away with murder in terms of structuring debt and those brand type fees to funnel profits away. Some kind of "reasonableness" test certainly wouldn't go amiss when it comes to judging measures taken by companies. There's already a movement against measures taken solely for the purpose of tax avoidance.
> "The problem with preventing the use of 'tax havens' is that there's no non-arbitrary way to decide if a company is truly using another country as a tax haven..."
It doesn't matter whether a specific company uses tax havens or not. The problem is that tax havens exist (and there are reasonably good definitions of how to recognise one).
Companies, who's role is to maximise shareholder value/profits etc, will use them within the extent of the law. That means it's the laws that need to change.
> It doesn't matter whether a specific company uses tax havens or not.
The only reasons there are tax havens is because there are tax hells.
No. Tax havens exist because people (and companies) want to hide assets. That's independent of the existence of any tax 'hell'. Unless you're of the opinion that all taxation is bad (an opinion I disagree with).
No, if taxation was low enough, the hasle of putting your money in a tax havens wouldn't be worth the time, money and trouble. Tax havens and the accountants needed to set them up are far from being free. If companies could spend the millions they spend on setting up these schemes on a low flat tax rate instead it would be worth it for them even if they ended up paying a bit more than by putting the money in a tax haven because of the time being saved and the good publicity + the positive effect that reasonable low taxes have on the economy.
>> No, if taxation was low enough, the hasle of putting your money in a tax havens wouldn't be worth the time, money and trouble.
You can't practically lower taxes enough to compete with tax havens.
In general they have low populations and the companies don't actually do any major activity there (there are few societal costs), so the country can survive and thrive with a very low percentage tax take from many effectively non-resident companies.
Contrast this with countries that have much larger populations. The number of profitable corporations per capita is going to be lower than a country that attracts corporations in simply on the basis of their low tax rate.
You'll notice where countries like Ireland are involved, that do have a population to support, they seem to eventually regret the tax haven arrangements they agreed to in the good times.
>> If companies could spend the millions they spend on setting up these schemes on a low flat tax rate instead it would be worth it for them even if they ended up paying a bit more than by putting the money in a tax haven because of the time being saved and the good publicity + the positive effect that reasonable low taxes have on the economy.
You can't really believe this?
You are making a lot of assumptions in your post. Have you questioned any of them? How much it costs to set up a system to avoid tax? How tax havens actually came about? How corporates actually use them? The information is out there and there's at least one good book on the subject (Treasure Islands by Nick Shaxon).
Yes, Google has to pay an army of both lawyers and accountants to take care of all the crazy complex tax scheme internationally. I know several people who run startups with such schemes and they give 1% of their revenue to their accountant. If we got rid of the IRS and equivalent and just used a flat tax on the total amount of revenue, well, let's say the CPA industry would take a plunge and regular folks and companies like Google would save billions.
It's not as simple as that. Suppose I run a company based in France employing 100 people and selling goods by mail order. All my operations are in France, so clearly I should pay my taxes in France. The only economic activity that occurs when I sell to someone in the UK is the postage delivery at the UK end. Your proposition is that I should pay UK taxes, but clearly I should definitely pay French taxes. So which do I pay, both? That's not a viable tax regime.
Trust me, if there was a simple way to fix this, it would be fixed.
It's definitively not as simple as your example. Both Amazon and Google have staff and infrastructure in UK and other European countries. Yet they channel all their profit to lower tax countries (Luxembourg for Amazon and Ireland for Google).
In the case of Amazon, when some sales staff is in the UK (evidence coming from whistleblowers, for instance http://www.guardian.co.uk/technology/2013/may/16/amazon-whis...), when warehouses are in the UK, and Luxembourg seems to be used only for signing the official contract, how is that not tax avoidance?
Of course what they're doing isn't as simple as my example. The point is you have to construct robust, enforceable and fair rules on an international basis that catch out Google et al on the one hand BUT also don't affect companies like the one I describe. The handwavey comments along the lines of "Just make them pay tax where they sell their stuff" like the one I relied to are less than helpful in this regard.
Suppose I run a company based in France employing 100 people and selling goods by mail order. All my operations are in France, so clearly I should pay my taxes in France.
I don't think anyone would have a problem with that. The problem is running your operations in France, supplying to customers in the UK, but declaring all of your profits in The Democratic People's Republic of South West Nowhere (corporation tax rate: 0.075%) where your corporate headquarters (head count: 1 lawyer (PT), 1 accountant, 3 board members who also sit on the board of 97 other businesses run by that lawyer and that accountant) is based.
The moment you're trading in another country you must honor their laws and taxes. If the costs become too high and the margins too low you can always leave, or skip said country in the first place.
The moment you're trading in another country
The difficulty is in defining what "trading in another country" actually means.
If you sell a physical product, there are some unambiguous facts that can be considered: where was the product made, where did its components come from, where was it delivered, that kind of thing.
If you're selling information, say an e-book or an MP3 download, things are slightly more ambiguous.
If you're providing services of some kind, things get much more complicated, as anyone who has to deal with VAT in Europe can testify. There is a concept of the "place of supply", and trying to come up with a standard way of determining that place of supply that is both practical and reasonably fair to all concerned is still a work in progress.
And that is just for sales taxes/VAT, where the parties involved tend to be obvious (someone paid money, and someone received it). With multinational business structures, where you might have revenues and expenses in many jurisdictions and somehow you have to decide how to balance everything up and declare profits, there's an entire extra layer of ambiguity to contend with.
For the US, IRS publications 515 and 519 clarify all that stuff. The IRS wants to tax "US Source Income", there are various criteria that define it. For goods sold from overseas and shipped to the US, it call comes down to "where it is sold", which is at the discretion of the seller. It can be at the customers end if that's convenient for you (but it rarely is).
I worked for a Canadian company that sold niche hardware primarily into the US market. We were based entirely in Canada and just shipped to the US using UPS.
We regularly had to convince US business buyers that they didn't need a W-9 from us, nor did they need to withhold taxes.
For the US, IRS publications 515 and 519 clarify all that stuff. The IRS wants to tax "US Source Income", there are various criteria that define it.
Are we back to talking about sales or other revenue-based tax here? The major dispute we were originally talking about in this HN discussion was to do with where profits are declared and corporation tax or the equivalent is paid; I only mentioned the sales/VAT angle as an example of how easily tax rules can get complicated when you have to decide where some intangible thing happened.
"This is a good move on the part of the US" - not in terms of foreign relations.
They don't seem to care much about that lately, though.
It's not dual taxation. The IRS deducts the foreign tax paid. So if the foreign country has a higher tax rate, you will never pay US tax. I'm not saying it's a great policy, but it isn't as bad as it sounds. You can always renounce your US citizenship - think of it as a maintenance fee. Yes, draconian.
There are also different treatments of capital gains, and phantom gains which arise only from shifts in exchange rates. For anyone of any means beyond their salary alone these both can lead to paying more combined tax to both countries than either would require individually. Thats dual taxation in my book.
Phantom gains have been particularly bad in the last decade with the falling US dollar. In Australia, house prices in my area about doubled between 2002 and 2012, but with the change in exchange rates, the IRS calculates the gain as if the price had more than quadrupled!
I didn't realize this part, thanks.
>So if the foreign country has a higher tax rate, you will never pay US tax.
If I live and work completely in a foreign country why would I ever pay US income tax under any circumstances at all? The US is one of two countries on this planet that expect people who's only tie is being a citizen (perhaps never having set foot there and not speaking the language) to file income tax and potentially pay a portion of their income.
Even worse, the US expects you to file with them the way you file in your country of residence. File join in the country you live in? You're expected to file joint with the US then. Which means your foreign spouse who has no ties to the US of any kind (outside of being married to a citizen) will potentially have to pay US tax on their income.
And worst of all, the tax is mostly an annoyance. The true problem is that you have to report every account you have signing power over. That includes pension fund. That includes your companies bank accounts that you manage (which is why an American will never hold such a position in e.g. Switzerland). Lots of banks also won't take Americans on as customers. They don't get enough to warrant dealing with US bureaucracy to report information on these accounts.
>You can always renounce your US citizenship
Which is what many people are doing. The US is one of the few nations on earth that people give up citizenship from.
Yeah, I was only challenging the dual taxation claim. I agree that the rest is draconian.
Out of curiosity, what is the other country?
I can never remember. I thought it was North Korea but lately I heard it was somewhere in Africa. I only know the US is one of two places and the other isn't part of the developed world so it's not the best company to be keeping.
Eritrea.
That's not true. In Switzerland there's a two year line of people waiting to renounce their US citizenships, because they get double taxed.
> There is a treaty between the United States and Switzerland to avoid double taxation on income, which means that taxes paid to Switzerland by a resident of this country must not necessarily be paid to the United States. In general, an American employed in Switzerland can expect to pay at least as much tax to the various Swiss government levels as he would have to if he were paying tax in the United States.
"too much" being $80k last I checked, where you have to pay US taxes on any amount exceeding the $80k. (or wait, it might be that you pay the difference between your US tax rate and the foreign tax rate...)
You're correct. If you're married and file joint I think that number is $130k. So if a dual income family makes $180 that means paying tax, a portion of which was made by someone who isn't and was never American.
Even the Mafia was never so cheeky.
"too much" being $80k
The foreign tax exclusion for a single person is $97,600 in 2013.
The US IT sector is heavily subsidized. Giving Apple, Google, Facebook etc. billion dollar subsidies at home would spur trade wars. So instead the US uses its never failing ability to play European countries against eachother and its influence over smaller jurisdictions like Ireland, Netherlands, Switzerland, Guernsey, Jersey, Bahamas, Isle of Man, British Virgin Islands etc to make sure that large US corporations' foreign income - which wouldn't be taxed in the US anyways - can be kept untaxed.
Other countries and foreign companies can't and don't take advantage of legal global tax dodging jurisdictions and schemes?
I wasn't aware it was exclusive to the US. I also wasn't aware German / French / British etc. IT firms don't dodge global taxes at every opportunity.
It talks about France. France is a machine of expending money right now, better said, of wasting money.
I am living in France this Summer, a very rich and beautiful country with a hole in the pocket. French people love to life well, and someone else to pay the bills, the Germans, the rich, whoever but not them.
Mr Hollande only want to do one thing, to raise taxes. But there is never enough money when you don't expend wisely.
The problem is that Hollande is very left wing, yet France already had one of the best income equality ratios in the western world.
It might have been better if France got someone very conservative like Obama and the US got someone from the true left like Hollande (though he wouldn't get a single thing done in the US, it would be fun to watch people like Rush Limbaugh literally die on air).
What a full load of BS.
You should go back to where ever you come from or wherever it is better for you to live.
Sarkozy ruined France so yes now everbody needs to pay for it.
And the problem is not taxes,i'm happy to pay taxes. The problem is people like French liberals ( liberals are "right-wing" in France ) that gives hand outs to their friends or vote laws without financing their them , and then all they have left is blaming the poor,the homeless,the public workers,the artists or the muslims for France demise...
> French people love to life well, and someone else to pay the bills,
Whatever. Or maybe you prefer US way of life, where it is me/myself/I and there is next to 0 solidarity.
Sarkozy is not libertarian at all if that's what you mean by "libéral". He's just as socialist as the left when it comes to the economy. To give you an idea, Sarkozy created more than 50 taxes during his mandate [1] and didn't cut on spending while creating more social aid programs (RSA). Only in France would he be considered a libertarian or "néo-libéral" as they say just because he limited the maximum amount of tax one could pay to 50% [2]. A 50% tax makes you a libertarian, Ayn Rand disciple in France, isn't that insanity? You still have to work until the 28th of July for the State in France.
1: http://www.contrepoints.org/2012/03/07/72137-lahurissante-ac...
Only France could make Brussel look like Galt's Gulch to the people who have a lot of money.
http://www.publicserviceeurope.com/article/1876/french-elite...
I know people that have this attitude in the US. TONS of tax dollars are wasted on government-funded programs that just don't work.
"Whatever. Or maybe you prefer US way of life, where it is me/myself/I and there is next to 0 solidarity."
I would rather live in a country like this than one that takes upwards of 70% of my money and when I ask for some accountability, I get people telling me to leave.
If by solidarity you mean the state slavery of collectivism, then you're absolutely right, Americans are often very individualistic.
If you by solidarity you mean there's no sense of nation, then you're just making it all up as you go along.
However, trying to pigeonhole the most diverse country in world history on such a simplistic basis, is impossible. Only someone that has never spent much time in the countless cultures of America, would make such a statement.
I spend a few years in USA. Yes USA is quite diverse , from Maine to California , but that was not my point ( i studied in CS Maine and in Massachusets ).
Let's see how this pans out. Maybe this time the UK will not play for the US team, given the outrage there about this issue, but I'm afraid that without a common EU position about this the US will be able to use their usual divide et impera tactics.
I hope the US wins. I'd rather this money stays with Google and Amazon than it goes to the EU states. Why? Because the more profit Google and Amazon make, the more value they produce for society as in more work, better technology, better life etc. What does the state do with tax money? It spends it badly and ends up creating more debt. So, it creates the opposite of value, negative value or debt, and crony capitalism because everyone wants to influence the way this money is redistributed. To give you an idea of how bad it is here, people work until the 28th of July for the state here in France because of all the taxes, if you have a company it can be even worse.
EU states are already the most taxed ones in the world and they have the biggest national debts, it's clear here that the way to fix this is not "more tax" but "less spending". For the last 60 years, spending has been skyrocketing and taxes are at the highest and are killing jobs, innovations and whole economies. Why keep spending even more by making taxes even higher than they are, this is ludicrous. It's time to admit maybe we should start spending less, not more taxes, this isn't working and hasn't worked for the last 60 years.
The idea that private industry is always more efficient than the public sector is, at best, an over simplification. One need look no further than healthcare to find an example where the public sector is vastly more efficient than a market of competing, private sector companies.
The state also spends money on things that would not be funded any other way. Pure-scientific research, such as CERN. Policing for people too poor to hire private security services. The idea that these things are "the opposite of value" is ludicrous.
Also, if you're not going to tax Google and Amazon, then that gives large international companies who can dodge tax a huge advantage over smaller national companies who cannot. That undermines the underlying principle of capitalism: competition. Either you tax no companies, or all of them - any halfway position is worse than either.
Public health-care is a complete failure here in France. We actually pay more than Switzerland where it's privatize and the French assurance maladie is going completely bankrupt while being forced on us. Many pure scientific research have been done by private entities, I don't see why only public programs could do any pure scientific research. Plus, if the people were given their money back , maybe they could use it to invest in stuff they actually care about such as pure scientific research which only represent like 1 or 2% of our national budget today.
As for policing, I don't think anyone disagrees that it should remain public. Justice and Police and Military security are what the state exists for. Not for subsidizing movie producers or a dying paper media industry like we do here in France. I'm ok with a low flat tax that everyone would pay to sustain the basic functions of the state. It would probably be cheaper for Google and Amazon compared to whatever they're paying their accountants to design their tax schemes and give them huge gain in time wasted for bureaucracy.
WHO ranks the French health care system as the best in the world, and the expenditure per capita is less than Switzerland (at least in 2007), so I'm not sure where you're getting your numbers from.
I also suspect you'd have a hard time finding private companies willing to spend $9 billion on a particle accelerator with no foreseeable profits.
I'm generally against subsidising any industry, but letting Google and Amazon get away with dodging tax is effectively the same thing as a subsidy. Speaking as someone who owns a small company, I'd rather the playing field be level.
> WHO ranks the French health care system as the best in the world, and the expenditure per capita is less than Switzerland (at least in 2007), so I'm not sure where you're getting your numbers from.
http://www.securite-sociale.info/
http://reachfinancialindependence.com/french-healthcare/
FYI: it's forbidden by law to leave social security in France and to encourage others to do so. Best system ever indeed, once you get it you never leave it unless you're ok with jail time.
Those sources don't appear to quote any hard numbers, and don't seem to dispute the WHO's methodology, but then again I can't read French :)
Sarkozy was elected in 2008 and he significantly lowered what national healthcare pays for you. You now need to pay for both a national healthcare and a private insurance to complete the cost. Problem is national healthcare is not a real insurance, what you pay is based on your salary, not your actual risk. So people with no risk end up paying much more than they would with a private insurance. My family in the Netherlands and Switzerland pay way less than I do.
The WHO report is back from 2000, so it's certainly possible the rankings have changed since.
Why on earth do you live in France? It sounds like you don't believe in anything that makes France France.
And health care is most definitely more expensive in Switzerland than France. It's privatized but there are strict regulations on how much money insurance companies can make and all citizens are required by law to have insurance.
> Not for subsidizing movie producers
France makes great movies, but they could never compete against Hollywood financially. I for one am quite glad that France does what they need to to make sure good, original French movies (ok, not all of them, but much better than Hollywood) don't lose out to fast-food garbage the US is pumping out.
In the face of ideology there is little to discuss...
Your post is a tirade against taxation in general, it's not pertinent to the point at hand.
Obviously (most) governments want to avoid a situation where a foreign entity is strong enough to destroy any local competitor and on top of that, contribute nothing back to the economy in terms of tax revenue. It's completely ridiculous.
If you deliver goods and services in a country, you should expect to pay the appropriate taxes in that country. It is completely unjust that Google et al can do this kind of thing, it puts local companies at a massive disadvantage.
It's not tirade against taxes in general, it's a tirade against spending. Don't you understand that states have clearly refused to cut their spending and that their only answer is more taxes? We're already at 60 to 70% taxes here in France and they always need more because they refuse to cut spending, not only do they refuse to cut them but they make them bigger each year. First they're coming for Google and Amazon but you don't care because they're not you, then they'll come for your money. Here in France even if you earn around €40k, you're close to a 50% tax already when you sum they all up. They are so desperate that they even went after Nutella to tax the palm oil they use pretending it was dangerous even though scientist said there was nothing special about it [1].
The second article of the Déclaration des droits de l'Homme clearly states that private and individual properties ought to be protected. Where is the respect for private property when 50% of your property is taken by force by the State every year. Our whole revolution was about fighting unfair taxation, privileges for the few and insane State spending... and now we're back to square 1.
1: http://www.guardian.co.uk/world/2012/nov/12/france-nutella-a...
As a French citizen, do you think it's fair that you get taxed at a high rate whilst some huge, billion dollar business pays significantly less in terms of percentage?
Whether the French tax rate is too high or not is not relevant. The question is, should a foreign company be given an unfair advantage compared to a local company? I would hope your answer is 'no'.
Google and Amazon already pay plenty enough taxes here, they employ thousands of people and pay millions in salary tax. They contribute to improving people's life thanks to their great products unlike the State that only creates more debt.
But to answer your question, I think that as a French citizen I pay too much tax and I'm glad Google and Amazon are able to get away with it. I applaud anyone who manages to not feed the beast. I, on the contrary, feel guilty for paying so much tax and helping keep this monster of State alive. The answer is less tax for everyone, not more tax especially on the company that actually manage to make a lot of money and create a lot of work. And yes, local companies are dying here because of the crazy taxation, and taxing Google and Amazon more wouldn't change anything for local companies.
>> I think that as a French citizen I pay too much tax and I'm glad Google and Amazon are able to get away with it.
Even though their activities directly increase your own tax bill. You have an odd way of thinking.
>> taxing Google and Amazon more wouldn't change anything for local companies.
Of course it would, their tax avoidance games mean nobody else can compete.
You can argue that lower tax for everyone is a good thing, but I really don't see how you can argue for the perpetuation of special exemptions for those that can afford it.
> Even though their activities directly increase your own tax bill. You have an odd way of thinking.
The French State creates € 12 billions in debt each month [1]. If you think them paying any more taxes would decrease my tax bill in any way, then you have an odd way of doing math.
1: http://www.planetoscope.com/comptes-publics/315-compteur-de-...
> Of course it would, their tax avoidance games mean nobody else can compete.
Are you seriously saying that the reason Google has no competition in France is because they pay less taxes? Even Microsoft, the multi-billion dollar company failed to do so with Bing but if only Google paid its full taxes then French companies would be able to take over is what you're saying? I very much doubt that.
> I really don't see how you can argue for the perpetuation of special exemptions for those that can afford it
As long as there is no low flat-tax but unfair and complicated tax system. People will always try to avoid it. Get rid of your insane tax system and you'll get rid of these special exemptions. Just like getting rid of alcohol prohibition got rid of the bootlegging problems.
>> If you think them paying any more taxes would decrease my tax bill in any way, then you have an odd way of doing math.
Them paying more would either relieve the burden on other parts of society, slow down the debt accumulation (even just a little bit), or allow the government to spend more on public services. All of these three have an impact on your life. If you think it would have no effect at all then you have an odd way of doing math.
>> Are you seriously saying that the reason Google has no competition in France is because they pay less taxes?
Maybe, who knows? But what we have at the moment is market distortion and monetary advantages for multinationals that can play these games. Certainly the likes of Starbucks (who pay little to no UK tax) have a direct financial advantage against smaller operators and local chains.
>> As long as there is no low flat-tax but unfair and complicated tax system.
This is a pipe dream, and any flat tax I've ever seen proposed is highly regressive, loading the burden onto the middle classes (and away from the very wealthy). What I find most amusing about it is how the very wealthy have so many cheerleaders who are in effect arguing for higher taxes for themselves.
>> People will always try to avoid it.
Yes, but you seem to be supporting your own country getting screwed by large corporations and transferring that burden to yourself, French companies and French citizens.
>> Get rid of your insane tax system and you'll get rid of these special exemptions. Just like getting rid of alcohol prohibition got rid of the bootlegging problems.
It's not quite that simple unfortunately.
>> Them paying more would either relieve the burden on other parts of society, slow down the debt accumulation (even just a little bit), or allow the government to spend more on public services.
But this is exactly what I'm saying, the more taxes we pay, the more the government spends and create debt. The only way out of this vicious circle is _less_ spending, not more tax. We've been doing more taxes for 60 years and we have more debts than ever.
> Are you seriously saying that the reason Google has no competition in France is because they pay less taxes?
>> Maybe, who knows?
Ok, you're just not being honest right now just to win the argument. Or you're delusional.
>> This is a pipe dream, and any flat tax I've ever seen proposed is highly regressive, loading the burden onto the middle classes
I don't know in what world you live in, but here in France, the burden is already on the middle class. The rich are all domiciled outside of France where they pay much less (around 10 to 15%). A low flat tax around 10 to 15% would bring them back as they would have no interest in going abroad. Many countries have a flat tax http://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_fl...
>> Yes, but you seem to be supporting your own country getting screwed by large corporations and transferring that burden to yourself, French companies and French citizens.
No, I think you are. By setting too high taxes, you make the rich run away and pay their taxes elsewhere, leaving the burden on the middle class who's dying.
>> It's not quite that simple unfortunately.
It is actually. Just not in the interest of the current governments (both left and right are socialist in France).
>> But this is exactly what I'm saying, the more taxes we pay, the more the government spends and create debt.
I'm not sure there's a causal relationship there.
>>The only way out of this vicious circle is _less_ spending, not more tax. We've been doing more taxes for 60 years and we have more debts than ever.
Lower taxes all round is a fine idea. Letting some multinationals off from their tax bill is not a step in the right direction to achieving it.
>> Ok, you're just not being honest right now just to win the argument. Or you're delusional.
I'm being totally honest, the effective tax breaks given to multinationals via their various international financial games are a market distortion that disadvantages smaller players and breaks competition.
>> I don't know in what world you live in, but here in France, the burden is already on the middle class. The rich are all domiciled outside of France where they pay much less (around 10 to 15%). A low flat tax around 10 to 15% would bring them back as they would have no interest in going abroad. Many countries have a flat tax
That list isn't a particularly prestigious club...
Many would say that they should stay abroad if they're not willing to pay to be part of the society we're creating in the west.
As a counterpoint, most people seem to agree that some small percentage of earners pay over half of income tax in most western countries anyway (the threat of rich flight is always used as an excuse not to raise taxes further). Any flat tax that brought in the same amount of money as the present system would relieve this burden from them. Any flat tax that didn't bring in the same amount of money is pointless to argue about because we could reduce the overall tax take in any of a huge number of ways.
Whether the absent rich would return in sufficient numbers to make any impact at all is really a matter of speculation.
Perhaps, but isn't it better for companies like Google and Amazon to have competitors than a tax free advantage? Trickle down economics isn't a solution.
The thing here is not about "more taxes" or "less taxes". It is about WHO pays the taxes, however high or low they are. Giving a big competitive advantage to these (mostly US) corporations isn't going to lower your taxes in France; on the contrary, you don't just have to pay more taxes (or create more debt).
Any observers here for the last 60 years have noticed that the more tax revenues we get, the more ambitious we get with out spending and the more debt we create. The day France gets no or too little tax revenue and very bad rating is the day it'll be forced to cut spending. Until then, time has proven that it will never seriously cut spending.
Correlation is definitely not causation...
But there is a clear causation here. In order to keep increasing spending forever as they are doing, govs need tax revenue, the more money they are allowed to borrow, the more debt they can create. They couldn't create so much debt if they didn't have tax revenue to justify their ability to repay their debt. Problem is, at some point, if you want to keep on increasing spending and therefor your debt forever, you have to increase taxes forever too and that's what's killing the economy. Not to mention that it doesn't even work http://en.wikipedia.org/wiki/Laffer_curve
Come on, no serious economist gives credit to Laffer's curve - until taxation goes over something like 70%. And it's incredibly easy to demystify: Just try to check how many times taxes were increased, and fiscal revenues increased. If we were on the descending slope of that curve, increasing taxes would decrease fiscal revenue.
Check the news, in France we've just reach this point. This year the State is getting a decrease in tax revenue despite a tax increase. Heh, at least they would have accomplished something useful: they proved an old theory right!
>Because the more profit Google and Amazon make, the more value they produce for society as in more work, better technology, better life etc.
Yea, because trickle down economics works fantastic: http://www.nytimes.com/2007/04/12/business/12scene.html?_r=0
I thought we already saw? There were some token payments, a fraction of the amount owed, sufficient to placate the majority not bothering with the details. David Cameron is weak and serves the Bullingdon types - BBC news this morning: http://www.bbc.co.uk/news/business-23273448 This is described as economic recovery.
I'm not sure why people are particularly surprised by this. Most of the large international companies that make most out of tax avoidance have large US bases. While the US economy does lose some to the schemes they use (like all the cash Apple has sat outside the US, to give a commonly quoted example) it loses less than the competing economies overall so agreeing to crack down on tax avoidance could result in a net loss. Even if it didn't, those companies can also afford to buy the best lobbyists in town who in turn can buy the relevant number of votes to threaten politicians who don't toe the line.
and when these US based companies eventually bring back those profits to the US (whether it be at the full current rate - unlikely - or some negotiated one time discount rate), the lower the foreign tax burden the greater the US government gains.
If you make a certain amount of money in a certain country, then you should pay that country's taxes. Pretty simple concept, no?
This whole "let's reroute all our profits from all the countries into this country where the taxes are close to zero" is utter BS. If you don't like its taxes, don't do business in that country. Simple. If the government thinks they're losing businesses with high taxes, then maybe they will lower them - or maybe not. It's their and their citizens' prerogative.
> It's their and their citizens' prerogative.
No it's not. Our states are not pure democracies. If a majority of people decide by referendum that we should kill all Arabs, it would not be their "prerogative". That's because we are constitutional republics before being democracies. That is to say we all have to abide by what our constitutions say no matter what the majority say. And last time I checked, our constitution protects private and individual property. Therefor, a 75% tax or even 50% like we have in France goes against the protection of private property in our constitution and it was rejected by the supreme court here. Any taxation goes against the very basis of our constitutions and therefor should not be treated lightly or abused. Or do you think that if a majority decides it's ok to tax people 100% then that's ok because it's "their prerogative"? How about if a majority decide women shouldn't vote anymore either, would it be their prerogative too? The answer is no. Google and Amazon already pay lots of taxes in the US, if they had to pay in every single country, they'd have much less money to invest in all those products we enjoy while the government would just create more debt.
Putting my accounting hat on.
It is simple concept, but its implementation is not.
What does "make a certain amount of money in a certain country" mean? EBT? (Earnings before taxes?) Well, we have this revenue from this country, we are buying intercompany services (without market subsitute)[1], so let's price them in the same amount as the revenues... And bam, there you have profit of 0 and all earnings exported to tax haven.
The entire point is, that is is not easy to define, what should be taxed. Sales or revenues are not profit. You still have to provide whatever you sold and the costs are tax deductible. For all companies, not just the big ones.
[1] It is called transfer pricing and it is checked by tax authorities.
Accounting hat off
Actually, in the same manner the US initiated a massive FUD campaign against the "evil" (non-US) forces at the ITU summit last year in Dubai. Behind the facade of "save the Internet", the agenda was to save the Internet giants like Google and keep the US control over the net. In light of NSA revelations, it has even more sinister overtones.
I'm no fan of the overreach of the US government that includes, but is not limited to:
- requiring all citizens and non-citizens to declare all foreign bank accounts (FBAR) including signatory authorities on trusts and companies;
- unclear rules on the aforementioned. Do you have to declare retirement accounts? Are they taxed? Nobody really knows. It's clear the only value in FBAR is in non-compliance if the government decides to prosecute you;
- requiring non-resident citizens and residents to file tax returns and pay taxes if their income is sufficiently high and either the income is in a country that has no double taxation treaty with the US or it does and its tax rate is simply lower, even for those who haven't stepped foot in the US in 20+ years. I actually know many US citizens who don't do this and it could be a real problem for them at some point.
All of this while allowing the systematic avoidance of tax by US companies on a massive scale. US companies need to report their foreign income. An individual would have to pay US taxes on foreign income. Why shouldn't a company do the same? Why can't it pay the difference between US taxes and whatever taxes they've already paid as is standard in all double taxation treaty cases?
But the move here by the French is blatantly political and narrowly targeted at US companies. You'll note the language is around the "digital economy". Well, why should such reform be limited to only Internet companies, which--surprise, surprise--are primarily US companies?
That's actually what the US (rightfully IMHO) is objecting to.
All of this is simply window dressing however. The real problem with the system is complexity. Think of tax loopholes as bugs. The more complex software, the more bugs there are and the harder it is to eradicate them. Tax law is no different.
Unfortunately there is no political appetite for true reform as every complicated exception is the result of shoring up some constituency or pork barreling or other "corruption" so as much as we need to stop, say, poring money into corn subsidies, it just won't happen for the foreseeable future.
Borders are disappearing. We already see the nonsensical effects of this such as attempts to limit content distribution to geographical regions. At some point we're simply going to have a global tax regime and, dare I say it, world government, scary as that will probably be.
So basically: "They pay taxes to us, fuck you and yours"
Wow. How low can you go? How corrupt can you get?