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Just for the record, the Netherlands has been proudly advertising their tax deals for years. See this presentation[1], slide 12. Right from the horses mouth:

by gizmo 11y ago

Just for the record, the Netherlands has been proudly advertising their tax deals for years. See this presentation[1], slide 12. Right from the horses mouth: Reason 7 [to have a holding company in Holland]: Fiscal climate: Very competitive tax climate from its far-reaching tax treaty network to the possibility to conclude socalled[sic] advance tax rulings. Utterly blatant. And notice the logo of Starbucks next to it. The Dutch government advertises that Starbucks pays practically nothing in tax, in order to undercut other EU countries. These tax deals usually take the form of a fixed tax guarantee: the company agrees to place their holding company in the Netherlands and pay X euros in tax for the next N years (2 to 5), regardless of their actual revenue or profit. For the Dutch government this is just free tax revenue and if they don't make a sweetheart deal with the multinational the holding company would end up in Luxembourg or Ireland instead. This way the multinational can make the countries fight for the most preposterously low offer. [1]: https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/publicaties/2014/05/09/presentatie-over-het-nederlandse-vestigingsklimaat/presentatie-over-het-nederlandse-vestigingsklimaat.pdf https://www.rijksoverheid.nl/binaries/rijksoverheid/document...

solidangle 11y ago
Starbucks also promised to create jobs in the Netherlands by locating their European coffee bean processing plant there. Extra jobs and tax revenue sounds like a pretty good deal to me.
- Drakim 11y ago
  The problem is the "race to the bottom" as countries have to offer better and better deals to outbid each other. It's a tragedy of the commons issue.
  - stevesearer 11y ago
    Just throwing this out there with no idea of the reality of it, but maybe it is a good thing to have some downward pressure on tax rates from large multinationals because without that it could end up just being a 'race to the top' with countries continually ratcheting up rates unchecked.
    - _delirium 11y ago
      What's more common is that the large multinationals get a targeted carve-out only usable by large multinationals, with the tax burden shifted to individuals and small businesses. A small business cannot practically take advantage of arrangements like "double Irish with a Dutch sandwich".
      - gnopgnip 11y ago
        The corporate tax rate is not as important because taxes will still be paid on payroll and other uses of the money. The effective tax rate is not going to change much as the corporate tax rate changes because so much of the companies expenses are going to payroll and bonuses.
        Retric 11y ago
        The goal of corporate taxes is to collect revenue from profits when a foreign entity own the company. Taxing people only works when the owners live in your country. Worse, high personal tax rates can encourage wealthy people to leave your country either on paper or directly. PS: If your corporate tax rate is zero, then your country is often better off discouraging foreign investment.
      - undefined0 11y ago
        In the UK at least, you can use umbrella trusts to legally dodge corporate tax as a small/medium business or self-employed if you're earning a decent amount.
        mattmanser 11y ago
        That's tax avoidance, HMRC will come knocking and you'll end up having to pay 5 years tax in one chunk. Oh, plus penalties for not declaring you were avoiding tax! Here is the HMRC specifically warning against this exact scheme and telling you they will tax all your money later and fine you: https://www.gov.uk/government/publications/spotlight-26-contractor-loan-schemes-too-good-to-be-true/spotlight-26-contractor-loan-schemes-too-good-to-be-true https://www.gov.uk/government/publications/spotlight-26-cont... So definitely not in the UK.
- epa 11y ago
  If a country was trying to adopt this, another issue would be the existing tax base that would be lost to lower rates. So you would have to make it up with many more companies - maybe possible, maybe not for a long time.
- lumberjack 11y ago
  They also reduce jobs and the quality of those jobs whenever they win a big contract to serve as a cafeteria for some big venue as has recently happened in my city.
- pizza234 11y ago
  Not really. After N years and M thousands of jobs created, MamaCorp decides that performing some production process in PoorCountry is much cheaper, so it decides to leave... unless VeryLowTaxCountry keeps the taxes very low. At that point, it's not anymore such a good deal (if you're HSBC, you even get a free pass for doing any crime you prefer, without going to jail). This, not taking into account, let's say, that MamaCorp sets up a subsidiary in VeryHighTaxCountry, with very high profits. That profits though, are entirely funneled to the shell company in VeryLowTaxCountry, so that it pays no taxes in VeryHighTaxCountry and little taxes in VeryLowTaxCountry. I'm mixing concepts here, but let's not forget that MamaCorps have a huge leverage because of their capitals, and because of their creative accounting strategies too, so deals like this need to be analyzed with extreme care and doubt.
- s73v3r 11y ago
  Has anyone ever done a study on how well these deals work out? I know in the US, there have been studies on whether or not the tax breaks for the film industry are worth it, and they almost never are. As soon as the tax break ends, they move filming somewhere else.
- jlarocco 11y ago
  That's a BS argument. Starbucks will open restaurants there anyway because they want to sell coffee and make money. And if they don't, and there's demand, other coffee shops will. IMO tax breaks like these are completely backwards most of the time. A huge corporation like Starbucks has entire departments dedicated to doing their taxes and finding loop holes to save money. The last thing they need is to pay less tax to begin with. If anybody is going to get a break, it should be small business owners. The one place tax break incentives make sense are for large, one off things like a big manufacturing plant, where there will only be one (or just a few) of them, and getting it in your country or state is a big win. But there's really no reason I can see to incentive putting coffee shops on every other corner.

by gizmo 11y ago

solidangle 11y ago

Starbucks also promised to create jobs in the Netherlands by locating their European coffee bean processing plant there. Extra jobs and tax revenue sounds like a pretty good deal to me.

Drakim 11y ago
The problem is the "race to the bottom" as countries have to offer better and better deals to outbid each other. It's a tragedy of the commons issue.
- stevesearer 11y ago
  Just throwing this out there with no idea of the reality of it, but maybe it is a good thing to have some downward pressure on tax rates from large multinationals because without that it could end up just being a 'race to the top' with countries continually ratcheting up rates unchecked.
  - _delirium 11y ago
    What's more common is that the large multinationals get a targeted carve-out only usable by large multinationals, with the tax burden shifted to individuals and small businesses. A small business cannot practically take advantage of arrangements like "double Irish with a Dutch sandwich".
    - gnopgnip 11y ago
      The corporate tax rate is not as important because taxes will still be paid on payroll and other uses of the money. The effective tax rate is not going to change much as the corporate tax rate changes because so much of the companies expenses are going to payroll and bonuses.
      - Retric 11y ago
        The goal of corporate taxes is to collect revenue from profits when a foreign entity own the company. Taxing people only works when the owners live in your country. Worse, high personal tax rates can encourage wealthy people to leave your country either on paper or directly. PS: If your corporate tax rate is zero, then your country is often better off discouraging foreign investment.
    - undefined0 11y ago
      In the UK at least, you can use umbrella trusts to legally dodge corporate tax as a small/medium business or self-employed if you're earning a decent amount.
      - mattmanser 11y ago
        That's tax avoidance, HMRC will come knocking and you'll end up having to pay 5 years tax in one chunk. Oh, plus penalties for not declaring you were avoiding tax! Here is the HMRC specifically warning against this exact scheme and telling you they will tax all your money later and fine you: https://www.gov.uk/government/publications/spotlight-26-contractor-loan-schemes-too-good-to-be-true/spotlight-26-contractor-loan-schemes-too-good-to-be-true https://www.gov.uk/government/publications/spotlight-26-cont... So definitely not in the UK.
epa 11y ago
If a country was trying to adopt this, another issue would be the existing tax base that would be lost to lower rates. So you would have to make it up with many more companies - maybe possible, maybe not for a long time.
lumberjack 11y ago
They also reduce jobs and the quality of those jobs whenever they win a big contract to serve as a cafeteria for some big venue as has recently happened in my city.
pizza234 11y ago
Not really. After N years and M thousands of jobs created, MamaCorp decides that performing some production process in PoorCountry is much cheaper, so it decides to leave... unless VeryLowTaxCountry keeps the taxes very low. At that point, it's not anymore such a good deal (if you're HSBC, you even get a free pass for doing any crime you prefer, without going to jail). This, not taking into account, let's say, that MamaCorp sets up a subsidiary in VeryHighTaxCountry, with very high profits. That profits though, are entirely funneled to the shell company in VeryLowTaxCountry, so that it pays no taxes in VeryHighTaxCountry and little taxes in VeryLowTaxCountry. I'm mixing concepts here, but let's not forget that MamaCorps have a huge leverage because of their capitals, and because of their creative accounting strategies too, so deals like this need to be analyzed with extreme care and doubt.
s73v3r 11y ago
Has anyone ever done a study on how well these deals work out? I know in the US, there have been studies on whether or not the tax breaks for the film industry are worth it, and they almost never are. As soon as the tax break ends, they move filming somewhere else.
jlarocco 11y ago
That's a BS argument. Starbucks will open restaurants there anyway because they want to sell coffee and make money. And if they don't, and there's demand, other coffee shops will. IMO tax breaks like these are completely backwards most of the time. A huge corporation like Starbucks has entire departments dedicated to doing their taxes and finding loop holes to save money. The last thing they need is to pay less tax to begin with. If anybody is going to get a break, it should be small business owners. The one place tax break incentives make sense are for large, one off things like a big manufacturing plant, where there will only be one (or just a few) of them, and getting it in your country or state is a big win. But there's really no reason I can see to incentive putting coffee shops on every other corner.