5 ms·

"Are countries, simply put, afraid to put an end to tax schemes like this, because it would just mean that Ikea or Google would pack up and leave?" In an "odd"

by zo1 10y ago

"Are countries, simply put, afraid to put an end to tax schemes like this, because it would just mean that Ikea or Google would pack up and leave?" In an "odd" application of market-competition, that is precisely what happened. Countries where Google generally did business wanted to tax Google at some X. Then along came Ireland, or Google found Ireland, and saw that they could do some legal paperwork and pay Ireland's tax rate of X-Y instead of X in the "source" countries. The point I'm making is that Google did pack up and leave, and it will happen again unless really drastic actions are taken against them. I don't think anyone wants to do that, at this point. You either bully all countries from allowing loop holes such as this, even though they don't want to. Or you disallow Google from operating in your country if they don't pay taxes on the profit from "sales" you deem occurred in your country. Small countries that want/need that tax revenue from Google, even if it is X-Y, won't like it if you compel them into complying and causing Google to "pack up and leave". It also puts the "bullying" nature of whatever international body is tasked with enforcing this into light.

alkonaut 10y ago
Seems like a reasonable thing to decide at international level. We have already more or less forced (or come to an agreement with) Switzerland to not hide "dark money". Getting some stronger wording in the tax legislation on EU level should be doable, but of course the Netherlands would squirm a bit.
ForHackernews 10y ago
It seems like they should just assess tax liability based on something other than where a company locates its headquarters. Maybe in order to do business in jurisdiction X, where "doing business" == "selling ads" in Google's case, you have to pay taxes to X.
- ptaipale 10y ago
  The selling of ads is already taxed. It's called VAT. It's a major revenue source for both EU, and all member nations.
spriggan3 10y ago
> The point I'm making is that Google did pack up and leave No they did not. There is a Google Spain and a Google France. They can't escape the Spanish law or the french law if they have an office in these countries, no matter where Google trully is incorporated, and there is an obvious reason why they have officies in these countries. So what Google Spain and Google France do is that they pay huge fees to Google Ireland for the use of Google brand, so they never make a profit officially, then the money is ex filtrated from Google Ireland to tax havens. But they did not leave Spain nor France.
- aianus 10y ago
  Google Search and Adwords are not developed in Spain or France. In effect these subsidiaries are just local distributors for a US product. If Apple sells an iPhone (developed in the US and built in China) to retailers in Paris, should they have to pay French income tax on the entire profit of the phone? Of course not, that's ridiculous, even if the retailer is an Apple subsidiary.
  - deleted 10y ago
    [deleted]
  - varjag 10y ago
    > Google Search and Adwords are not developed in Spain or France. In effect these subsidiaries are just local distributors for a US product. Neither they are developed in Ireland, but they chose to pay their tax there. Perhaps that's significant.
anonymousDan 10y ago
"Then along came Ireland." This is utter nonsense. The problem is US tax repatriation laws introduced during the Clinton administration that allow US companies to leave their profits offshore in countries such as Bermuda or the Cayman Islands. Since they are only taxable on repatriation to the US, they pay no tax on them. Instead, they pressure Congress to introduce 'one-off' tax amnesties that allow them to repatriate at a much lower rate. This problem could be solved tomorrow if US politicians rescinded those tax laws. Ireland has no legal right to tax those profits, since they are earned by parent US company e.g. Google US. Which is perfectly correct, since the foundation of most of those profits are the intellectual property created primarily by the parent company. Don't let US politicians pull the wool over your eyes that this is a problem over which they have no control. In case you're interested, here's a good article that gives more background: http://www.rollingstone.com/politics/news/the-biggest-tax-scam-ever-20140827 http://www.rollingstone.com/politics/news/the-biggest-tax-sc...
- AnthonyMouse 10y ago
  And if they paid that tax in the US (which would then allow the US rate to be lower for the same revenue), how would that help Spain and France? The US would just be what Ireland currently is.
  - uola 10y ago
    > (which would then allow the US rate to be lower for the same revenue) While I'm sure it can be minimized, the US doesn't have a particularly low corporate income tax rate. > And if they paid that tax in the US [...] how would that help Spain and France? Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acquire their European competition. We're essentially in a trade war, just that Europe hasn't realized it.
    - anonymousDan 10y ago
      Exactly! Basically US companies have a massive tax advantage over local competitors in other countries. Every time you see another local bookshop closing down because it can't compete with Amazon's 'economies of scale', you should realise in fact a large part of its advantages are due to US tax repatriation laws.

by zo1 10y ago

alkonaut 10y ago

Seems like a reasonable thing to decide at international level. We have already more or less forced (or come to an agreement with) Switzerland to not hide "dark money". Getting some stronger wording in the tax legislation on EU level should be doable, but of course the Netherlands would squirm a bit.

ForHackernews 10y ago

It seems like they should just assess tax liability based on something other than where a company locates its headquarters. Maybe in order to do business in jurisdiction X, where "doing business" == "selling ads" in Google's case, you have to pay taxes to X.

ptaipale 10y ago
The selling of ads is already taxed. It's called VAT. It's a major revenue source for both EU, and all member nations.

spriggan3 10y ago

> The point I'm making is that Google did pack up and leave No they did not. There is a Google Spain and a Google France. They can't escape the Spanish law or the french law if they have an office in these countries, no matter where Google trully is incorporated, and there is an obvious reason why they have officies in these countries. So what Google Spain and Google France do is that they pay huge fees to Google Ireland for the use of Google brand, so they never make a profit officially, then the money is ex filtrated from Google Ireland to tax havens. But they did not leave Spain nor France.

aianus 10y ago
Google Search and Adwords are not developed in Spain or France. In effect these subsidiaries are just local distributors for a US product. If Apple sells an iPhone (developed in the US and built in China) to retailers in Paris, should they have to pay French income tax on the entire profit of the phone? Of course not, that's ridiculous, even if the retailer is an Apple subsidiary.
- deleted 10y ago
  [deleted]
- varjag 10y ago
  > Google Search and Adwords are not developed in Spain or France. In effect these subsidiaries are just local distributors for a US product. Neither they are developed in Ireland, but they chose to pay their tax there. Perhaps that's significant.

anonymousDan 10y ago

"Then along came Ireland." This is utter nonsense. The problem is US tax repatriation laws introduced during the Clinton administration that allow US companies to leave their profits offshore in countries such as Bermuda or the Cayman Islands. Since they are only taxable on repatriation to the US, they pay no tax on them. Instead, they pressure Congress to introduce 'one-off' tax amnesties that allow them to repatriate at a much lower rate. This problem could be solved tomorrow if US politicians rescinded those tax laws. Ireland has no legal right to tax those profits, since they are earned by parent US company e.g. Google US. Which is perfectly correct, since the foundation of most of those profits are the intellectual property created primarily by the parent company. Don't let US politicians pull the wool over your eyes that this is a problem over which they have no control. In case you're interested, here's a good article that gives more background: http://www.rollingstone.com/politics/news/the-biggest-tax-scam-ever-20140827 http://www.rollingstone.com/politics/news/the-biggest-tax-sc...

AnthonyMouse 10y ago
And if they paid that tax in the US (which would then allow the US rate to be lower for the same revenue), how would that help Spain and France? The US would just be what Ireland currently is.
- uola 10y ago
  > (which would then allow the US rate to be lower for the same revenue) While I'm sure it can be minimized, the US doesn't have a particularly low corporate income tax rate. > And if they paid that tax in the US [...] how would that help Spain and France? Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acquire their European competition. We're essentially in a trade war, just that Europe hasn't realized it.
  - anonymousDan 10y ago
    Exactly! Basically US companies have a massive tax advantage over local competitors in other countries. Every time you see another local bookshop closing down because it can't compete with Amazon's 'economies of scale', you should realise in fact a large part of its advantages are due to US tax repatriation laws.