3 ms·

The truth is EU companies are being sold to US and Chinese companies. In the case of the US this is incentivized by the goverment (maybe indirectly) because US

by eb0la 10y ago

The truth is EU companies are being sold to US and Chinese companies. In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share. China might not have a plan, but they actually have cash in hand and they are pushed to invest somewhere else because they cannot have that money at rest. They need to recycle that benefits and buying in europe makes sense because is a big market that makes easy to keep money flowing in a global scale.

charlesdm 10y ago
> In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share. Actually, that is not entirely correct. US companies are incentivised to invert and redomicile abroad (often in the EU), because that way they can avoid the global taxation penalty the US imposes. More often than not, an EU company acquiring a US competitor will be able to achieve more tax synergies than a US company acquiring a US competitor.
- jacobush 10y ago
  s/achieve more tax synergies/evade more tax
  - charlesdm 10y ago
    Evasion means you do not declare certain income, and that gets you in jail. I think that's obvious. You want people declaring their taxes. Avoidance, however, is staying within the law to achieve a beneficial outcome. Given any company has freedom to structure transactions in any way they want, it's only normal to go for the most tax efficient way of generating profits. As if you would pay 35% corporate tax if there is a simple legal way to only, say, pay 20%? Let's say there are two ways to book a profit: royalty income is taxed at 15% and normal corporate income is taxed at 30%. You develop a software product. If the tax code allows you to book all of your (software) income as royalty income, why wouldn't you? Honestly, people frequently see evasion and avoidance in the same way, but they are not. If a tax law framework exists, and you stay within it, I don't see how you're doing anything wrong. Change the laws. Avoidance is only possible due to bad legislating. It's all too easy for politicians to shame companies while they are the ones doing a poor job. Some countries are proactive in closing avoidance techniques, others are not. This is entirely dependant on the politicians in charge and the policy set out.
    - jacobush 10y ago
      Thank you for clarifying evasion vs avoidance. But in a larger context, there is some friction. The companies are trans-national. Countries, not. So by legal or illegal means, companies tend to shift their weight around to where the money stays with them. To companies, legality is just an expression of power. If the counter party (the government) is strong, the company either focuses on legal avoidance (GM) or avoids the reach of the strong party (Ericsson avoiding US jurisdiction). If the counter party is weak (south american governments) they can be illegaly manipulated (Ericsson). If the government has strong local enforcement but little resources and incentive to go after international shady deals, the country can be used as an operations base but with no illegal activity taking place in THAT country. (Sweden and Telia Sonera, Ericsson.)

by eb0la 10y ago

charlesdm 10y ago

> In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share. Actually, that is not entirely correct. US companies are incentivised to invert and redomicile abroad (often in the EU), because that way they can avoid the global taxation penalty the US imposes. More often than not, an EU company acquiring a US competitor will be able to achieve more tax synergies than a US company acquiring a US competitor.

jacobush 10y ago
s/achieve more tax synergies/evade more tax
- charlesdm 10y ago
  Evasion means you do not declare certain income, and that gets you in jail. I think that's obvious. You want people declaring their taxes. Avoidance, however, is staying within the law to achieve a beneficial outcome. Given any company has freedom to structure transactions in any way they want, it's only normal to go for the most tax efficient way of generating profits. As if you would pay 35% corporate tax if there is a simple legal way to only, say, pay 20%? Let's say there are two ways to book a profit: royalty income is taxed at 15% and normal corporate income is taxed at 30%. You develop a software product. If the tax code allows you to book all of your (software) income as royalty income, why wouldn't you? Honestly, people frequently see evasion and avoidance in the same way, but they are not. If a tax law framework exists, and you stay within it, I don't see how you're doing anything wrong. Change the laws. Avoidance is only possible due to bad legislating. It's all too easy for politicians to shame companies while they are the ones doing a poor job. Some countries are proactive in closing avoidance techniques, others are not. This is entirely dependant on the politicians in charge and the policy set out.
  - jacobush 10y ago
    Thank you for clarifying evasion vs avoidance. But in a larger context, there is some friction. The companies are trans-national. Countries, not. So by legal or illegal means, companies tend to shift their weight around to where the money stays with them. To companies, legality is just an expression of power. If the counter party (the government) is strong, the company either focuses on legal avoidance (GM) or avoids the reach of the strong party (Ericsson avoiding US jurisdiction). If the counter party is weak (south american governments) they can be illegaly manipulated (Ericsson). If the government has strong local enforcement but little resources and incentive to go after international shady deals, the country can be used as an operations base but with no illegal activity taking place in THAT country. (Sweden and Telia Sonera, Ericsson.)