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It's good that the EU is taking steps against these unfair deals, but IMHO it's not enough. In this "web era", we just can't accept that it's enough to open you

It's good that the EU is taking steps against these unfair deals, but IMHO it's not enough. In this "web era", we just can't accept that it's enough to open your headquarters in Luxembourg to only pay Luxembourg corporate taxes, when actually your EU operation is like 97% outside of Luxembourg. It's just not sustainable, it needs to change - Luxembourg is just stealing taxes from all other EU countries, that's all.

onli 9y ago
Yes. In a globalized world that model just can't work anymore. That's just siphoning off wealth from all countries to enterprises, backed by one single country. Sorry to open that can of worms, but taxing on profit in the country (and not headquarter placement) is actually one of the few early Trump suggestions that differed from the mainstream and made sense.
- mcny 9y ago
  Taxing profit is essentially a tax break for spending. Amazon.com in the US reinvests almost everything it makes back into Amazon from what I understand (please correct me if I'm wrong). Is it ok for them to pay no taxes? Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. If I'm on a low margin business, that's not the government's problem to pick winners and losers, right?
  - sjwright 9y ago
    The $1B of salaries are being taxed as income and the $2.2B of sales most likely hits a sales tax. (Or the $1.2B difference, if it’s a VAT/GST style tax.) I personally don’t see the point of corporate tax, other than to make other taxes seem smaller than they’d otherwise have to be. Profits are not in and of themselves useful to people; they have to be converted to income somehow.
    - neoeldex 9y ago
      The problem with taxing income is that it taxes the lower/middle class heavier than upperclass. Usually the upperclass has ways of diverting their income into other means. Taxing profits is the current approach. There's been talk about taxing revenue for companies. Which is measurable on a nation's level
      - sjwright 9y ago
        Then identify the ways wealthy people can divert income (e.g. Australia's fringe benefits tax) and force them to report it as income.
  - themihai 9y ago
    I think you are wrong: - I'm sure Amazon did its best to pay the lowest possible tax. In EU they are taxed on profit so if they woundn't make a profit(i.e. they would reinvest) they would not be taxed. - Amazon Europe is not Amazon US. They don't want to trade as Amazon US in Europe because they would pay even more tax(in the US). - It's not enough that they are registered in a country with the lowest possible tax, they get a special deal there too to pay less tax than the other Luxembourg based companies/business. This is what EU is sueing them for...they've got state aid(as tax break) from Luxembourg.
    - vixen99 9y ago
      its best
  - empath75 9y ago
    It’s a tax break for investment
  - zaqokm321 9y ago
    > Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. That does not quite add up .... let's say the tax rate is 20%. The tax on $0.2B is $40m, the tax on $2.2B would be $440m, which would mean the company is making a $220m loss. But not only that, say the salaries are $1B then the government would $200m in double taxation, maybe socialise the loss and take $200 million from the workers salaries. Then not only that, lets say the $1B of junk is made in the same country as the above company, the government would make another $200m by taxing them. That is a little regressive.
  - ams6110 9y ago
    Amazon is paying payroll taxes on all its salaries, sales taxes on everything it buys, property taxes on its physical locations, plus employing thousands of people. They are not "dodging" any responsibilities.
  - gpresot 9y ago
    Companies are generally taxed on income (so in your example, 20% on $0.2B). This is the "corporate tax". In addition other taxes may be applied (VAT, labor taxes etc), but this is another matter. Companies try to reduce the amount paid in corporate tax (on income) in many ways. Some legal (e.g. creating a separate company that owns the IP, like brands and patents, which then charges a fee for their use to other part of the corporation; this way they can shift profit from a high rate country (France, US) to a lower rate country (Ireland). This seems to be the case here, plus the fact that Luxembourg offered a deal on this tax rate. Another legal way to reduce taxes is by investing your income: this generates depreciation which reduces your profit for the following years (but not your cash at year end, particularly if you finance part of the investment through debt). Illegal ways to reduce your profits: fake invoices, etc. The EU is now discussing ways to tax some companies (in particular tech companies with substantial cost bases abroad (e.g servers, ip, brands could be owned by a separate company in Bermuda which charges sister companies in UK, France, US, thus leaving potentially zero profit to be taxed in those countries) based on revenues (e.g. you have revenues of $1B in UK, you pay 3% tax on that (equivalent to charging 20% tax rate on $150 Million of profit. This would make the separate IP company useless.
    - taysic 9y ago
      Taxing based on revenue sounds very detrimental for companies with low margins - say your profit is only 1% of your revenue. Then you would go out of business by this tax. Also seems very harmful to yet unprofitable startups.
  - taysic 9y ago
    > If I'm on a low margin business, that's not the government's problem to pick winners and losers, right? So you would penalize companies that are offering a useful service and making less profits over those that are offering a useful service and making more profits. The former may be reducing cost greatly to the consumer but may not be able to stay in business due to this type of tax. Thus, it would artificially prop up the cost of goods to the consumer.
- themihai 9y ago
  >> few early Trump suggestions that differed from the mainstream and made sense. That doesn't really make sense for America First...Why would US want its corporations taxed with 20% all over EU instead of 1% in Luxembourg? It would be less left to bring back home (whenever the corporate tax is lowered to make that possible).
  - Moru 9y ago
    Trump most likely sees this as European companies should pay tax in US.
    - deleted 9y ago
      [deleted]
    - themihai 9y ago
      But they do pay tax in the US, don't they? I'm not familiar with any Luxembourg-like scheme employed by EU companies in US.
      - onli 9y ago
        If BMW sells a car in the US, where is the profit from that taxed? See https://www.reuters.com/article/us-trump-usa-tax-trade/u-s-tax-plan-would-break-wto-rules-lawyers-say-as-eu-business-frets-idUSKBN15G5EH?il=0 https://www.reuters.com/article/us-trump-usa-tax-trade/u-s-t... for an explanation. The idea was to tax local turnover, not income.
        themihai 9y ago
        > If BMW sells a car in the US, where is the profit from that taxed? The profit made in US is taxed in the US. Isn't that so? Maybe I didn't understand it but the article is more about the import/customs tax. As far as I understand from that link Trump wants to make the import costs non-deductible and basically pay an extra tax(due the lack of deductibility) on top of the custom tax. It's a pure protectionist policy. The issue in EU is different. The companies operate in a certain state(i.e. Italy) but pay the tax in a different one(i.e. Luxembourg). Like BMW would do all its tax/accounting in EU with no regard to US's IRS even if it operates a business in US(i.e employs people, sells products etc). See the excerpt: >> Lawyers said the impact of the border adjustment and deductions for U.S. costs meant that imports would face an effective tariff of up to 20 percent. “The total tax rate on the 100 percent domestically-produced good is going to have a lower effective tax rate than the rate on the import,” said Scott Lincicome, counsel with White & Case in Washington. That would breach Article 3 of the General Agreement on Tariffs and Trade, which is policed by the WTO. This allows signatory states to impose permitted tariffs on goods entering their country, but precludes them from treating a domestic item more favorably than an imported one when it comes to internal taxes like sales or income taxes.
easytiger 9y ago
Absolute complete nonsense. Not only a misunderstanding of the situation but a crazy and completely incorrect understanding of EEC principles. This particular problem aside, for there are reasonable nuances from the EUs POV. Your statment: > we just can't accept that it's enough to open your headquarters in Luxembourg to only pay Luxembourg corporate taxes Yes. We can. That is quite literally the point of being in the EEC and isn't at all the nuance of the issue Amazon and Ireland have encountered and not something even remotely in question by this report. Complete misrepresentation. You only pay appropriate taxes in the nation state in which you HQ. This allows poorer countries to compete with richer countries, and allows wealth to "drain" into poorer countries whilst providing cheaper services to the richer ones.
- oblio 9y ago
  > This allows poorer countries to compete with richer countries. Yes, the poor, starving Grand Duchy of Luxembourg :D
  - easytiger 9y ago
    Yes, the appointed capital of The EU
    - toyg 9y ago
      What? The most central EU institutions are based in Bruxelles, Belgium. The EU Parliament also spends half the time in Strasbourg, France. Only the Court of Justice is in Luxembourg. There is no "appointed capital". Bruxelles is the closest thing in practical terms, but the location of the institutions it hosts was an early choice that has since been slowly rejected. All new EU authorities are "dispersed" elsewhere, and there is talk of moving the Parliament to Strasbourg full-time, now that it's pretty clear that the French are nowhere as dominant in European institutions as originally feared.
      - easytiger 9y ago
        capital being slang for "institutional seat"
Keats 9y ago
The funny thing is that if you try to do it as a one person or small company, it won't work as your company will be considered a tax resident in the company you live in (as far as I'm aware).
- gutnor 9y ago
  There are plenty of stuff that does not work as a small company. You know the easy way that large companies balance their cashflow between countries selling IP and stuff. Try that as a small company (eg: make money in the UK, try to hire some guy in Spain to build an app there, i.e. a genuine case of actual workflow issues) and realise that you can only charge for actual service and yes you can in theory have vague service like "consulting" but in reality if the tax office take an interest in your company you are going to be crucified. Cashflow balancing is corporate taxed both ways, better get it right.
dogma1138 9y ago
Luxembourg has a 29% corporate tax rate the 4th highest in Europe. This isn't Liechtenstein, Ireland or Estonia... Unlike Ireland Luxembourg also did not hand out tax credits. Shell paid less than 1 bln US in tax last year in the EU, and less than 5 bln US globally, and overall it's by far much more subsidized than Apple or Amazon, the difference being it's a European corporation. Most of not all of the largest European corporations excel at Tax avoidance, in fact they are the ones Google, Apple and Amazon learned the tricks of the trade from, heck the EU was just fine establishing tax heavens for their own corporations and canonizing them in EU law as long as they are the ones benefiting from them.
- olau 9y ago
  > Unlike Ireland Luxembourg also did not hand out tax credits. This seems to be contradicted by the story itself: "Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon's profits were not taxed," Ms Vestager added. She said Amazon paid four times less tax than other local companies.
  - dogma1138 9y ago
    You should read the actual source. Amazon paid normal tax rates on trade goods, it paid the lower tax rate on IP derived revenue such as AWS and several other digital services the deal wasn’t any different than what EU companies in Europe get including OVH. The difference is that Amazon like many other US tech companies have substantial revenue from IP and licensing while EU companies still rely on trade goods and services. This isn’t a court ruling like with Apple there is more than a good chance that this will not hold in the high court. Likely even better since Amazon didn’t get direct tax subsidies.
    - riffraff 9y ago
      This is the actual source http://europa.eu/rapid/press-release_IP-17-3701_en.htm http://europa.eu/rapid/press-release_IP-17-3701_en.htm And it says > The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies) [...] the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. IANAL, but I am not sure why you interpret this as different from Apple's. They both depend on the arbitrariness and non-generality of a company-specific tax ruling.
MR4D 9y ago
To me this looks like a corporate shakedown. The EU has some truly dumb laws (as do we here in the US), but punishing companies that folllow the law shouldn’t be the solution. Fixing the law is the only right (and moral) option. Everything else is basically thuggery.
- kuschku 9y ago
  The EU is based on a legal system that believes that the spirit of the law, if it is obvious, is above the letter of the law (and also it doesn’t have precedents, all courts can reinterpret law again, if you want to change something, you need to rewrite the laws). As a result, this is completely justified – Amazon and Apple broke the spirit of the law with a technicality.
  - taysic 9y ago
    Realistically its those governments who offered them the deals that broke the law. I don't see why its the companies obligation to deny these tax deals and uphold the EU's wishes.
    - ionised 9y ago
      I find it difficult to believe companies as big as Apple and Amazon don't have teams of tax lawyers aware of EU tax law that knew very well this deal wouldn't last, and yet they claim they knew nothing of how illegal this was. It's bollocks.
- ams6110 9y ago
  Exactly. Government sees some successful operation, and sends the tax goons around to make sure they "pay tribute."
  - ionised 9y ago
    Tax is theft?
- cc81 9y ago

onli 9y ago

Yes. In a globalized world that model just can't work anymore. That's just siphoning off wealth from all countries to enterprises, backed by one single country. Sorry to open that can of worms, but taxing on profit in the country (and not headquarter placement) is actually one of the few early Trump suggestions that differed from the mainstream and made sense.

mcny 9y ago
Taxing profit is essentially a tax break for spending. Amazon.com in the US reinvests almost everything it makes back into Amazon from what I understand (please correct me if I'm wrong). Is it ok for them to pay no taxes? Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. If I'm on a low margin business, that's not the government's problem to pick winners and losers, right?
- sjwright 9y ago
  The $1B of salaries are being taxed as income and the $2.2B of sales most likely hits a sales tax. (Or the $1.2B difference, if it’s a VAT/GST style tax.) I personally don’t see the point of corporate tax, other than to make other taxes seem smaller than they’d otherwise have to be. Profits are not in and of themselves useful to people; they have to be converted to income somehow.
  - neoeldex 9y ago
    The problem with taxing income is that it taxes the lower/middle class heavier than upperclass. Usually the upperclass has ways of diverting their income into other means. Taxing profits is the current approach. There's been talk about taxing revenue for companies. Which is measurable on a nation's level
    - sjwright 9y ago
      Then identify the ways wealthy people can divert income (e.g. Australia's fringe benefits tax) and force them to report it as income.
- themihai 9y ago
  I think you are wrong: - I'm sure Amazon did its best to pay the lowest possible tax. In EU they are taxed on profit so if they woundn't make a profit(i.e. they would reinvest) they would not be taxed. - Amazon Europe is not Amazon US. They don't want to trade as Amazon US in Europe because they would pay even more tax(in the US). - It's not enough that they are registered in a country with the lowest possible tax, they get a special deal there too to pay less tax than the other Luxembourg based companies/business. This is what EU is sueing them for...they've got state aid(as tax break) from Luxembourg.
  - vixen99 9y ago
    its best
- empath75 9y ago
  It’s a tax break for investment
- zaqokm321 9y ago
  > Let's say someone buys $1B worth of junk, has expenses like salary etc of $1B, does something with it and sells products and services worth $2.2B. Do they pay taxes on $2.2B or on $0.2B? I think we can fix some kinds of tax dodging by taxing the $2.2B. That does not quite add up .... let's say the tax rate is 20%. The tax on $0.2B is $40m, the tax on $2.2B would be $440m, which would mean the company is making a $220m loss. But not only that, say the salaries are $1B then the government would $200m in double taxation, maybe socialise the loss and take $200 million from the workers salaries. Then not only that, lets say the $1B of junk is made in the same country as the above company, the government would make another $200m by taxing them. That is a little regressive.
- ams6110 9y ago
  Amazon is paying payroll taxes on all its salaries, sales taxes on everything it buys, property taxes on its physical locations, plus employing thousands of people. They are not "dodging" any responsibilities.
- gpresot 9y ago
  Companies are generally taxed on income (so in your example, 20% on $0.2B). This is the "corporate tax". In addition other taxes may be applied (VAT, labor taxes etc), but this is another matter. Companies try to reduce the amount paid in corporate tax (on income) in many ways. Some legal (e.g. creating a separate company that owns the IP, like brands and patents, which then charges a fee for their use to other part of the corporation; this way they can shift profit from a high rate country (France, US) to a lower rate country (Ireland). This seems to be the case here, plus the fact that Luxembourg offered a deal on this tax rate. Another legal way to reduce taxes is by investing your income: this generates depreciation which reduces your profit for the following years (but not your cash at year end, particularly if you finance part of the investment through debt). Illegal ways to reduce your profits: fake invoices, etc. The EU is now discussing ways to tax some companies (in particular tech companies with substantial cost bases abroad (e.g servers, ip, brands could be owned by a separate company in Bermuda which charges sister companies in UK, France, US, thus leaving potentially zero profit to be taxed in those countries) based on revenues (e.g. you have revenues of $1B in UK, you pay 3% tax on that (equivalent to charging 20% tax rate on $150 Million of profit. This would make the separate IP company useless.
  - taysic 9y ago
    Taxing based on revenue sounds very detrimental for companies with low margins - say your profit is only 1% of your revenue. Then you would go out of business by this tax. Also seems very harmful to yet unprofitable startups.
- taysic 9y ago
  > If I'm on a low margin business, that's not the government's problem to pick winners and losers, right? So you would penalize companies that are offering a useful service and making less profits over those that are offering a useful service and making more profits. The former may be reducing cost greatly to the consumer but may not be able to stay in business due to this type of tax. Thus, it would artificially prop up the cost of goods to the consumer.
themihai 9y ago
>> few early Trump suggestions that differed from the mainstream and made sense. That doesn't really make sense for America First...Why would US want its corporations taxed with 20% all over EU instead of 1% in Luxembourg? It would be less left to bring back home (whenever the corporate tax is lowered to make that possible).
- Moru 9y ago
  Trump most likely sees this as European companies should pay tax in US.
  - deleted 9y ago
    [deleted]
  - themihai 9y ago
    But they do pay tax in the US, don't they? I'm not familiar with any Luxembourg-like scheme employed by EU companies in US.
    - onli 9y ago
      If BMW sells a car in the US, where is the profit from that taxed? See https://www.reuters.com/article/us-trump-usa-tax-trade/u-s-tax-plan-would-break-wto-rules-lawyers-say-as-eu-business-frets-idUSKBN15G5EH?il=0 https://www.reuters.com/article/us-trump-usa-tax-trade/u-s-t... for an explanation. The idea was to tax local turnover, not income.
      - themihai 9y ago
        > If BMW sells a car in the US, where is the profit from that taxed? The profit made in US is taxed in the US. Isn't that so? Maybe I didn't understand it but the article is more about the import/customs tax. As far as I understand from that link Trump wants to make the import costs non-deductible and basically pay an extra tax(due the lack of deductibility) on top of the custom tax. It's a pure protectionist policy. The issue in EU is different. The companies operate in a certain state(i.e. Italy) but pay the tax in a different one(i.e. Luxembourg). Like BMW would do all its tax/accounting in EU with no regard to US's IRS even if it operates a business in US(i.e employs people, sells products etc). See the excerpt: >> Lawyers said the impact of the border adjustment and deductions for U.S. costs meant that imports would face an effective tariff of up to 20 percent. “The total tax rate on the 100 percent domestically-produced good is going to have a lower effective tax rate than the rate on the import,” said Scott Lincicome, counsel with White & Case in Washington. That would breach Article 3 of the General Agreement on Tariffs and Trade, which is policed by the WTO. This allows signatory states to impose permitted tariffs on goods entering their country, but precludes them from treating a domestic item more favorably than an imported one when it comes to internal taxes like sales or income taxes.

easytiger 9y ago

Absolute complete nonsense. Not only a misunderstanding of the situation but a crazy and completely incorrect understanding of EEC principles. This particular problem aside, for there are reasonable nuances from the EUs POV. Your statment: > we just can't accept that it's enough to open your headquarters in Luxembourg to only pay Luxembourg corporate taxes Yes. We can. That is quite literally the point of being in the EEC and isn't at all the nuance of the issue Amazon and Ireland have encountered and not something even remotely in question by this report. Complete misrepresentation. You only pay appropriate taxes in the nation state in which you HQ. This allows poorer countries to compete with richer countries, and allows wealth to "drain" into poorer countries whilst providing cheaper services to the richer ones.

oblio 9y ago
> This allows poorer countries to compete with richer countries. Yes, the poor, starving Grand Duchy of Luxembourg :D
- easytiger 9y ago
  Yes, the appointed capital of The EU
  - toyg 9y ago
    What? The most central EU institutions are based in Bruxelles, Belgium. The EU Parliament also spends half the time in Strasbourg, France. Only the Court of Justice is in Luxembourg. There is no "appointed capital". Bruxelles is the closest thing in practical terms, but the location of the institutions it hosts was an early choice that has since been slowly rejected. All new EU authorities are "dispersed" elsewhere, and there is talk of moving the Parliament to Strasbourg full-time, now that it's pretty clear that the French are nowhere as dominant in European institutions as originally feared.
    - easytiger 9y ago
      capital being slang for "institutional seat"

Keats 9y ago

The funny thing is that if you try to do it as a one person or small company, it won't work as your company will be considered a tax resident in the company you live in (as far as I'm aware).

gutnor 9y ago
There are plenty of stuff that does not work as a small company. You know the easy way that large companies balance their cashflow between countries selling IP and stuff. Try that as a small company (eg: make money in the UK, try to hire some guy in Spain to build an app there, i.e. a genuine case of actual workflow issues) and realise that you can only charge for actual service and yes you can in theory have vague service like "consulting" but in reality if the tax office take an interest in your company you are going to be crucified. Cashflow balancing is corporate taxed both ways, better get it right.

dogma1138 9y ago

Luxembourg has a 29% corporate tax rate the 4th highest in Europe. This isn't Liechtenstein, Ireland or Estonia... Unlike Ireland Luxembourg also did not hand out tax credits. Shell paid less than 1 bln US in tax last year in the EU, and less than 5 bln US globally, and overall it's by far much more subsidized than Apple or Amazon, the difference being it's a European corporation. Most of not all of the largest European corporations excel at Tax avoidance, in fact they are the ones Google, Apple and Amazon learned the tricks of the trade from, heck the EU was just fine establishing tax heavens for their own corporations and canonizing them in EU law as long as they are the ones benefiting from them.

olau 9y ago
> Unlike Ireland Luxembourg also did not hand out tax credits. This seems to be contradicted by the story itself: "Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon's profits were not taxed," Ms Vestager added. She said Amazon paid four times less tax than other local companies.
- dogma1138 9y ago
  You should read the actual source. Amazon paid normal tax rates on trade goods, it paid the lower tax rate on IP derived revenue such as AWS and several other digital services the deal wasn’t any different than what EU companies in Europe get including OVH. The difference is that Amazon like many other US tech companies have substantial revenue from IP and licensing while EU companies still rely on trade goods and services. This isn’t a court ruling like with Apple there is more than a good chance that this will not hold in the high court. Likely even better since Amazon didn’t get direct tax subsidies.
  - riffraff 9y ago
    This is the actual source http://europa.eu/rapid/press-release_IP-17-3701_en.htm http://europa.eu/rapid/press-release_IP-17-3701_en.htm And it says > The tax ruling enabled Amazon to shift the vast majority of its profits from an Amazon group company that is subject to tax in Luxembourg (Amazon EU) to a company which is not subject to tax (Amazon Europe Holding Technologies) [...] the level of the royalty payments, endorsed by the tax ruling, was inflated and did not reflect economic reality. IANAL, but I am not sure why you interpret this as different from Apple's. They both depend on the arbitrariness and non-generality of a company-specific tax ruling.

MR4D 9y ago

To me this looks like a corporate shakedown. The EU has some truly dumb laws (as do we here in the US), but punishing companies that folllow the law shouldn’t be the solution. Fixing the law is the only right (and moral) option. Everything else is basically thuggery.

kuschku 9y ago
The EU is based on a legal system that believes that the spirit of the law, if it is obvious, is above the letter of the law (and also it doesn’t have precedents, all courts can reinterpret law again, if you want to change something, you need to rewrite the laws). As a result, this is completely justified – Amazon and Apple broke the spirit of the law with a technicality.
- taysic 9y ago
  Realistically its those governments who offered them the deals that broke the law. I don't see why its the companies obligation to deny these tax deals and uphold the EU's wishes.
  - ionised 9y ago
    I find it difficult to believe companies as big as Apple and Amazon don't have teams of tax lawyers aware of EU tax law that knew very well this deal wouldn't last, and yet they claim they knew nothing of how illegal this was. It's bollocks.
ams6110 9y ago
Exactly. Government sees some successful operation, and sends the tax goons around to make sure they "pay tribute."
- ionised 9y ago
  Tax is theft?
cc81 9y ago