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Most of the criticism (of Nike and Apple, for instance) isn't for breaking even the spirit of the law. Most often the companies are acting precisely as the law

Most of the criticism (of Nike and Apple, for instance) isn't for breaking even the spirit of the law. Most often the companies are acting precisely as the law is intended to work, and criticism is based on a misunderstanding of what is turnover and what is profit, and how taxes should be calculated. Very commonly the complaint is that Nike (for instance) pays no corporate income tax to a country even though it sells a lot of goods there. This is a misunderstanding: the vehicle for collecting sales-based taxes is VAT, not corporate income tax. Corporate income tax is paid where the company operates. A major thing people don't seem to understand is that within EU, it is perfectly OK for a company operating in one EU country to sell goods and services to another country. Free movement of goods and capital. The very foundation of EU which infuriates people.

germanier 9y ago
It's perfectly OK if that company actually operates in that country. It is not OK if the only presence they have is a mailbox and the actual act of operation is done somewhere else. A taxation race to the bottom is not what the fundamental principles of the EU are about. At best they are an unwanted side-effect.
- valuearb 9y ago
  No you are missing the point of the EU. No company should be forced to base in a country to sell there. Apple pays huge amounts of taxes in Germany despite not being based there. It just doesn’t pay much “income tax” because it’s not based there.
  - bwindels 9y ago
    Which would be fine if there were EU regulations about taxation. Now it's just multinationals playing out different EU members against each other to get the best deal, look at Ireland and Luxembourg. I can imagine a EU fiscal policy would be heavily lobbied against by the companies that use these back doors, as it would shift power back to the politicians/people: either you have access to the EU market and pay taxes according to these rules, or you can't sell your product here.
  - germanier 9y ago
    No, I understand the purpose just fine. It isn't about taxes at all. All EU tax rules were just bolted on to fix the most obvious unfair results of other regulation. For example, I am customer of a German branch of a French bank. The company is based in Paris and all contracts clearly state that. The actual service is provided from a German office building. That's where almost all employees responsible for the German customers are located and where you sent letters to. That company pays "income" tax according to German rules to the German government for all services provided from that building even though it's based in France. (Surely they do some tax avoidance as well but this doesn't change the point.) Thanks to the EU freedoms they could just open up an office in Germany, employ people there, and provide services. I am also a customer at a Dutch bank based in Amsterdam and that's where the service is provided from. They don't have a presence in Germany and don't pay German taxes. Thanks to the EU freedoms they can provide services to me across the border. (For the record: Apple does have legal entities in Germany. For every transaction they just happen to use the most tax-efficient entity of theirs without much consideration of the real-life transaction.)
    - valuearb 9y ago
      Apple doesn't build phones or computers or software in germany. It sells stuff built elsewhere. Why isn't Porsche paying US Income taxes on stuff it builds in Germany?
- ptaipale 9y ago
  > It is not OK if the only presence they have is a mailbox and the actual act of operation is done somewhere else. As I said, the very point of EU (free movement of goods and capital) is that it is perfectly OK to have just a mailbox presence (e.g. to handle warranty claims and such, a service which is sold to the actual operating company in another EU country) and have the actual operation done somewhere else. I take benefit of this all the time; for instance, I buy things from amazon.de which has much lower prices than domestic companies. They just pay VAT, based on sales, to my country, on my country's tax rate, but they don't operate here.
  - germanier 9y ago
    Sorry, I didn't make my point clear enough. Amazon does provide services from Luxembourg which would be fine if that's where they are actually based at. As far as I know they have some lawyers there but that's about their presence (which is what I meant with "mailbox only"). The actual service is peovided somewhere else. Making it possible to exploit that is definitely not the point of EU freedoms. I provided an example that illustrates EU freedoms working how they are supposed to be in a cousin comment. And yes, Amazon operates in Germany. They have engineering offices, customer service, and warehouses all located in Germany. Every company from Luxembourg should be able to. But taxing income derived from that is still possible under EU rules (and actually done).
    - peoplewindow 9y ago
      The EU corporate tax regime was specifically set up (by Fritz Bolkerstein) to tax companies where they are registered, not where they nebulously "provide services", something you can't define and nor can the EU. That's exactly because the EU was meant to encourage businesses to move around the continent and set up wherever was more convenient for them. Of course in recent years the EU got cold feet on the whole "four freedoms". Services never really happened. Capital is a joke - France and Germany ban foreign investments all the time and Greece had capital controls within recent memory. It's only migration the EU is really, really keen on, probably because that's the one that suits their political objectives the best.
GlobalFrog 9y ago
I have to disagree here : based in France, I sometimes do business in Belgium and I have to declare and pay VAT to Belgium for sales made there, while deducing the taxes paid locally to Belgium counterparts. That's the spirit of the law. But when you build an artificial business construct whose sole aim is to move earnings from a country to another while creating an artificial debt within an entity in a business group, just not to pay taxes, I don't see how it can be described by anything other than "Breaking the spirit of the law". I do know this is legal, but that only respects the letter of the law, not the spirit of it. The spirit of the free movements of items and people in Europe is made to promote trade and sales, not to promote the movement of money in order to evade taxes (that's actually the spirit of the tax heaven territories). In my view, the real problem when you do not respect the spirit of the law is that you do not respect the people themselves, even if you're not doing anything illegal. And I fear that some of those people, when they learn of another case like this one in 6 months, one year or two years, could consider using violence. In the past, several terrorist groups had targeted economic or corporate symbols (the Baader group for example), so we shouldn't forget histoire. These affairs will feed those enclined to follow that path again, but against what are now documented possibilities. That is why the states across the world need to act: it is not only about getting countries' money back, it is also to avoid future violence.

germanier 9y ago

It's perfectly OK if that company actually operates in that country. It is not OK if the only presence they have is a mailbox and the actual act of operation is done somewhere else. A taxation race to the bottom is not what the fundamental principles of the EU are about. At best they are an unwanted side-effect.

valuearb 9y ago
No you are missing the point of the EU. No company should be forced to base in a country to sell there. Apple pays huge amounts of taxes in Germany despite not being based there. It just doesn’t pay much “income tax” because it’s not based there.
- bwindels 9y ago
  Which would be fine if there were EU regulations about taxation. Now it's just multinationals playing out different EU members against each other to get the best deal, look at Ireland and Luxembourg. I can imagine a EU fiscal policy would be heavily lobbied against by the companies that use these back doors, as it would shift power back to the politicians/people: either you have access to the EU market and pay taxes according to these rules, or you can't sell your product here.
- germanier 9y ago
  No, I understand the purpose just fine. It isn't about taxes at all. All EU tax rules were just bolted on to fix the most obvious unfair results of other regulation. For example, I am customer of a German branch of a French bank. The company is based in Paris and all contracts clearly state that. The actual service is provided from a German office building. That's where almost all employees responsible for the German customers are located and where you sent letters to. That company pays "income" tax according to German rules to the German government for all services provided from that building even though it's based in France. (Surely they do some tax avoidance as well but this doesn't change the point.) Thanks to the EU freedoms they could just open up an office in Germany, employ people there, and provide services. I am also a customer at a Dutch bank based in Amsterdam and that's where the service is provided from. They don't have a presence in Germany and don't pay German taxes. Thanks to the EU freedoms they can provide services to me across the border. (For the record: Apple does have legal entities in Germany. For every transaction they just happen to use the most tax-efficient entity of theirs without much consideration of the real-life transaction.)
  - valuearb 9y ago
    Apple doesn't build phones or computers or software in germany. It sells stuff built elsewhere. Why isn't Porsche paying US Income taxes on stuff it builds in Germany?
ptaipale 9y ago
> It is not OK if the only presence they have is a mailbox and the actual act of operation is done somewhere else. As I said, the very point of EU (free movement of goods and capital) is that it is perfectly OK to have just a mailbox presence (e.g. to handle warranty claims and such, a service which is sold to the actual operating company in another EU country) and have the actual operation done somewhere else. I take benefit of this all the time; for instance, I buy things from amazon.de which has much lower prices than domestic companies. They just pay VAT, based on sales, to my country, on my country's tax rate, but they don't operate here.
- germanier 9y ago
  Sorry, I didn't make my point clear enough. Amazon does provide services from Luxembourg which would be fine if that's where they are actually based at. As far as I know they have some lawyers there but that's about their presence (which is what I meant with "mailbox only"). The actual service is peovided somewhere else. Making it possible to exploit that is definitely not the point of EU freedoms. I provided an example that illustrates EU freedoms working how they are supposed to be in a cousin comment. And yes, Amazon operates in Germany. They have engineering offices, customer service, and warehouses all located in Germany. Every company from Luxembourg should be able to. But taxing income derived from that is still possible under EU rules (and actually done).
  - peoplewindow 9y ago
    The EU corporate tax regime was specifically set up (by Fritz Bolkerstein) to tax companies where they are registered, not where they nebulously "provide services", something you can't define and nor can the EU. That's exactly because the EU was meant to encourage businesses to move around the continent and set up wherever was more convenient for them. Of course in recent years the EU got cold feet on the whole "four freedoms". Services never really happened. Capital is a joke - France and Germany ban foreign investments all the time and Greece had capital controls within recent memory. It's only migration the EU is really, really keen on, probably because that's the one that suits their political objectives the best.

GlobalFrog 9y ago

I have to disagree here : based in France, I sometimes do business in Belgium and I have to declare and pay VAT to Belgium for sales made there, while deducing the taxes paid locally to Belgium counterparts. That's the spirit of the law. But when you build an artificial business construct whose sole aim is to move earnings from a country to another while creating an artificial debt within an entity in a business group, just not to pay taxes, I don't see how it can be described by anything other than "Breaking the spirit of the law". I do know this is legal, but that only respects the letter of the law, not the spirit of it. The spirit of the free movements of items and people in Europe is made to promote trade and sales, not to promote the movement of money in order to evade taxes (that's actually the spirit of the tax heaven territories). In my view, the real problem when you do not respect the spirit of the law is that you do not respect the people themselves, even if you're not doing anything illegal. And I fear that some of those people, when they learn of another case like this one in 6 months, one year or two years, could consider using violence. In the past, several terrorist groups had targeted economic or corporate symbols (the Baader group for example), so we shouldn't forget histoire. These affairs will feed those enclined to follow that path again, but against what are now documented possibilities. That is why the states across the world need to act: it is not only about getting countries' money back, it is also to avoid future violence.