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How Nike Avoids Paying Taxes in Australia

34 points by wasx 9y ago

Froyoh 9y ago
This is not fair
6nf 9y ago
Transfer pricing. It's the same for all big companies operating in Australia (and probably most other countries) Of course there's nothing illegal about this and it's very difficult to really do something about it. The Australian Tax Office is struggling with this problem every day.
- turc1656 9y ago
  I think it's pretty easy to deal with it actually. Just apply a top line revenue tax of something like 2%. That can't be avoided because it is incurred at the point of sale. So it becomes an effective tax on accessing the market of that state/country. Then you would still have the corporate income tax that gets applied but companies would be able to offset their income tax liability with taxes paid for this new top line revenue tax. So it essentially becomes a sort of AMT tax for companies to ensure that they are paying some sort of minimum tax. 2% might not sound like much but when you consider that it's top line revenue and the majority of companies have profit margins in the 10-25% range, this equates to a minimum tax rate of 8-20%.
  - photojosh 9y ago
    How does that differ significantly from sales tax/GST? We'd get the same government revenue increase from increasing GST from 10 to 12%, no? Ultimately the cost of all taxes will be borne by consumers anyway.
atonse 9y ago
I’ve had this very cynical idea for a while now. And that is, the only way we will get governments to stop this nonsense is if we democratize the extreme tax evasion... ahem ahem.. sorry, “smart tax planning” that these companies take advantage of. Perfect opportunity for the Stripe Atlas team :-) If you make it so an individual can pay $50 a month and they get this full double Dutch Irish sandwich shell company crap setup for them, and millions of citizens start to get incomes this way and pay their “lawful amount” rather than their fair share, then governments will start to clamp down. Because right now we (private citizens who pay 25-40% in income taxes) are powerless in convincing our governments to do something about this travesty. Thoughts? Remember, as these companies say with their weasel words “we pay the full taxes we owe!” So it would be legal.
- xmodem 9y ago
  That would be funny, but I think if you actually tried to do it, you would very quickly run into overheads which make it unviable for most individuals. A lot of tax havens outsource the cost of compliance by requiring all financials to be independently audited, for instance, and when you have a couple of layers of shell companies that's 15-20k right there. That, and you probably still end up having to pay income tax on it when you bring it into the country.
  - paulddraper 9y ago
    Exactly. And that is why you won't see small or even mid-sized companies arranging their taxes like this: it's just too expensive. Only big companies -- Apple, Nike, Amazon, Google -- can afford to save international taxes like this. IMO, the better solution is 100% sales tax (ala the US FairTax proposal https://en.m.wikipedia.org/wiki/FairTax https://en.m.wikipedia.org/wiki/FairTax). Companies avoid paying corporate income taxes far easier than avoiding sales tax.
    - brokenmachine 9y ago
      How many individuals would we need in order to make it worthwhile? Asking for a friend. Maybe we could work together with people in another country - because we all want to pay "the full taxes we owe".
      - paulddraper 9y ago
        ...how many people do you file taxes with?
- pkaye 9y ago
  The average person gets most of their income through wages and it very hard to shelter it through these schemes.
  - atonse 9y ago
Gustomaximus 9y ago
I think there is one solution to this, the G20/WTO type organisations need to come to an agreement that to trade with each other they have minimum tax rates. Countries are free to tax higher but if say these nations agree to say a minimum 25% type thing, then any country or company operating outside of this agreement is not welcome. I'd be inclined to do the same thing for personal tax. Otherwise we risk a race to the bottom for tax rates if we let cooperates continue this. And this is 'capitalism' done right. Part of governments role is to create a 'level playing field' for business and stop a handful of larger/international companies having a non business advantage. Further, I'd be inclined to go a bit nuclear with punishments and make rules that abuser pay 100x what they gained and the company assets/brand in which they did this for are seized and auctioned. This later seems harsh but if we don't stop companies doing this we may see serious repercussions on government's ability to provide for society as we know it. Companies need to feel the risk is not worth the reward. I doubt this will happen, as an Australian our Prime Minister us known to have his hundreds of millions stashed in the Caymen Islands. What an example for the nation and likelyhood of crackdown seems low.
- wtfstatists 9y ago
  And this is 'capitalism' done right. Part of governments role is to create a 'level playing field' for business and stop a handful of larger/international companies having a non business advantage. States do not exist over capitalism but under it. States competing for tax money is capitalism working perfectly, and about time this tax nonsense (or atleast overcharging productive class) comes to halt. To give an contrarian opinion, I am extremely happy that states are finally made to work for the money.
exidy 9y ago
I agree that corporate tax avoidance is a problem and needs to be addressed on a global basis. But as an Australian, I think we're missing the elephant in the room. We hold up these prominent brands like Nike and Apple, but ignore the fact that they are products designed and manufactured elsewhere. All we do in Australia is open the shipping container and distribute the goods to stores. Very little value is added in Australia. Regardless of tax changes, the tax revenue from simple distribution is always going to be low. If we want to improve our corporate tax revenue, we need to create things in Australia, whether that's manufacturing, software, services or whatever.
- photojosh 9y ago
  Agreed. Disclaimer: I have a slight confirmation bias because I'm involved with "creating things in Australia"... The article doesn't mention sales tax (so 10% of the purchase price does go to the government), or the income tax from the people who work in distribution and retail.
- plaguuuuuu 9y ago
  I don't think that closes the loophole. Although I don't know much about taxation. AFAIK an Australian manufacturer could just as easily do the same thing - set up a shell company in Ireland or wherever then fund the local company's operations and factories through 'loans' which must be paid back to the parent company in Ireland
beckler 9y ago
This reminds me of how some pairs of Converse sneakers have a thin layer of felt on the bottom that rubs off, so that they're considered "slippers" at the time they're exported and not "sneakers" to get a cheaper tariff.

34 points by wasx 9y ago

This is not fair

6nf 9y ago

Transfer pricing. It's the same for all big companies operating in Australia (and probably most other countries) Of course there's nothing illegal about this and it's very difficult to really do something about it. The Australian Tax Office is struggling with this problem every day.

turc1656 9y ago
I think it's pretty easy to deal with it actually. Just apply a top line revenue tax of something like 2%. That can't be avoided because it is incurred at the point of sale. So it becomes an effective tax on accessing the market of that state/country. Then you would still have the corporate income tax that gets applied but companies would be able to offset their income tax liability with taxes paid for this new top line revenue tax. So it essentially becomes a sort of AMT tax for companies to ensure that they are paying some sort of minimum tax. 2% might not sound like much but when you consider that it's top line revenue and the majority of companies have profit margins in the 10-25% range, this equates to a minimum tax rate of 8-20%.
- photojosh 9y ago
  How does that differ significantly from sales tax/GST? We'd get the same government revenue increase from increasing GST from 10 to 12%, no? Ultimately the cost of all taxes will be borne by consumers anyway.

atonse 9y ago

I’ve had this very cynical idea for a while now. And that is, the only way we will get governments to stop this nonsense is if we democratize the extreme tax evasion... ahem ahem.. sorry, “smart tax planning” that these companies take advantage of. Perfect opportunity for the Stripe Atlas team :-) If you make it so an individual can pay $50 a month and they get this full double Dutch Irish sandwich shell company crap setup for them, and millions of citizens start to get incomes this way and pay their “lawful amount” rather than their fair share, then governments will start to clamp down. Because right now we (private citizens who pay 25-40% in income taxes) are powerless in convincing our governments to do something about this travesty. Thoughts? Remember, as these companies say with their weasel words “we pay the full taxes we owe!” So it would be legal.

xmodem 9y ago
That would be funny, but I think if you actually tried to do it, you would very quickly run into overheads which make it unviable for most individuals. A lot of tax havens outsource the cost of compliance by requiring all financials to be independently audited, for instance, and when you have a couple of layers of shell companies that's 15-20k right there. That, and you probably still end up having to pay income tax on it when you bring it into the country.
- paulddraper 9y ago
  Exactly. And that is why you won't see small or even mid-sized companies arranging their taxes like this: it's just too expensive. Only big companies -- Apple, Nike, Amazon, Google -- can afford to save international taxes like this. IMO, the better solution is 100% sales tax (ala the US FairTax proposal https://en.m.wikipedia.org/wiki/FairTax https://en.m.wikipedia.org/wiki/FairTax). Companies avoid paying corporate income taxes far easier than avoiding sales tax.
  - brokenmachine 9y ago
    How many individuals would we need in order to make it worthwhile? Asking for a friend. Maybe we could work together with people in another country - because we all want to pay "the full taxes we owe".
    - paulddraper 9y ago
      ...how many people do you file taxes with?
pkaye 9y ago
The average person gets most of their income through wages and it very hard to shelter it through these schemes.
- atonse 9y ago

Gustomaximus 9y ago

I think there is one solution to this, the G20/WTO type organisations need to come to an agreement that to trade with each other they have minimum tax rates. Countries are free to tax higher but if say these nations agree to say a minimum 25% type thing, then any country or company operating outside of this agreement is not welcome. I'd be inclined to do the same thing for personal tax. Otherwise we risk a race to the bottom for tax rates if we let cooperates continue this. And this is 'capitalism' done right. Part of governments role is to create a 'level playing field' for business and stop a handful of larger/international companies having a non business advantage. Further, I'd be inclined to go a bit nuclear with punishments and make rules that abuser pay 100x what they gained and the company assets/brand in which they did this for are seized and auctioned. This later seems harsh but if we don't stop companies doing this we may see serious repercussions on government's ability to provide for society as we know it. Companies need to feel the risk is not worth the reward. I doubt this will happen, as an Australian our Prime Minister us known to have his hundreds of millions stashed in the Caymen Islands. What an example for the nation and likelyhood of crackdown seems low.

wtfstatists 9y ago
And this is 'capitalism' done right. Part of governments role is to create a 'level playing field' for business and stop a handful of larger/international companies having a non business advantage. States do not exist over capitalism but under it. States competing for tax money is capitalism working perfectly, and about time this tax nonsense (or atleast overcharging productive class) comes to halt. To give an contrarian opinion, I am extremely happy that states are finally made to work for the money.

exidy 9y ago

I agree that corporate tax avoidance is a problem and needs to be addressed on a global basis. But as an Australian, I think we're missing the elephant in the room. We hold up these prominent brands like Nike and Apple, but ignore the fact that they are products designed and manufactured elsewhere. All we do in Australia is open the shipping container and distribute the goods to stores. Very little value is added in Australia. Regardless of tax changes, the tax revenue from simple distribution is always going to be low. If we want to improve our corporate tax revenue, we need to create things in Australia, whether that's manufacturing, software, services or whatever.

photojosh 9y ago
Agreed. Disclaimer: I have a slight confirmation bias because I'm involved with "creating things in Australia"... The article doesn't mention sales tax (so 10% of the purchase price does go to the government), or the income tax from the people who work in distribution and retail.
plaguuuuuu 9y ago
I don't think that closes the loophole. Although I don't know much about taxation. AFAIK an Australian manufacturer could just as easily do the same thing - set up a shell company in Ireland or wherever then fund the local company's operations and factories through 'loans' which must be paid back to the parent company in Ireland

beckler 9y ago

This reminds me of how some pairs of Converse sneakers have a thin layer of felt on the bottom that rubs off, so that they're considered "slippers" at the time they're exported and not "sneakers" to get a cheaper tariff.