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Couldn't we just ban tax evasion? What makes it so hard? (honest question) A recent European study has shown that the more company win money, the less they pa

by yann63 8y ago

Couldn't we just ban tax evasion? What makes it so hard? (honest question) A recent European study has shown that the more company win money, the less they pay in taxes (in percentage). Is it because of bad laws? Corrupt politicians? Something else?

jstanley 8y ago
Tax evasion is already illegal.
- mtsr 8y ago
  Tax evasion is, but tax avoidance isn’t.
  - madeofpalk 8y ago
    What's 'tax avoidance'? Doesn't everyone avoid tax when they claim expenses and make deductions?
    - ui-explorer12 8y ago
      yes - so maximizing your use of any method to reduce your tax burden is (a) the smart thing to do and (b) the (a)moral imperative of a corporation. not a judgement call, just not sure how you frame the raison d'etre for something that oesn't embody life to begin with.
      - cheerlessbog 8y ago
        Why moral imperative? Perhaps you mean ethical or legal, but is not even legally required, so far as I know, that a corporation must maximize return to investors. More broadly, society created the concept of the corporation and imbued it with valuable privileges such as limited liability and a potentially favorable tax regime. Some argue it would be morally reasonable to require it balance the interests of stakeholders.
    - mtsr 8y ago
      Exactly, and when companies do the same thing it’s legally considered perfectly fine. Morally can be a different matter, though.
    - hackeraccount 8y ago
      Evasion is a bug in the tax code. Avoidance is a feature. Laws are written to create the possibility of avoidance - e.g. we add a 20% tax on cigarettes. We create a 20% tax credit on solar panels. We don't tax interest gains off of savings accounts. For what it's worth it's pointless to complain about tax law complexity. Complexity increases with the amount of money you're trying to drag out of the economy. The more money you want the greater the temptation to create loopholes because they end up being worth more. Imagine a country where the tax rate is 100%. If you pass a law that taxes building cars at 90% you've effectively created an industry. Compare that with how much you'll be loved if the tax rate is 10% and you lower the tax on making cars to 9%. Still good but you'll only garner like not love. Honestly this is why the details of tax law - how fair it is for example - only marginally interest me. The overall rate - and for that you might as well include borrowing, so it's easier to just ask - what percentage of GDP does the government spend are a lot more interesting to me.
  - whynyc 8y ago
    Illegal avoidance is called evasion.
meuk 8y ago
My guess: Big corporations often have more potential to outsource, and are better known, and have a stronger PR and legal department. These traits give them a much better negotiation position (don't remember that governments profit from taxes, so it's a bit of a demand and supply thing: If taxes are high in one country, a big company will threaten to move to another, which costs the country money in the end). At least, this is the argument that the Dutch government uses to abandon as many taxes for companies as possible.
- Fnoord 8y ago
  Yeah, the Dutch government, ran by the VVD...
yoz-y 8y ago
It's because for an international company there is really no clear cut way to say what is tax evasion and what is not. If your company is incorporated in France, has offices in Ireland and serves customers all over the world, how do you calculate where to pay what? Sovereign countries are free to set their tax rate to 0 in order to attract companies there.
- gzeus 8y ago
  But shouldn't they like pay taxes for where the customer is from? Suppose a guy from US purchases the service, shouldn't tax be paid there. Isn't that how its supposed to work? Taking only in terms of Giants.
  - izacus 8y ago
    It gets really hairy in cases like Google and Facebook, where the guy paying the service might be a US agency paying to show ads to YouTube/FB users in Europe.
  - yoz-y 8y ago
    Note that there already is a tax that people are paying 'where the customers are'. It's the VAT, which is one of the biggest sources of income for a state.
  - Veelox 8y ago
    To complicate the situation, a French citizen, living in Spain, the sole owner of a company incorporated in Ireland, buys software from an American company to run for a customer in Brazil. Which country/countries should be able to tax the revenue?
    - johneth 8y ago
      The company would pay corporation tax in Ireland. The French citizen, if resident in Spain, would probably pay taxes in Spain (generally countries tax residents). The customer may need to pay sales tax on the purchase to Brazil, if Brazil has such a thing. But I agree with your point - it does get quite complicated and bureaucratic.
betterunix2 8y ago
First, it is not tax evasion if the law is being followed. The real problem is that tax laws have these various loopholes, and the question is why the law is written that way. Almost always it is because wealthy people benefit from the loopholes and lobby for politicians to either keep them in place or replace them with new loopholes (which is the likely outcome from this French tax). When the tax code is complicated enough, as it will inevitably become over time, you wind up with a situation where accountants find creative ways to combine different aspects of the tax code to minimize a company or individual's tax bill.
ui-explorer12 8y ago
tax evasion is illegal; tax minimization is lowering your tax burden using existing laws and is not illegal. Governments should reduce the number of unintentional loopholes but (a) it's far easier to pass new laws than amend old ones, (b) if you change a law that an existing big domestic firm or voting block is exploiting they will let you know at the polls; with a new law you can sell it as "balanced fiscal justice - righting a great wrong by making big foreign multinationals pay their fair share!" I'm definitely not against tax reform, my big concern is the common approach of new taxes as political theater without any honest attempt at simplification, broad application or coordination with other jurisdictions. All this tax is doing is targeting a small, low-vote target that will figure out a complicated way to shift taxable revenue into a different jurisdiction, perpetuating the exact problem it supposedly addresses.
- josefx 8y ago
  > without any honest attempt at simplification, broad application or coordination with other jurisdictions. The problem with that is that the other jurisdictions have no interest in closing tax loopholes. The irish bend over backwards to let Apples unique sheme qualify as double irish (their tax office had to issue several private rulings) and they had no interest in getting rid of the double irish itself either. For a tax haven making even a cent in taxes they wouldn't have otherwise gotten while costing a different country a million is a win.
  - diarmuidc 8y ago
    The double Irish was gotten rid of in 2015 https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut...
    - microcolonel 8y ago
      You can see the impact of that crackdown in their tax receipts and tax to GDP ratio. Government revenue from Double Irish tax arrangements was fully 5% of their GDP. https://data.oecd.org/tax/tax-revenue.htm https://data.oecd.org/tax/tax-revenue.htm
ddebernardy 8y ago
> Couldn't we just ban tax evasion? What makes it so hard? (honest question) Two things, mostly. The first is lack of financial transparency. The other is how corporate tax is levied. With respect to transparency, there's no shortage of options to create structures in tax havens such that there's little if any paper trail that ties it to their owners or beneficiaries. And just in passing, the US and the UK are not void of problems here; on the contrary, they regularly appear on worst offenders lists: https://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware https://www.theguardian.com/us-news/2016/apr/06/panama-paper... The other issue is basically related to accounting and how corporate tax gets levied. If you're a multinational, it's possible to set up a subsidiary in a place with to no corporate tax and make your international profits all appear there instead of coming home where they get taxed. (This is the reason US businesses were so many billions abroad in the run up to Trump's tax cuts.) Related to this is the ability to move money out of countries that do tax, using questionable licensing fees and accounting tricks the like. Example: https://www.telegraph.co.uk/business/2016/04/20/mcdonalds-france-faces-300m-tax-bill-over-luxembourg-link/ https://www.telegraph.co.uk/business/2016/04/20/mcdonalds-fr... Anyway, to fix this you basically need to get all countries together so there's more transparency, and dig into how corporate taxes get levied.
3pt14159 8y ago
Political economy and a race to the bottom. Though take hope, there are many people working on this and the silver lining of tech's centralization is that it will be easy to chase them down once the right laws are in place.
bobl 8y ago
Europe is losing ~globalization and we are fighting over the scraps. Which European country do you think will be overall obviously better in ten years? And not in the sense that "everything gets better", but in the sense of having a high rate of success in converting progress to prosperity. I don't know of any.
- TomVDB 8y ago
  What exactly are they losing?
  - deleted 8y ago
    [deleted]
  - bobl 8y ago
    Essentially competitiveness. Countries that are, or at least aspires to be, competitive would be restricting foreign companies and invest in infrastructure. While Europe is doing the opposite. We are selling our companies and restricting the building of infrastructure. And while you can point to specific examples, like startups, that are successful in Europe it is mostly an illustration of how much we are leaving on the table.
  - sbacic 8y ago
    As a European, I feel like the EU, in general, is on the losing side of globalization. There is not a single European internet company in the top 15. I think part of the reason for this is cultural (aversion to risk), part of it is due to the environment (relatively low salaries for IT, limited access to venture capital) and a part of it is due to bad policies being enacted by the EU - most notably the EU VAT on digital services, the GDPR and now the Copyright directive. When it comes to digital services, Europe is seen as a place to sell things, not make them. This state of affairs has left Germany and France bitter over the success of American tech giants, particularly as they put ever increasing pressure on local businesses. So the EU reacted in pretty much the only way it knows how - by introducing legislation against said businesses. This had the unintentional consequence of targeting European tech startups as well, making Europe an even worse place to start a new business than it already was. Instead of a single digital market, you have 28 different national markets, each with their own rules and regulation, only ~11 of which are actually interesting due to their size and purchasing power. At the same time, austerity policies enacted after the 2008 recession have resulted in cuts in the scope and quality of public services. Prices for most goods and services are rather high. The middle and lower classes are particularly hard hit, leaving many to wonder whether globalization is worth it.
cpursley 8y ago
Banning tax evasion is easy. Just get rid of corporate income taxes and replace it with a sales tax. It's not like corporations pay taxes anyways; their customers do as tax is built into the cost of products.
- iguy 8y ago
  Yup. Tax things which really exist within a country, not accounting fictions (like precisely which arm of a multinational made how much profit). Although I'd also like everyone to stop using the term "income tax" for this. It's a tax on corporate profits, and has nothing at all to do with personal income tax, a tax on wages.
- cheerlessbog 8y ago
  That wouldn't prevent some of the shenanigans described above. For example, giving my IP away for cheap to a subsidiary in a low tax jurisdiction that actually performs the sale.
  - iguy 8y ago
    No, it would, that's the point. If your subsidiary in the Bahamas sells something in France, it pays French VAT.
    - cpursley 8y ago
      Exactly!
- lr4444lr 8y ago
  ... and you ban cash and all ad hoc barter networks. Good luck.
  - cpursley 8y ago
    Make cash / ad hoc tax free. Want to avoid tax? Buy used!
- 8y ago
snarf21 8y ago
As others have said, it isn't evasion but avoidance. The issue is that there a lot of ways to put the money on the books wherever you want it. Let's say you want to sell mobile phones. You could create one company in France that builds, buys and sells phones. In this case it becomes pretty clear it is a French company and all the money will be taxed in France. But let's say you have that same company and split it up into three companies. You put your corporate company A in Ireland. That company A owns a company B in India that makes the phones. The corporate company A also owns a company C in France that only sells phones. Company A can decide which company is profitable by deciding who much B charges C for the phones they make. Company A can also charge B and C consulting fees for helping to run their businesses. Basically A can decide which of the three companies is profitable and make the others even "lose" money as far as the accounting goes. It is now very unclear if this is a French company and at who's tax laws the money should be assessed. Obviously, the company A can make this much more complicated. It is also really hard to know which of these organizational things are about tax avoidance and what is about efficiency of manufacturing and running a business.
- alkonaut 8y ago
  The difference between avoidance and evasion is only relevant if you have tax law interpreted to the letter only. Tax law should be interpreted by the lawmakers intention and companies should be ready to be fined or uptaxed if authorities find they pay less taxes than is reasonable given global profits and relative turnover within their jurisdiction. Constructs such as paying “royalties” to parent companies, or taking very expensive internal loans to effectively move all profits to tax havens (using Dutch BV’s etc) should simply be outlawed. Countries simply shouldn’t recognize these as acceptable practices. This obviously leads to what companies like to call a “hostile business climate” - so a country will need to be pretty attractive in other aspects to not scare off international business.
  - nradov 8y ago
    It's unreasonable to expect judges to divine lawmakers' intent on subtle issues of tax policy. If lawmakers want a tax to work a certain way then they need to just write that down so that it's clear to everyone.
microcolonel 8y ago
The problem is that European politicians and their sympathizers have gone to great lengths to make you think it is tax evasion that they are policing. Tax evasion is illegal, these companies read the rules and follow them, but in the EU they are still in jeopardy in the courts, because the courts are arbitrary.
lr4444lr 8y ago
Anything taxed has to have an asset value determined for it, and reliably recorded. This is extremely complicated to enforce on almost anything if you sit down and really think about how - if it were the only thing you had of value to offer - you might be able to hide it's true value.
Proven 8y ago
> Is it because of bad laws? No, it's because of the good laws. Taxation is theft. And it's not called tax evasion but tax planning. No one is obliged to pay more than the minimum.
- tonyedgecombe 8y ago
  > Taxation is theft. No it isn't. Property rights are determined by the state, hence taxation by the state cannot be considered theft.
  - morpheuskafka 8y ago
    I agree that taxation isn't necessarily theft, as part of the social contract, but aren't property rights at least in some cases fundamental?
  - kortilla 8y ago
    That’s not really a valid argument against “taxation is theft”. As a citizen born in a country, you never enter into an agreement that the government should be able to take a cut of all of your transactions, but that’s what happens and refusal to partake results in violence (an arrest and time in prison). It’s no different than the local mob going around giving beatdowns to get protection money from businesses. The people that voted for the government sure think it’s different, but it’s not much different to the people who didn’t. There is a reason they had to put the ability to tax right in the constitution. And there is also a reason the US is no longer part of Britain.
    - tonyedgecombe 8y ago
      No, but you also don't have to partake in the economic system, that is your choice.
    - anoncake 8y ago
      It's easy to establish the duty to pay your taxes even using "freedom of contract". By stepping foot on a public road, you accepted the terms and conditions. Market extremism is a funny thought experiment, but ultimately absurd.
yann63 8y ago
Thanks a lot to all your answers. My question was badly formulated. I meant to ask: why are we tolerating this situation? Regardless of tax evasion / tax optimization or whatever is the wording, most people agree that these companies are not paying the amount of taxes they should. I get the why and how these companies are doing this. I just don't understand why we, as a society, accept that. Our society has never been so rich, yet we see decline in education, health, etc. I do think we should only have progress: more culture, better life, less work, etc.
- burlesona 8y ago
  That is a great philosophical question. My banal answer: entertainment is also better than it ever has been, and the messes of people are this more numb and manipulable than they ever have been.
- iguy 8y ago
  > most people agree that these companies are not paying the amount of taxes they should They will say this because the news tells them this is true. But it seems far from obvious to me. If a multinational sets up shop in France, then a whole pile of taxes do get paid: VAT is 20% of all sales. Then there is income tax / social security / etc. I don't know any French details, but I'm quite sure it's above 30% in total... all of which you should think of as being collected on the transaction that A pays Mr. B. If the company spends most of their revenue on salaries, then this already sounds like order of 50% of throughput goes to tax. In addition to this, they may make some profit. And it seems pretty hard to know where the profit was made. How much is iOS worth? Or the Starbucks logo... quite a bit, your groggy airport customers know what they're getting, but there's no really obvious way to put a unique number on this. And thus it's honestly difficult to say where the profit was made. Yet this is often the whole violent argument! Over maybe 20% of say 5% profit, 1% of sales... 1/50th of the taxes already collected above. If they wished to collect more, they could easily tweak those numbers. I'd go so far as to suggest that we should just give up, set the tax on corporate profits to zero globally... but at least they are generally moving down. > Our society has never been so rich, yet we see decline in education, health, etc But we collect more tax than ever. It it buys us worse healthcare, or education, than it did in the past, then the problem may lie elsewhere.
rb808 8y ago
You make it sound as if taxation is a good thing. In much of the world capitalism, retained profits and growing the economy is used to make people wealthier. The countries with fastest growth and highest employment, healthiest companies tend to have lower tax rates (China, USA). Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly performing economies where young people leave. Europe has the advantage that it got rich through its empires (and low taxes) and is now stagnating into poverty. Companies and people already pay a lot of tax compared to the rest of the world, Europeans should be trying to reduce this burden instead of figuring out how to tax more.
- yason 8y ago
  The countries with fastest growth and highest employment, healthiest companies tend to have lower tax rates (China, USA). Another yardstick for comparing countries is how they treat and take care of the poor ones. High-tax countries often fare well in that and China, USA not so much.
- anoncake 8y ago
  > Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly performing economies where young people leave. Maybe countries with high unemployment and poorly performing economies have a problem with companies paying too little taxes.
  - growlist 8y ago
    If only it were that simple.
  - Mirioron 8y ago
    How does that fix the problem though? The government doesn't create jobs, companies do.
Mirioron 8y ago
The point isn't tax evasion, it's France wanting more tax revenue without pissing off the public. Remember that the yellow vests protest started because of a tax increase on the general public.

by yann63 8y ago

jstanley 8y ago

Tax evasion is already illegal.

mtsr 8y ago
Tax evasion is, but tax avoidance isn’t.
- madeofpalk 8y ago
  What's 'tax avoidance'? Doesn't everyone avoid tax when they claim expenses and make deductions?
  - ui-explorer12 8y ago
    yes - so maximizing your use of any method to reduce your tax burden is (a) the smart thing to do and (b) the (a)moral imperative of a corporation. not a judgement call, just not sure how you frame the raison d'etre for something that oesn't embody life to begin with.
    - cheerlessbog 8y ago
      Why moral imperative? Perhaps you mean ethical or legal, but is not even legally required, so far as I know, that a corporation must maximize return to investors. More broadly, society created the concept of the corporation and imbued it with valuable privileges such as limited liability and a potentially favorable tax regime. Some argue it would be morally reasonable to require it balance the interests of stakeholders.
  - mtsr 8y ago
    Exactly, and when companies do the same thing it’s legally considered perfectly fine. Morally can be a different matter, though.
  - hackeraccount 8y ago
    Evasion is a bug in the tax code. Avoidance is a feature. Laws are written to create the possibility of avoidance - e.g. we add a 20% tax on cigarettes. We create a 20% tax credit on solar panels. We don't tax interest gains off of savings accounts. For what it's worth it's pointless to complain about tax law complexity. Complexity increases with the amount of money you're trying to drag out of the economy. The more money you want the greater the temptation to create loopholes because they end up being worth more. Imagine a country where the tax rate is 100%. If you pass a law that taxes building cars at 90% you've effectively created an industry. Compare that with how much you'll be loved if the tax rate is 10% and you lower the tax on making cars to 9%. Still good but you'll only garner like not love. Honestly this is why the details of tax law - how fair it is for example - only marginally interest me. The overall rate - and for that you might as well include borrowing, so it's easier to just ask - what percentage of GDP does the government spend are a lot more interesting to me.
- whynyc 8y ago
  Illegal avoidance is called evasion.

meuk 8y ago

My guess: Big corporations often have more potential to outsource, and are better known, and have a stronger PR and legal department. These traits give them a much better negotiation position (don't remember that governments profit from taxes, so it's a bit of a demand and supply thing: If taxes are high in one country, a big company will threaten to move to another, which costs the country money in the end). At least, this is the argument that the Dutch government uses to abandon as many taxes for companies as possible.

Fnoord 8y ago
Yeah, the Dutch government, ran by the VVD...

yoz-y 8y ago

It's because for an international company there is really no clear cut way to say what is tax evasion and what is not. If your company is incorporated in France, has offices in Ireland and serves customers all over the world, how do you calculate where to pay what? Sovereign countries are free to set their tax rate to 0 in order to attract companies there.

gzeus 8y ago
But shouldn't they like pay taxes for where the customer is from? Suppose a guy from US purchases the service, shouldn't tax be paid there. Isn't that how its supposed to work? Taking only in terms of Giants.
- izacus 8y ago
  It gets really hairy in cases like Google and Facebook, where the guy paying the service might be a US agency paying to show ads to YouTube/FB users in Europe.
- yoz-y 8y ago
  Note that there already is a tax that people are paying 'where the customers are'. It's the VAT, which is one of the biggest sources of income for a state.
- Veelox 8y ago
  To complicate the situation, a French citizen, living in Spain, the sole owner of a company incorporated in Ireland, buys software from an American company to run for a customer in Brazil. Which country/countries should be able to tax the revenue?
  - johneth 8y ago
    The company would pay corporation tax in Ireland. The French citizen, if resident in Spain, would probably pay taxes in Spain (generally countries tax residents). The customer may need to pay sales tax on the purchase to Brazil, if Brazil has such a thing. But I agree with your point - it does get quite complicated and bureaucratic.

betterunix2 8y ago

First, it is not tax evasion if the law is being followed. The real problem is that tax laws have these various loopholes, and the question is why the law is written that way. Almost always it is because wealthy people benefit from the loopholes and lobby for politicians to either keep them in place or replace them with new loopholes (which is the likely outcome from this French tax). When the tax code is complicated enough, as it will inevitably become over time, you wind up with a situation where accountants find creative ways to combine different aspects of the tax code to minimize a company or individual's tax bill.

ui-explorer12 8y ago

tax evasion is illegal; tax minimization is lowering your tax burden using existing laws and is not illegal. Governments should reduce the number of unintentional loopholes but (a) it's far easier to pass new laws than amend old ones, (b) if you change a law that an existing big domestic firm or voting block is exploiting they will let you know at the polls; with a new law you can sell it as "balanced fiscal justice - righting a great wrong by making big foreign multinationals pay their fair share!" I'm definitely not against tax reform, my big concern is the common approach of new taxes as political theater without any honest attempt at simplification, broad application or coordination with other jurisdictions. All this tax is doing is targeting a small, low-vote target that will figure out a complicated way to shift taxable revenue into a different jurisdiction, perpetuating the exact problem it supposedly addresses.

josefx 8y ago
> without any honest attempt at simplification, broad application or coordination with other jurisdictions. The problem with that is that the other jurisdictions have no interest in closing tax loopholes. The irish bend over backwards to let Apples unique sheme qualify as double irish (their tax office had to issue several private rulings) and they had no interest in getting rid of the double irish itself either. For a tax haven making even a cent in taxes they wouldn't have otherwise gotten while costing a different country a million is a win.
- diarmuidc 8y ago
  The double Irish was gotten rid of in 2015 https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut...
  - microcolonel 8y ago
    You can see the impact of that crackdown in their tax receipts and tax to GDP ratio. Government revenue from Double Irish tax arrangements was fully 5% of their GDP. https://data.oecd.org/tax/tax-revenue.htm https://data.oecd.org/tax/tax-revenue.htm

ddebernardy 8y ago

> Couldn't we just ban tax evasion? What makes it so hard? (honest question) Two things, mostly. The first is lack of financial transparency. The other is how corporate tax is levied. With respect to transparency, there's no shortage of options to create structures in tax havens such that there's little if any paper trail that ties it to their owners or beneficiaries. And just in passing, the US and the UK are not void of problems here; on the contrary, they regularly appear on worst offenders lists: https://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware https://www.theguardian.com/us-news/2016/apr/06/panama-paper... The other issue is basically related to accounting and how corporate tax gets levied. If you're a multinational, it's possible to set up a subsidiary in a place with to no corporate tax and make your international profits all appear there instead of coming home where they get taxed. (This is the reason US businesses were so many billions abroad in the run up to Trump's tax cuts.) Related to this is the ability to move money out of countries that do tax, using questionable licensing fees and accounting tricks the like. Example: https://www.telegraph.co.uk/business/2016/04/20/mcdonalds-france-faces-300m-tax-bill-over-luxembourg-link/ https://www.telegraph.co.uk/business/2016/04/20/mcdonalds-fr... Anyway, to fix this you basically need to get all countries together so there's more transparency, and dig into how corporate taxes get levied.

3pt14159 8y ago

Political economy and a race to the bottom. Though take hope, there are many people working on this and the silver lining of tech's centralization is that it will be easy to chase them down once the right laws are in place.

bobl 8y ago

Europe is losing ~globalization and we are fighting over the scraps. Which European country do you think will be overall obviously better in ten years? And not in the sense that "everything gets better", but in the sense of having a high rate of success in converting progress to prosperity. I don't know of any.

TomVDB 8y ago
What exactly are they losing?
- deleted 8y ago
  [deleted]
- bobl 8y ago
  Essentially competitiveness. Countries that are, or at least aspires to be, competitive would be restricting foreign companies and invest in infrastructure. While Europe is doing the opposite. We are selling our companies and restricting the building of infrastructure. And while you can point to specific examples, like startups, that are successful in Europe it is mostly an illustration of how much we are leaving on the table.
- sbacic 8y ago
  As a European, I feel like the EU, in general, is on the losing side of globalization. There is not a single European internet company in the top 15. I think part of the reason for this is cultural (aversion to risk), part of it is due to the environment (relatively low salaries for IT, limited access to venture capital) and a part of it is due to bad policies being enacted by the EU - most notably the EU VAT on digital services, the GDPR and now the Copyright directive. When it comes to digital services, Europe is seen as a place to sell things, not make them. This state of affairs has left Germany and France bitter over the success of American tech giants, particularly as they put ever increasing pressure on local businesses. So the EU reacted in pretty much the only way it knows how - by introducing legislation against said businesses. This had the unintentional consequence of targeting European tech startups as well, making Europe an even worse place to start a new business than it already was. Instead of a single digital market, you have 28 different national markets, each with their own rules and regulation, only ~11 of which are actually interesting due to their size and purchasing power. At the same time, austerity policies enacted after the 2008 recession have resulted in cuts in the scope and quality of public services. Prices for most goods and services are rather high. The middle and lower classes are particularly hard hit, leaving many to wonder whether globalization is worth it.

cpursley 8y ago

Banning tax evasion is easy. Just get rid of corporate income taxes and replace it with a sales tax. It's not like corporations pay taxes anyways; their customers do as tax is built into the cost of products.

iguy 8y ago
Yup. Tax things which really exist within a country, not accounting fictions (like precisely which arm of a multinational made how much profit). Although I'd also like everyone to stop using the term "income tax" for this. It's a tax on corporate profits, and has nothing at all to do with personal income tax, a tax on wages.
cheerlessbog 8y ago
That wouldn't prevent some of the shenanigans described above. For example, giving my IP away for cheap to a subsidiary in a low tax jurisdiction that actually performs the sale.
- iguy 8y ago
  No, it would, that's the point. If your subsidiary in the Bahamas sells something in France, it pays French VAT.
  - cpursley 8y ago
    Exactly!
lr4444lr 8y ago
... and you ban cash and all ad hoc barter networks. Good luck.
- cpursley 8y ago
  Make cash / ad hoc tax free. Want to avoid tax? Buy used!
8y ago

snarf21 8y ago

As others have said, it isn't evasion but avoidance. The issue is that there a lot of ways to put the money on the books wherever you want it. Let's say you want to sell mobile phones. You could create one company in France that builds, buys and sells phones. In this case it becomes pretty clear it is a French company and all the money will be taxed in France. But let's say you have that same company and split it up into three companies. You put your corporate company A in Ireland. That company A owns a company B in India that makes the phones. The corporate company A also owns a company C in France that only sells phones. Company A can decide which company is profitable by deciding who much B charges C for the phones they make. Company A can also charge B and C consulting fees for helping to run their businesses. Basically A can decide which of the three companies is profitable and make the others even "lose" money as far as the accounting goes. It is now very unclear if this is a French company and at who's tax laws the money should be assessed. Obviously, the company A can make this much more complicated. It is also really hard to know which of these organizational things are about tax avoidance and what is about efficiency of manufacturing and running a business.

alkonaut 8y ago
The difference between avoidance and evasion is only relevant if you have tax law interpreted to the letter only. Tax law should be interpreted by the lawmakers intention and companies should be ready to be fined or uptaxed if authorities find they pay less taxes than is reasonable given global profits and relative turnover within their jurisdiction. Constructs such as paying “royalties” to parent companies, or taking very expensive internal loans to effectively move all profits to tax havens (using Dutch BV’s etc) should simply be outlawed. Countries simply shouldn’t recognize these as acceptable practices. This obviously leads to what companies like to call a “hostile business climate” - so a country will need to be pretty attractive in other aspects to not scare off international business.
- nradov 8y ago
  It's unreasonable to expect judges to divine lawmakers' intent on subtle issues of tax policy. If lawmakers want a tax to work a certain way then they need to just write that down so that it's clear to everyone.

microcolonel 8y ago

The problem is that European politicians and their sympathizers have gone to great lengths to make you think it is tax evasion that they are policing. Tax evasion is illegal, these companies read the rules and follow them, but in the EU they are still in jeopardy in the courts, because the courts are arbitrary.

lr4444lr 8y ago

Anything taxed has to have an asset value determined for it, and reliably recorded. This is extremely complicated to enforce on almost anything if you sit down and really think about how - if it were the only thing you had of value to offer - you might be able to hide it's true value.

Proven 8y ago

> Is it because of bad laws? No, it's because of the good laws. Taxation is theft. And it's not called tax evasion but tax planning. No one is obliged to pay more than the minimum.

tonyedgecombe 8y ago
> Taxation is theft. No it isn't. Property rights are determined by the state, hence taxation by the state cannot be considered theft.
- morpheuskafka 8y ago
  I agree that taxation isn't necessarily theft, as part of the social contract, but aren't property rights at least in some cases fundamental?
- kortilla 8y ago
  That’s not really a valid argument against “taxation is theft”. As a citizen born in a country, you never enter into an agreement that the government should be able to take a cut of all of your transactions, but that’s what happens and refusal to partake results in violence (an arrest and time in prison). It’s no different than the local mob going around giving beatdowns to get protection money from businesses. The people that voted for the government sure think it’s different, but it’s not much different to the people who didn’t. There is a reason they had to put the ability to tax right in the constitution. And there is also a reason the US is no longer part of Britain.
  - tonyedgecombe 8y ago
    No, but you also don't have to partake in the economic system, that is your choice.
  - anoncake 8y ago
    It's easy to establish the duty to pay your taxes even using "freedom of contract". By stepping foot on a public road, you accepted the terms and conditions. Market extremism is a funny thought experiment, but ultimately absurd.

yann63 8y ago

Thanks a lot to all your answers. My question was badly formulated. I meant to ask: why are we tolerating this situation? Regardless of tax evasion / tax optimization or whatever is the wording, most people agree that these companies are not paying the amount of taxes they should. I get the why and how these companies are doing this. I just don't understand why we, as a society, accept that. Our society has never been so rich, yet we see decline in education, health, etc. I do think we should only have progress: more culture, better life, less work, etc.

burlesona 8y ago
That is a great philosophical question. My banal answer: entertainment is also better than it ever has been, and the messes of people are this more numb and manipulable than they ever have been.
iguy 8y ago
> most people agree that these companies are not paying the amount of taxes they should They will say this because the news tells them this is true. But it seems far from obvious to me. If a multinational sets up shop in France, then a whole pile of taxes do get paid: VAT is 20% of all sales. Then there is income tax / social security / etc. I don't know any French details, but I'm quite sure it's above 30% in total... all of which you should think of as being collected on the transaction that A pays Mr. B. If the company spends most of their revenue on salaries, then this already sounds like order of 50% of throughput goes to tax. In addition to this, they may make some profit. And it seems pretty hard to know where the profit was made. How much is iOS worth? Or the Starbucks logo... quite a bit, your groggy airport customers know what they're getting, but there's no really obvious way to put a unique number on this. And thus it's honestly difficult to say where the profit was made. Yet this is often the whole violent argument! Over maybe 20% of say 5% profit, 1% of sales... 1/50th of the taxes already collected above. If they wished to collect more, they could easily tweak those numbers. I'd go so far as to suggest that we should just give up, set the tax on corporate profits to zero globally... but at least they are generally moving down. > Our society has never been so rich, yet we see decline in education, health, etc But we collect more tax than ever. It it buys us worse healthcare, or education, than it did in the past, then the problem may lie elsewhere.

rb808 8y ago

You make it sound as if taxation is a good thing. In much of the world capitalism, retained profits and growing the economy is used to make people wealthier. The countries with fastest growth and highest employment, healthiest companies tend to have lower tax rates (China, USA). Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly performing economies where young people leave. Europe has the advantage that it got rich through its empires (and low taxes) and is now stagnating into poverty. Companies and people already pay a lot of tax compared to the rest of the world, Europeans should be trying to reduce this burden instead of figuring out how to tax more.

yason 8y ago
The countries with fastest growth and highest employment, healthiest companies tend to have lower tax rates (China, USA). Another yardstick for comparing countries is how they treat and take care of the poor ones. High-tax countries often fare well in that and China, USA not so much.
anoncake 8y ago
> Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly performing economies where young people leave. Maybe countries with high unemployment and poorly performing economies have a problem with companies paying too little taxes.
- growlist 8y ago
  If only it were that simple.
- Mirioron 8y ago
  How does that fix the problem though? The government doesn't create jobs, companies do.

Mirioron 8y ago

The point isn't tax evasion, it's France wanting more tax revenue without pissing off the public. Remember that the yellow vests protest started because of a tax increase on the general public.