4 ms·
Here's an example: A German company pays to advertise to a German consumer. It used to be that the money spent on that advertisement went to a German advertisem
by m12k 7y ago
Here's an example: A German company pays to advertise to a German consumer. It used to be that the money spent on that advertisement went to a German advertisement company, so that money would stay in the German economy, and the system would be sustainable, with money flowing around the system but not escaping. Now the ad money ends up in the Cayman Islands via Ireland and none of it is retained in Germany because the multinational advertising company has no/very few employees in Germany (no salaries/income tax) there's no VAT (because the ad sale is a B2B transaction) and there's no corporate taxes (because the ad company uses transfer pricing - e.g. licensing of IP that they can price arbitrarily - to shift all their profits to Ireland where they make them disappear in a puff of smoke). The end result is that money is being siphoned out of the German economy and into tax havens (so there's no return flow like there'd be if this was just normal trade with other active economies) making it harder and harder to sustain the German economy. There's a leak in the system when selling to consumers, and if it's left unchecked it'll slowly collapse the middle class and consumerism as we know it. I'm not sure if revenue tax is the best solution, but we need A solution. (or you know, we could just blame the foreigners and let the weakest parts of society fight over the jobs and shreds of wellfare state that are left, which seems to be the preferred solution these days). Mind you I'm not arguing against international trade (which increases competition and drives down prices) but against the unfair competitive advantage that multinational companies, especially digital ones, have over local companies by not needing to pay taxes at all. We need an even playing field, tax-wise, that's all.
- alt_f4 7y ago> It used to be that the money spent on that advertisement went to a German advertisement company It sounds to me like the problem is that the German economy failed to produce a Google competitor or, at least, a decent local German online advertising network that the German consumer would want to use. So, now they have a problem that they're trying to solve with taxation instead of innovation. This won't work, it just creates barriers to international trade in global world. It is 19th century economics. > have over local companies by not needing to pay taxes at all That is incorrect. They pay their taxes in their home countries. Why should they be penalized extra over local to Germany companies by having to pay double tax: once at home and once in that country?
- m12k 7y agoYou don't seem to understand how transfer pricing and tax havens work. These companies are not paying taxes on profits from most of their foreign sales in their home countries - the home corporation pays taxes on their domestic profits, and profits from those international subsidiaries that can't be channeled to tax havens (e.g. not from Europe) while all those profits that can make their way to tax havens do. Here's an article explaining how Apple does it: https://www.irishtimes.com/business/apple-s-cash-mountain-how-it-avoids-tax-and-the-irish-link-1.3281734 https://www.irishtimes.com/business/apple-s-cash-mountain-ho...
- tonfa 7y agoWhat that article doesn't make it clear is that the overseas cash was still subject to US taxation. A few years ago, that taxation could be indefinitely deferred, but that's no longer the case. So calling it a tax haven is somewhat misleading if we're talking about US companies.