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40% of multinational profits are shifted to tax havens each year

270 points by Mopolo 7y ago

ccvannorman 7y ago
Remember when the Panama Papers came out and absolutely nothing happened? On the plus side, exploitation of the system by the richest has been going on for millennia, the only difference is that today more people are aware of it.
- arethuza 7y ago
  That's not quite true - a lot of stuff happened see: https://en.wikipedia.org/wiki/Panama_Papers https://en.wikipedia.org/wiki/Panama_Papers Also, Mossack Fonseca was shut down. Mind you - nothing happened to the basic approach of offshore shell companies - which is the real problem.
  - 9c8675a8 7y ago
    Muh problem. As if it was your money to begin with. Do you honestly think this money will end up in your hands either directly or indirectly? You're all nuts.
  - ccvannorman 7y ago
    Oh my gosh, this is AMAZING! I was wrong, and thank you for this correction. Hope in humanity restored, a little bit.
    - arethuza 7y ago
      I can strongly recommend the Panama Papers book: https://www.amazon.co.uk/Panama-Papers-Breaking-Story-Powerful/dp/1786070472 https://www.amazon.co.uk/Panama-Papers-Breaking-Story-Powerf...
- tasogare 7y ago
  No, scriptural money and globalization are big differences too. Not too long ago it would have been easy to physically steal rich people, now it requires far more organization.
- Cthulhu_ 7y ago
  Not true; 1.2 billion has already been recovered, and there's still investigations ongoing - and likely will be for years to come still. Just because it's not on HN doesn't mean it's not happening.
systemtest 7y ago
I am fairly certain 40% of all citizens would shift their income to a tax haven if possible.
- exabrial 7y ago
  That's exactly how I feel about it. I don't think "paying" taxes are something that is honorable. The money is removed from you forcefully.
  - SolaceQuantum 7y ago
    Honestly, I'm down for paying taxes. It pays for my lifestyle and is propostional to my lifestyle. If I own land, that land is only valuable due to the society that land exists in. It's protected, and safe, due to public services like roads, which law enforcement, fire control folks, postal service, and ambulances drive upon. I've earned my income from a lifetime of education, starting from my public school kindergarden all the way to me state university attendance, which in of itself is only useful to attend because there are bright minds teaching what they research via government grants. All of that costs money, and paying taxes is more or less funding my lifestyle as it is now. If you want to not pay taxes, then stop paying taxes and give up everything you purchase with them. Go subsistence farm in the woods or something, or deal with bartering instead of money (which itself is only useful because there is some regulation to keep it useful).
    - 9c8675a8 7y ago
      > It pays for my lifestyle No it doesn't. You're deluded, a hypocrite or a liar.
      - mcv 7y ago
        What's hypocritical about this? I suppose if you honestly believed SolaceQuantum was wrong[0], you might indeed believe they were either deluded or a liar, but even then, what's hypocritical about it? [0] They're not wrong of course; everything claimed in that comment is entirely (or 'mostly', at least) correct. I'd love to see you try to refute any of it.
seibelj 7y ago
Corporations already pay myriad income taxes and distributed profits (capital gains and dividends) are taxed, paid by the recipient. Corporate tax is double taxation and is inefficient. The optimal corporate tax rate is zero and I wish people would understand this. 35% corporate tax rate the US had before the tax cut was completely absurd and the only corps that paid it were small ones that didn’t have in house staff to get around it. Even your favorite socialist European countries have far lower rates than 35%. If we set the rate to 0% companies would stop playing all these stupid games and fire all the people who spend their lives waging this war. It drives me bananas!
- jessaustin 7y ago
  I think the idea is that taxes aren't only evaded at the level of the firm. Shareholders also evade taxes, but through "double taxation" they might still end up paying something.
  - throwawaysea 7y ago
    I don’t think the designs of tax structures are that clever or principled. I think it’s more like “we want to spend more and so let’s find the most politically expedient revenue source we can get away with”. Over time, the legislation (and spending habits) put in place by all the politicians that come and go results in an inefficient, inscrutable mess that is modern taxation and government spending, along with requisite anomalies like taxing the same dollar several times.
- deleted 7y ago
  [deleted]
- jermaustin1 7y ago
  This is something that a lot of economists agree on: tax the rich, not the corporations. I happen to agree with it as well. The problem is the ultra rich then leave the money in the corporations, and find ways to benefit from their company cars, company jets, and company manhattan duplex penthouse apartments above their offices that they then pay a nominal rent for. I think that below a certain revenue (not profit), corporations should be taxed at 0%. Problem is (same with free webhosting), people take advantage and just start spinning up hundreds or thousands of corporations (real estate companies do this already for liability). No matter how you structure it there is no way to provide tax advantages to one entity without having people game that system.
onion2k 7y ago
I'm surprised it's not more.
cs702 7y ago
Wow. Power, in all its forms -- economic, cultural, social, political -- is highly concentrated among impersonal giant corporations today. For this kind of legal tax avoidance would be impossible without mutual understanding, collaboration, and coordination across national boundaries among many disparate groups of people, all serving their corporate masters in one way or another (as their employers, as their customers, as taxpaying entities, etc.). Consider only how many people and organizations must be involved to make tax treaties and regulations around the world amenable to this kind of tax avoidance. Whether this kind of concentration of power is good or bad for society, I'm not sure. My best guess is no -- but I'm not certain. For there is also evidence that large-scale, concentrated business investment has been a force for good worldwide.[a] -- [a] See, for example, Marc Benioff's book, "Trailblazer: The Power of Business as the Greatest Platform for Change" at https://www.amazon.com/Trailblazer-Business-Greatest-Platform-Change/dp/1984825194 https://www.amazon.com/Trailblazer-Business-Greatest-Platfor...
- eeZah7Ux 7y ago
  > Power ... is highly concentrated among impersonal giant corporations That power ultimately belongs to the billionaires that own the relative majority of stocks. The faceless companies are just proxies. This is where wealth inequality comes from.
- moosey 7y ago
  I consider libertarianism to be contemporary monarchic support, due to exactly these issues. Corporations are run as monarchic or dictatorial structures, with some controls. Ultimately, we have a choice: work hard to build the government that we want, or allow it to falter to the energies of the billionaire class. Or, even worse, allow the billionaire class choose the government that they want.
  - disintegore 7y ago
    It's time for syndicalism to make a comeback.
  - nicoburns 7y ago
mcv 7y ago
Corporations being able to book their profits wherever they find it most convenient to book them, is utterly unreasonable. They make their profits in specific markets, and should be paying their taxes there. Profits made from selling in the US should be paid in the US, profits made from selling in Germany should be paid there. The problem is, profits are the end result of a lot of complex corporate operations across many countries. Who's to say which bit of which revenue was used to pay for which costs, while other bits are pure profit? There is another corporate tax that is entirely linked to the market they're selling to, though: VAT. The problem is: it's only over revenue made from selling to consumers, not to other businesses, and it's always completely offloaded to those consumers, and therefore not really a corporate tax but a consumption tax. So how about treating profits that way? In every market, you count the revenue made from selling in that market, and subtract the costs made by buying, hiring, etc in that market. The difference is the profit you made in that market, and you've got to pay your corporate tax over that amount to the tax authority in that market. That way you can't book your profits in a country where you didn't make any revenue. And if somehow you do make your revenue in a country where you didn't make incur costs, you pay tax over the entire amount. If you don't make revenue, then tough. You could have made some tax-free revenue there. I'm no international tax lawyer, though, so there are probably problems with this idea. I like the principle, though: they've got to pay back to the market they're profiting from, and not to a completely unrelated country that offers them tax breaks for coming there.
- gpresot 7y ago
  >So how about treating profits that way? In every market, you count the revenue made from selling in that market, and subtract the costs made by buying, hiring, etc in that market. The difference is the profit you made in that market, and you've got to pay your corporate tax over that amount to the tax authority in that market. >That way you can't book your profits in a country where you didn't make any revenue. And if somehow you do make your revenue in a country where you didn't make incur costs, you pay tax over the entire amount. If you don't make revenue, then tough. You could have made some tax-free revenue there. This is already what is happening. Company A sells something for 100 in Country X. But the product is manufactured in Country Y, and the brand is "rented" by a company that owns it and set up in country Z. These costs that get passed to Country Y and Z are the local revenues in these countries. It happens that Y and Z are countries with lower tax rates, so the comapny tries to maximise the Transfer Price it pays to its legal entities located there.
cascom 7y ago
My guess is that’s and approximation of the U.S. companies’ foreign source income that they don’t want to be double taxed on...were the double taxation to go away there wouldn’t be a need to play this game
fedups 7y ago
It's a bit odd seeing Zucman as a contributor here, considering his recent economic advice has been criticized for assuming that tax avoidance isn't a thing.
cascom 7y ago
If you want to go down the rabbit whole - read the link below... https://www.taxpolicycenter.org/briefing-book/how-does-current-system-international-taxation-work https://www.taxpolicycenter.org/briefing-book/how-does-curre...
9c8675a8 7y ago
Good. They and everyone else should be able to do as they please with the money they've earned. Fuck taxes and fuck the corrupt, crazy bullshit and wars they fund.
throwawaysea 7y ago
FYI this isn’t new info; this research was published approximately 1.5 years ago. Personally I’m not certain that a government would put this extra money to good use. Gabriel Zucman (advisor behind Warren’s wealth tax, whose doctoral advisor was Thomas Piketty) is one of the people behind this website, and seemingly has an ideological problem with personal and corporate wealth accumulation. But I haven’t seen cogent arguments (from him or Piketty or Emmanuel Saez) as to why accumulation of having a tax strategy is wrong. Everyone would avoid taxes if they could, and governments aren’t exactly known for putting capital to efficient use. Furthermore theee corporations have to pay taxes when money is repatriated so this is more of a tax rearrangement strategy. See https://www.investors.com/politics/editorials/overseas-profits-return/ https://www.investors.com/politics/editorials/overseas-profi...
- Thlom 7y ago
  As far as I understand Piketty does not argue that wealth accumulation is morally wrong. He argues that wealth accumulation has a negative effect on society.
- mcv 7y ago
  > "Everyone would avoid taxes if they could, and governments aren’t exactly known for putting capital to efficient use." Those are different issues, though. Firstly, of course governments should put their tax revenue to good use. When they don't, it's a failure of democracy to hold the government accountable. Of course in a non-democratic country or a severely compromised democracy, it's hard to impossible to hold the government accountable. Either way, the thing to complain about is the way taxes are used or misused, not their existence at all, as governments won't be able to function without them. If you don't want governments or countries at all, then argue for that directly, and I will sympathise. But you don't get any sympathy from me if you want to live in a nice country but don't want to pay any taxes for it. And secondly, just that everybody would avoid to pay taxes if they could, doesn't mean it's okay for corporations to be able to do so. It merely underscores the inequality between people and corporations.
vixen99 7y ago
Not to stray into politics but in general terms, I'm wondering if decided views on the topic (either way) would be altered for folk living in a country which then democratically elected a government with a no-bones-about-it Marxist agenda. Interestingly enough, I believe such an experiment might take place shortly.
mrfusion 7y ago
Weren’t the corporate tax cuts supposed to help with this? Has it been helping? Isn’t the us corporate tax rate now basically competitive with other countries?
- IAmEveryone 7y ago
  It helped in the way that legalising murder would lower the crime rate.
mistrial9 7y ago
the forty percent number here is quite ironic -- that is about the same percentage of your total income you will pay in California as a high-value working professional person.. high-tech engineer and a company, registered nurse at a huge health company.. like that .. forty percent of you check is -gone-, roughly.. you might get some back at tax time (yearly) if your papers are a certain way..
Faint 7y ago
What typically happens to corporate profits that are declared in a tax-haven? Naively, when those profits are moved out of the tax-haven, they will create income, profits or dividends on the entities they are transferred to, and those will be taxed in turn. But there are probably ways around these taxes, what would the point be otherwise?
buboard 7y ago
the exact next line is rather underwhelming: > This shifting reduces corporate income tax revenue by nearly $200 billion, or 10% of global corporate tax receipts. Companies sometimes have to shift profits through tax heavens because many 'proper' countries are too bureaucratic when it comes to things like IP or international profits handling. "Multinational" no longer means that it's a megacorp - we live in a connected globe. Perhaps we should talk about why tax compliance is such a big burden for mid-size businesses. Seems Germany is losing more than everyone
rayiner 7y ago
> This shifting reduces corporate income tax revenue by nearly $200 billion, or 10% of global corporate tax receipts. To put that into perspective, the OECD has $50 trillion in GDP, and raises over $17 trillion in tax revenue. So we are talking about 1.2% of total tax revenue. Even taxing all multinational corporate profits at 50% with no tax havens would only add up to less than 5% of all tax revenue. I wonder what the agenda is when we spend so much time and political bandwidth talking about rounding errors.
- tapland 7y ago
  Because a yearly tax rate isn't a flat fee and yearly rates compound. For example, from the widely shared article from business insider the other week. If there was a 3% tax on money past $1B Jeff Bezos wouldn't have beat $86B in fortune, but he's at $160B today. That's a 100% increase caused by what you call a 'rounding error'. Over not-even-that-many-years.
  - xyzzyz 7y ago
    Corporate income taxes are not annual taxes on wealth. They do not compound.
  - rayiner 7y ago
    The vast bulk of taxes in the OECD are payroll and income taxes, which do not compound yearly. Taxes on property account for just 2% of tax revenue in the OECD: https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf https://www.oecd.org/tax/tax-policy/revenue-statistics-highl.... As to Jeff Bezos--what is the point of taxes? Raising money to pay for public services, or trying to make Jeff Bezos have less money? I'm in the former camp. I don't care how much money Jeff Bezos has, I care about raising revenue to pay for public services. Estimates are that an 8% wealth tax would raise between $60 billion and $430 billion annually: https://www.manhattan-institute.org/issues-2020-taxing-the-rich-wont-fix-the-deficit https://www.manhattan-institute.org/issues-2020-taxing-the-r.... Total U.S. government spending (at all levels) is somewhere between 12 and 86 times as much as what an 8% wealth tax would raise. (Of course, an 8% wealth tax would be completely insane and we would never do it. Sweden and France topped out at 1.5% before they realized it was a stupid idea and ditched it.) I don't see the point of doing battle with billionaires (and potentially driving them all to Canada, or Sweden, or France) to maybe optimistically collect 8% more tax revenue, and realistically more like 1-3%. We could raise $500 billion+ (an extra 10% of revenue) by adopting a Canadian style VAT. Which has the major advantage that it's not insane and everybody else in the OECD has one.
zacharytelschow 7y ago
Breaking news: Businesses avoid taxes to maximize their profits just as individuals do. More at 9.
jariel 7y ago
Have a good look at that map and it's immediately evident that the starkest contrast among 'major nations' lies right within the EU itself. The outgoing President of the EU Commission, Jean-Paul Junker was literally the architect of Luxembourg's primary tax-avoidance strategies while he was PM from 1995-2013. Not only does this speak to primary, 'first order' divisions within a supposed economic union, but the blatant hypocrisy of their leadership (completely unelected, I might add). One of the 'big red flags' for current EU negotiators on Brexit, an issue which lies at the heart of their negotiation strategy, is the concern that the UK will attempt to offer lower-tax status to major European entities after departure, kind of like a 'Western Singapore'. The other 'most important issue' is that of Ireland and the Irish border. It's not ironic at all, that it is in fact Ireland which has become the 'other Luxembourg', sucking taxes into it's nation from other EU nations as we've seen on these pages with Google, Apple, Dell etc.. It's beyond pale that the EU is primarily targeting foreign multinationals, most of whom are just rationally following the letter of EU was, whilst this gross imbalance perpetuates right in front of anyone willing to pay attention for a few minutes. This is a huge issue that we need to see real leadership on very soon.
ifthenelseend 7y ago
Tax heavens have MUCH lower taxes, but they also have other benefits like very little bureaucracy, better privacy and better protection from lawsuits. You will also have a lot of freedom managing your company. For example, if you try to move a German company to another country and that country has lower tax rate, then Germans will put additional punishing taxes on your company for the next 10 years, despite you are not living there anymore. You will never have that issue with offshore corporations.
- ifthenelseend 7y ago
  If you need an offshore corporation, it can be opened for a few hundred $, but if you need to do the same for example in Germany, then you have to pay 25000 EURO to found a GmbH.
  - icebraining 7y ago
    You don't pay 25000€, you invest them in the company. And from what I can tell, there's a "mini-GmbH" model that avoids even that requirement.
mamon 7y ago
I think it is a good thing, like a free market for tax laws - you can choose the one that best suits your needs :) More seriously though, tax havens are necessary: governments are just as greedy as corporations, so we need some means of tax avoidance, otherwise politicians would just pass a law introducing 100% tax rate on everything.
theredbox 7y ago
I am honestly not surprised. In my country the current government came up with the idea to slam an additional tax on banks because they "think they earn too much" and they need to share with the society.
Wh1skey 7y ago
Reduces taxes. Problem solved.

270 points by Mopolo 7y ago

Remember when the Panama Papers came out and absolutely nothing happened? On the plus side, exploitation of the system by the richest has been going on for millennia, the only difference is that today more people are aware of it.

arethuza 7y ago
That's not quite true - a lot of stuff happened see: https://en.wikipedia.org/wiki/Panama_Papers https://en.wikipedia.org/wiki/Panama_Papers Also, Mossack Fonseca was shut down. Mind you - nothing happened to the basic approach of offshore shell companies - which is the real problem.
- 9c8675a8 7y ago
  Muh problem. As if it was your money to begin with. Do you honestly think this money will end up in your hands either directly or indirectly? You're all nuts.
- ccvannorman 7y ago
  Oh my gosh, this is AMAZING! I was wrong, and thank you for this correction. Hope in humanity restored, a little bit.
  - arethuza 7y ago
    I can strongly recommend the Panama Papers book: https://www.amazon.co.uk/Panama-Papers-Breaking-Story-Powerful/dp/1786070472 https://www.amazon.co.uk/Panama-Papers-Breaking-Story-Powerf...
tasogare 7y ago
No, scriptural money and globalization are big differences too. Not too long ago it would have been easy to physically steal rich people, now it requires far more organization.
Cthulhu_ 7y ago
Not true; 1.2 billion has already been recovered, and there's still investigations ongoing - and likely will be for years to come still. Just because it's not on HN doesn't mean it's not happening.

systemtest 7y ago

I am fairly certain 40% of all citizens would shift their income to a tax haven if possible.

exabrial 7y ago
That's exactly how I feel about it. I don't think "paying" taxes are something that is honorable. The money is removed from you forcefully.
- SolaceQuantum 7y ago
  Honestly, I'm down for paying taxes. It pays for my lifestyle and is propostional to my lifestyle. If I own land, that land is only valuable due to the society that land exists in. It's protected, and safe, due to public services like roads, which law enforcement, fire control folks, postal service, and ambulances drive upon. I've earned my income from a lifetime of education, starting from my public school kindergarden all the way to me state university attendance, which in of itself is only useful to attend because there are bright minds teaching what they research via government grants. All of that costs money, and paying taxes is more or less funding my lifestyle as it is now. If you want to not pay taxes, then stop paying taxes and give up everything you purchase with them. Go subsistence farm in the woods or something, or deal with bartering instead of money (which itself is only useful because there is some regulation to keep it useful).
  - 9c8675a8 7y ago
    > It pays for my lifestyle No it doesn't. You're deluded, a hypocrite or a liar.
    - mcv 7y ago
      What's hypocritical about this? I suppose if you honestly believed SolaceQuantum was wrong[0], you might indeed believe they were either deluded or a liar, but even then, what's hypocritical about it? [0] They're not wrong of course; everything claimed in that comment is entirely (or 'mostly', at least) correct. I'd love to see you try to refute any of it.

seibelj 7y ago

Corporations already pay myriad income taxes and distributed profits (capital gains and dividends) are taxed, paid by the recipient. Corporate tax is double taxation and is inefficient. The optimal corporate tax rate is zero and I wish people would understand this. 35% corporate tax rate the US had before the tax cut was completely absurd and the only corps that paid it were small ones that didn’t have in house staff to get around it. Even your favorite socialist European countries have far lower rates than 35%. If we set the rate to 0% companies would stop playing all these stupid games and fire all the people who spend their lives waging this war. It drives me bananas!

jessaustin 7y ago
I think the idea is that taxes aren't only evaded at the level of the firm. Shareholders also evade taxes, but through "double taxation" they might still end up paying something.
- throwawaysea 7y ago
  I don’t think the designs of tax structures are that clever or principled. I think it’s more like “we want to spend more and so let’s find the most politically expedient revenue source we can get away with”. Over time, the legislation (and spending habits) put in place by all the politicians that come and go results in an inefficient, inscrutable mess that is modern taxation and government spending, along with requisite anomalies like taxing the same dollar several times.
deleted 7y ago
[deleted]
jermaustin1 7y ago
This is something that a lot of economists agree on: tax the rich, not the corporations. I happen to agree with it as well. The problem is the ultra rich then leave the money in the corporations, and find ways to benefit from their company cars, company jets, and company manhattan duplex penthouse apartments above their offices that they then pay a nominal rent for. I think that below a certain revenue (not profit), corporations should be taxed at 0%. Problem is (same with free webhosting), people take advantage and just start spinning up hundreds or thousands of corporations (real estate companies do this already for liability). No matter how you structure it there is no way to provide tax advantages to one entity without having people game that system.

onion2k 7y ago

I'm surprised it's not more.

cs702 7y ago

Wow. Power, in all its forms -- economic, cultural, social, political -- is highly concentrated among impersonal giant corporations today. For this kind of legal tax avoidance would be impossible without mutual understanding, collaboration, and coordination across national boundaries among many disparate groups of people, all serving their corporate masters in one way or another (as their employers, as their customers, as taxpaying entities, etc.). Consider only how many people and organizations must be involved to make tax treaties and regulations around the world amenable to this kind of tax avoidance. Whether this kind of concentration of power is good or bad for society, I'm not sure. My best guess is no -- but I'm not certain. For there is also evidence that large-scale, concentrated business investment has been a force for good worldwide.[a] -- [a] See, for example, Marc Benioff's book, "Trailblazer: The Power of Business as the Greatest Platform for Change" at https://www.amazon.com/Trailblazer-Business-Greatest-Platform-Change/dp/1984825194 https://www.amazon.com/Trailblazer-Business-Greatest-Platfor...

eeZah7Ux 7y ago
> Power ... is highly concentrated among impersonal giant corporations That power ultimately belongs to the billionaires that own the relative majority of stocks. The faceless companies are just proxies. This is where wealth inequality comes from.
moosey 7y ago
I consider libertarianism to be contemporary monarchic support, due to exactly these issues. Corporations are run as monarchic or dictatorial structures, with some controls. Ultimately, we have a choice: work hard to build the government that we want, or allow it to falter to the energies of the billionaire class. Or, even worse, allow the billionaire class choose the government that they want.
- disintegore 7y ago
  It's time for syndicalism to make a comeback.
- nicoburns 7y ago

mcv 7y ago

Corporations being able to book their profits wherever they find it most convenient to book them, is utterly unreasonable. They make their profits in specific markets, and should be paying their taxes there. Profits made from selling in the US should be paid in the US, profits made from selling in Germany should be paid there. The problem is, profits are the end result of a lot of complex corporate operations across many countries. Who's to say which bit of which revenue was used to pay for which costs, while other bits are pure profit? There is another corporate tax that is entirely linked to the market they're selling to, though: VAT. The problem is: it's only over revenue made from selling to consumers, not to other businesses, and it's always completely offloaded to those consumers, and therefore not really a corporate tax but a consumption tax. So how about treating profits that way? In every market, you count the revenue made from selling in that market, and subtract the costs made by buying, hiring, etc in that market. The difference is the profit you made in that market, and you've got to pay your corporate tax over that amount to the tax authority in that market. That way you can't book your profits in a country where you didn't make any revenue. And if somehow you do make your revenue in a country where you didn't make incur costs, you pay tax over the entire amount. If you don't make revenue, then tough. You could have made some tax-free revenue there. I'm no international tax lawyer, though, so there are probably problems with this idea. I like the principle, though: they've got to pay back to the market they're profiting from, and not to a completely unrelated country that offers them tax breaks for coming there.

gpresot 7y ago
>So how about treating profits that way? In every market, you count the revenue made from selling in that market, and subtract the costs made by buying, hiring, etc in that market. The difference is the profit you made in that market, and you've got to pay your corporate tax over that amount to the tax authority in that market. >That way you can't book your profits in a country where you didn't make any revenue. And if somehow you do make your revenue in a country where you didn't make incur costs, you pay tax over the entire amount. If you don't make revenue, then tough. You could have made some tax-free revenue there. This is already what is happening. Company A sells something for 100 in Country X. But the product is manufactured in Country Y, and the brand is "rented" by a company that owns it and set up in country Z. These costs that get passed to Country Y and Z are the local revenues in these countries. It happens that Y and Z are countries with lower tax rates, so the comapny tries to maximise the Transfer Price it pays to its legal entities located there.

cascom 7y ago

My guess is that’s and approximation of the U.S. companies’ foreign source income that they don’t want to be double taxed on...were the double taxation to go away there wouldn’t be a need to play this game

fedups 7y ago

It's a bit odd seeing Zucman as a contributor here, considering his recent economic advice has been criticized for assuming that tax avoidance isn't a thing.

cascom 7y ago

If you want to go down the rabbit whole - read the link below... https://www.taxpolicycenter.org/briefing-book/how-does-current-system-international-taxation-work https://www.taxpolicycenter.org/briefing-book/how-does-curre...

9c8675a8 7y ago

Good. They and everyone else should be able to do as they please with the money they've earned. Fuck taxes and fuck the corrupt, crazy bullshit and wars they fund.

throwawaysea 7y ago

FYI this isn’t new info; this research was published approximately 1.5 years ago. Personally I’m not certain that a government would put this extra money to good use. Gabriel Zucman (advisor behind Warren’s wealth tax, whose doctoral advisor was Thomas Piketty) is one of the people behind this website, and seemingly has an ideological problem with personal and corporate wealth accumulation. But I haven’t seen cogent arguments (from him or Piketty or Emmanuel Saez) as to why accumulation of having a tax strategy is wrong. Everyone would avoid taxes if they could, and governments aren’t exactly known for putting capital to efficient use. Furthermore theee corporations have to pay taxes when money is repatriated so this is more of a tax rearrangement strategy. See https://www.investors.com/politics/editorials/overseas-profits-return/ https://www.investors.com/politics/editorials/overseas-profi...

Thlom 7y ago
As far as I understand Piketty does not argue that wealth accumulation is morally wrong. He argues that wealth accumulation has a negative effect on society.
mcv 7y ago
> "Everyone would avoid taxes if they could, and governments aren’t exactly known for putting capital to efficient use." Those are different issues, though. Firstly, of course governments should put their tax revenue to good use. When they don't, it's a failure of democracy to hold the government accountable. Of course in a non-democratic country or a severely compromised democracy, it's hard to impossible to hold the government accountable. Either way, the thing to complain about is the way taxes are used or misused, not their existence at all, as governments won't be able to function without them. If you don't want governments or countries at all, then argue for that directly, and I will sympathise. But you don't get any sympathy from me if you want to live in a nice country but don't want to pay any taxes for it. And secondly, just that everybody would avoid to pay taxes if they could, doesn't mean it's okay for corporations to be able to do so. It merely underscores the inequality between people and corporations.

vixen99 7y ago

Not to stray into politics but in general terms, I'm wondering if decided views on the topic (either way) would be altered for folk living in a country which then democratically elected a government with a no-bones-about-it Marxist agenda. Interestingly enough, I believe such an experiment might take place shortly.

mrfusion 7y ago

Weren’t the corporate tax cuts supposed to help with this? Has it been helping? Isn’t the us corporate tax rate now basically competitive with other countries?

IAmEveryone 7y ago
It helped in the way that legalising murder would lower the crime rate.

mistrial9 7y ago

the forty percent number here is quite ironic -- that is about the same percentage of your total income you will pay in California as a high-value working professional person.. high-tech engineer and a company, registered nurse at a huge health company.. like that .. forty percent of you check is -gone-, roughly.. you might get some back at tax time (yearly) if your papers are a certain way..

Faint 7y ago

What typically happens to corporate profits that are declared in a tax-haven? Naively, when those profits are moved out of the tax-haven, they will create income, profits or dividends on the entities they are transferred to, and those will be taxed in turn. But there are probably ways around these taxes, what would the point be otherwise?

buboard 7y ago

the exact next line is rather underwhelming: > This shifting reduces corporate income tax revenue by nearly $200 billion, or 10% of global corporate tax receipts. Companies sometimes have to shift profits through tax heavens because many 'proper' countries are too bureaucratic when it comes to things like IP or international profits handling. "Multinational" no longer means that it's a megacorp - we live in a connected globe. Perhaps we should talk about why tax compliance is such a big burden for mid-size businesses. Seems Germany is losing more than everyone

rayiner 7y ago

> This shifting reduces corporate income tax revenue by nearly $200 billion, or 10% of global corporate tax receipts. To put that into perspective, the OECD has $50 trillion in GDP, and raises over $17 trillion in tax revenue. So we are talking about 1.2% of total tax revenue. Even taxing all multinational corporate profits at 50% with no tax havens would only add up to less than 5% of all tax revenue. I wonder what the agenda is when we spend so much time and political bandwidth talking about rounding errors.

tapland 7y ago
Because a yearly tax rate isn't a flat fee and yearly rates compound. For example, from the widely shared article from business insider the other week. If there was a 3% tax on money past $1B Jeff Bezos wouldn't have beat $86B in fortune, but he's at $160B today. That's a 100% increase caused by what you call a 'rounding error'. Over not-even-that-many-years.
- xyzzyz 7y ago
  Corporate income taxes are not annual taxes on wealth. They do not compound.
- rayiner 7y ago
  The vast bulk of taxes in the OECD are payroll and income taxes, which do not compound yearly. Taxes on property account for just 2% of tax revenue in the OECD: https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf https://www.oecd.org/tax/tax-policy/revenue-statistics-highl.... As to Jeff Bezos--what is the point of taxes? Raising money to pay for public services, or trying to make Jeff Bezos have less money? I'm in the former camp. I don't care how much money Jeff Bezos has, I care about raising revenue to pay for public services. Estimates are that an 8% wealth tax would raise between $60 billion and $430 billion annually: https://www.manhattan-institute.org/issues-2020-taxing-the-rich-wont-fix-the-deficit https://www.manhattan-institute.org/issues-2020-taxing-the-r.... Total U.S. government spending (at all levels) is somewhere between 12 and 86 times as much as what an 8% wealth tax would raise. (Of course, an 8% wealth tax would be completely insane and we would never do it. Sweden and France topped out at 1.5% before they realized it was a stupid idea and ditched it.) I don't see the point of doing battle with billionaires (and potentially driving them all to Canada, or Sweden, or France) to maybe optimistically collect 8% more tax revenue, and realistically more like 1-3%. We could raise $500 billion+ (an extra 10% of revenue) by adopting a Canadian style VAT. Which has the major advantage that it's not insane and everybody else in the OECD has one.

zacharytelschow 7y ago

Breaking news: Businesses avoid taxes to maximize their profits just as individuals do. More at 9.

jariel 7y ago

Have a good look at that map and it's immediately evident that the starkest contrast among 'major nations' lies right within the EU itself. The outgoing President of the EU Commission, Jean-Paul Junker was literally the architect of Luxembourg's primary tax-avoidance strategies while he was PM from 1995-2013. Not only does this speak to primary, 'first order' divisions within a supposed economic union, but the blatant hypocrisy of their leadership (completely unelected, I might add). One of the 'big red flags' for current EU negotiators on Brexit, an issue which lies at the heart of their negotiation strategy, is the concern that the UK will attempt to offer lower-tax status to major European entities after departure, kind of like a 'Western Singapore'. The other 'most important issue' is that of Ireland and the Irish border. It's not ironic at all, that it is in fact Ireland which has become the 'other Luxembourg', sucking taxes into it's nation from other EU nations as we've seen on these pages with Google, Apple, Dell etc.. It's beyond pale that the EU is primarily targeting foreign multinationals, most of whom are just rationally following the letter of EU was, whilst this gross imbalance perpetuates right in front of anyone willing to pay attention for a few minutes. This is a huge issue that we need to see real leadership on very soon.

ifthenelseend 7y ago

Tax heavens have MUCH lower taxes, but they also have other benefits like very little bureaucracy, better privacy and better protection from lawsuits. You will also have a lot of freedom managing your company. For example, if you try to move a German company to another country and that country has lower tax rate, then Germans will put additional punishing taxes on your company for the next 10 years, despite you are not living there anymore. You will never have that issue with offshore corporations.

ifthenelseend 7y ago
If you need an offshore corporation, it can be opened for a few hundred $, but if you need to do the same for example in Germany, then you have to pay 25000 EURO to found a GmbH.
- icebraining 7y ago
  You don't pay 25000€, you invest them in the company. And from what I can tell, there's a "mini-GmbH" model that avoids even that requirement.

mamon 7y ago

I think it is a good thing, like a free market for tax laws - you can choose the one that best suits your needs :) More seriously though, tax havens are necessary: governments are just as greedy as corporations, so we need some means of tax avoidance, otherwise politicians would just pass a law introducing 100% tax rate on everything.

theredbox 7y ago

I am honestly not surprised. In my country the current government came up with the idea to slam an additional tax on banks because they "think they earn too much" and they need to share with the society.

Wh1skey 7y ago

Reduces taxes. Problem solved.