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I have been seeing these headlines more and more lately and I have a nagging suspicion that somebody is pushing an agenda. What exactly that agenda is remains t

by sbacic 7y ago

I have been seeing these headlines more and more lately and I have a nagging suspicion that somebody is pushing an agenda. What exactly that agenda is remains to be seen. As for the news article you mentioned, it should be noted that the £28m is corporate tax, not _all_ the taxes. I'm reasonably sure that FAANG is not shirking the government on VAT or payroll taxes. As for why they pay so little corporate tax, I'd guess it's because they're not an EU company. All of FAANG's cost centers are in the US so it makes sense that they are allowed to offset those costs with revenue from the rest of the world. Whether they are doing so fairly is another matter, but even then, I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states.

zemnmez 7y ago
> I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states. "An unexpected conclusion from Hines-Rice was that: low foreign tax rates [from tax havens] ultimately enhance U.S. tax collections; by paying little/no foreign taxes, U.S. multinationals had avoided building up foreign tax credits; the 15.5% Tax Cuts and Jobs Act of 2017 levy would prove this finding again in 2017" Scott Dyreng; Bradley P. Lindsey (12 October 2009). "Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on US Multinational Firms' Tax Rates". Journal of Accounting Research. 47 (5): 1283–1316. doi:10.1111/j.1475-679X.2009.00346.x. https://en.wikipedia.org/wiki/James_R._Hines_Jr https://en.wikipedia.org/wiki/James_R._Hines_Jr.
tim333 7y ago
There are currently a lot of ways for multinational companies to reduce their tax burden to near zero by for example Microsoft allocating most of their European profits to a DVD stamping plant in Ireland which had a near zero rate at the time. Also they are kind of expected to maximise shareholder value by taking advantage of such legal avoidance schemes. The proper way to stop this is for counties to make anti avoidance laws. I recall a fuss in the press over Google along the lines of "Using dubious tactics dubbed the 'Double Irish' and the 'Dutch Sandwich', Google apparently was able to pay only 3.2 per cent in tax on its overseas profits in 2011 even though most of its sales were in countries with tax rates from 26 to 34 per cent," and Google's CEO said "We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate." And basically if the governments want more tax they have to pass appropriate tax laws: "If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom." Which is kind of what Spain is trying to do.
- sbacic 7y ago
  > The proper way to stop this is for counties to make anti avoidance laws. You mean tax evasion, not tax avoidance, right? Last time I checked, avoidance was legal, evasion was not. If you actually did mean tax avoidance, then I must point out how dangerous the idea of somebody arbitrarily deciding what _legal_ option is okay or isn't okay on a case by case basis. I'd much rather have some things reclassified as tax evasion rather than having a "just trust us" system in place that decides when something is legal or not.
  - pjc50 7y ago
    No, we really do mean a "general anti-avoidance rule" (GAAR e.g. https://www.gov.uk/government/collections/tax-avoidance-general-anti-abuse-rule-gaar https://www.gov.uk/government/collections/tax-avoidance-gene...), because otherwise you end up in an endless loop of adjusting the rules against moving targets. GAARs ultimately boil down to the question of "did you do this rather than a more obvious transaction structure simply to pay less tax", a sort of Occam's razor. > dangerous the idea of somebody arbitrarily deciding what _legal_ option is okay or isn't okay on a case by case basis. This happens all the time in precedent-based systems whenever something unclear is litigated. In some sense it's what the legal system is for, and it's the very opposite of arbitrary.
    - sbacic 7y ago
      > GAARs ultimately boil down to the question of "did you do this rather than a more obvious transaction structure simply to pay less tax", a sort of Occam's razor. Okay, so it is a "just trust us" system of deciding who is breaking the law and who isn't. In that case, I'll gladly take multinationals not paying taxes over some government official arbitrarily deciding that I am avoiding taxes and should be punished. Even more so because I live in a country where that same official might be untrained, apathetic or downright corrupt. > This happens all the time in precedent-based systems whenever something unclear is litigated. Which, AFAIK, the European system is not.
      - 7y ago
tonyedgecombe 7y ago
I'm sure the media does have an agenda here, that's not to say there isn't a problem though. I don't know about Spain but the UK has FAANG cost centres, Google employees 3,500 people in the UK for instance.
- sbacic 7y ago
  How many of those employees work as customer support and do stuff like localization as opposed to developing Google's core products that are then sold worldwide (I'm really hoping somebody could answer that)? The first is basically an extension of local sales while the second is a genuine cost center that should be offset by worldwide revenue.
  - tonyedgecombe 7y ago
    https://www.cityam.com/google-uk-employees-earned-226000-average-last-year/ https://www.cityam.com/google-uk-employees-earned-226000-ave... At an average of £225K per year I don't think there are many support staff.
hef19898 7y ago
Amazon's EU headquarter is in Luxemburg, Amazon EU S.a.r.l. Then you have Apple in Dublin. At that is without all the other legal entities FAANG has in the EU. And within the EU, optimizing tax is an art. For some time there was a thing called the double Irish (with some Dutch included if I remember well). Every large enough company is doing this. But saying all of of FAANGs cost centers are in the US is factually wrong. EDIT: Comment below explained the double Irish way better!
- sbacic 7y ago
  That doesn't make any of them European companies per se - their main HQs are still in the US, correct? > But saying all of of FAANGs cost centers are in the US is factually wrong. Care to shed some light on this? What exactly does FAANG develop in the EU? And why?

by sbacic 7y ago

zemnmez 7y ago

> I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states. "An unexpected conclusion from Hines-Rice was that: low foreign tax rates [from tax havens] ultimately enhance U.S. tax collections; by paying little/no foreign taxes, U.S. multinationals had avoided building up foreign tax credits; the 15.5% Tax Cuts and Jobs Act of 2017 levy would prove this finding again in 2017" Scott Dyreng; Bradley P. Lindsey (12 October 2009). "Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on US Multinational Firms' Tax Rates". Journal of Accounting Research. 47 (5): 1283–1316. doi:10.1111/j.1475-679X.2009.00346.x. https://en.wikipedia.org/wiki/James_R._Hines_Jr https://en.wikipedia.org/wiki/James_R._Hines_Jr.

tim333 7y ago

There are currently a lot of ways for multinational companies to reduce their tax burden to near zero by for example Microsoft allocating most of their European profits to a DVD stamping plant in Ireland which had a near zero rate at the time. Also they are kind of expected to maximise shareholder value by taking advantage of such legal avoidance schemes. The proper way to stop this is for counties to make anti avoidance laws. I recall a fuss in the press over Google along the lines of "Using dubious tactics dubbed the 'Double Irish' and the 'Dutch Sandwich', Google apparently was able to pay only 3.2 per cent in tax on its overseas profits in 2011 even though most of its sales were in countries with tax rates from 26 to 34 per cent," and Google's CEO said "We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate." And basically if the governments want more tax they have to pass appropriate tax laws: "If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom." Which is kind of what Spain is trying to do.

sbacic 7y ago
> The proper way to stop this is for counties to make anti avoidance laws. You mean tax evasion, not tax avoidance, right? Last time I checked, avoidance was legal, evasion was not. If you actually did mean tax avoidance, then I must point out how dangerous the idea of somebody arbitrarily deciding what _legal_ option is okay or isn't okay on a case by case basis. I'd much rather have some things reclassified as tax evasion rather than having a "just trust us" system in place that decides when something is legal or not.
- pjc50 7y ago
  No, we really do mean a "general anti-avoidance rule" (GAAR e.g. https://www.gov.uk/government/collections/tax-avoidance-general-anti-abuse-rule-gaar https://www.gov.uk/government/collections/tax-avoidance-gene...), because otherwise you end up in an endless loop of adjusting the rules against moving targets. GAARs ultimately boil down to the question of "did you do this rather than a more obvious transaction structure simply to pay less tax", a sort of Occam's razor. > dangerous the idea of somebody arbitrarily deciding what _legal_ option is okay or isn't okay on a case by case basis. This happens all the time in precedent-based systems whenever something unclear is litigated. In some sense it's what the legal system is for, and it's the very opposite of arbitrary.
  - sbacic 7y ago
    > GAARs ultimately boil down to the question of "did you do this rather than a more obvious transaction structure simply to pay less tax", a sort of Occam's razor. Okay, so it is a "just trust us" system of deciding who is breaking the law and who isn't. In that case, I'll gladly take multinationals not paying taxes over some government official arbitrarily deciding that I am avoiding taxes and should be punished. Even more so because I live in a country where that same official might be untrained, apathetic or downright corrupt. > This happens all the time in precedent-based systems whenever something unclear is litigated. Which, AFAIK, the European system is not.
    - 7y ago

tonyedgecombe 7y ago

I'm sure the media does have an agenda here, that's not to say there isn't a problem though. I don't know about Spain but the UK has FAANG cost centres, Google employees 3,500 people in the UK for instance.

sbacic 7y ago
How many of those employees work as customer support and do stuff like localization as opposed to developing Google's core products that are then sold worldwide (I'm really hoping somebody could answer that)? The first is basically an extension of local sales while the second is a genuine cost center that should be offset by worldwide revenue.
- tonyedgecombe 7y ago
  https://www.cityam.com/google-uk-employees-earned-226000-average-last-year/ https://www.cityam.com/google-uk-employees-earned-226000-ave... At an average of £225K per year I don't think there are many support staff.

hef19898 7y ago

Amazon's EU headquarter is in Luxemburg, Amazon EU S.a.r.l. Then you have Apple in Dublin. At that is without all the other legal entities FAANG has in the EU. And within the EU, optimizing tax is an art. For some time there was a thing called the double Irish (with some Dutch included if I remember well). Every large enough company is doing this. But saying all of of FAANGs cost centers are in the US is factually wrong. EDIT: Comment below explained the double Irish way better!

sbacic 7y ago
That doesn't make any of them European companies per se - their main HQs are still in the US, correct? > But saying all of of FAANGs cost centers are in the US is factually wrong. Care to shed some light on this? What exactly does FAANG develop in the EU? And why?