4 ms·

Hmm. Let's see how they do it in practise: funnel all money to another entity for 'licensing' their own brand. Net effect: no profit == no tax. Benefits for soc

by wokkel 6y ago

Hmm. Let's see how they do it in practise: funnel all money to another entity for 'licensing' their own brand. Net effect: no profit == no tax. Benefits for society: zero. Sure you don't want to change that?

solveit 6y ago
How does the other entity get out of taxes? If the answer is offshore tax havens, I agree that they're a problem, but domestic tax policy isn't the greatest lever for fixing this. But in general, just moving your money around doesn't let you entirely evade taxes.
- cutemonster 6y ago
  Moving your revenue to a place with low taxes, lets you escape taxes > doesn't let you entirely evade taxes "Entirely"? It's not about evading taxes to 100%, but maybe 90% (not sure about the numbers). Also, the taxes get paid in a different country, doesn't benefit the people in, say, the US.
  - hnick 6y ago
    Simply using licensing fees to shift revenue is a simple trick but countries can legislate against it if they want. Example: https://www.kwm.com/en/au/knowledge/insights/australian-software-distributor-liable-for-withholding-tax-on-offshore-payments-20140212 https://www.kwm.com/en/au/knowledge/insights/australian-soft... In that example they found that the 'licensing fee' was a royalty meaning there is a 30% withholding depending on double tax treaties and rates between the two locations. Which for a zero tax foreign licensor would mean a 30% local tax on however much you send overseas.
    - cutemonster 6y ago
      Thanks, interesting example. I wonder how much the company saved on avoiding taxes in that way, until it didn't work any more. (Didn't see any numbers, having had a look at the linked page) I wonder if there's any table of all different methods companies use, to avoid taxes, and how much they typically save, and what could be ways to stop it Maybe could be helpful for lawmakers > required to pay 30% withholding tax That's quite a lot is it? Compared to company taxes. Seems like a strong incentive to stop cheating
      - hnick 6y ago
        Company taxes are also 30% over here typically, flat rate. It is quite a lot I think, for small businesses at least. They don't have economies of scale or fancy setups and owners will pay a tax on profits then income taxes for themselves (I think dividends can work around this with franking credits), it can hurt margins, not to mention compliance overheads for GST etc.

by wokkel 6y ago

solveit 6y ago

How does the other entity get out of taxes? If the answer is offshore tax havens, I agree that they're a problem, but domestic tax policy isn't the greatest lever for fixing this. But in general, just moving your money around doesn't let you entirely evade taxes.

cutemonster 6y ago
Moving your revenue to a place with low taxes, lets you escape taxes > doesn't let you entirely evade taxes "Entirely"? It's not about evading taxes to 100%, but maybe 90% (not sure about the numbers). Also, the taxes get paid in a different country, doesn't benefit the people in, say, the US.
- hnick 6y ago
  Simply using licensing fees to shift revenue is a simple trick but countries can legislate against it if they want. Example: https://www.kwm.com/en/au/knowledge/insights/australian-software-distributor-liable-for-withholding-tax-on-offshore-payments-20140212 https://www.kwm.com/en/au/knowledge/insights/australian-soft... In that example they found that the 'licensing fee' was a royalty meaning there is a 30% withholding depending on double tax treaties and rates between the two locations. Which for a zero tax foreign licensor would mean a 30% local tax on however much you send overseas.
  - cutemonster 6y ago
    Thanks, interesting example. I wonder how much the company saved on avoiding taxes in that way, until it didn't work any more. (Didn't see any numbers, having had a look at the linked page) I wonder if there's any table of all different methods companies use, to avoid taxes, and how much they typically save, and what could be ways to stop it Maybe could be helpful for lawmakers > required to pay 30% withholding tax That's quite a lot is it? Compared to company taxes. Seems like a strong incentive to stop cheating
    - hnick 6y ago
      Company taxes are also 30% over here typically, flat rate. It is quite a lot I think, for small businesses at least. They don't have economies of scale or fancy setups and owners will pay a tax on profits then income taxes for themselves (I think dividends can work around this with franking credits), it can hurt margins, not to mention compliance overheads for GST etc.