France, Germany, Italy, Spain seek to base taxes on digital giants' revenues (opens in new tab)

I don't know where you got that so many people in the EU rejoice at the defection of the UK. It is a sad state of affair that gets the rest if the EU sad and angry. I don't see what there is to rejoice about, although I'm sure that some will see it as a benefit in some narrow way.

Being an economic liberal, I always thought that this was one of the main advantages of the EU. Setup shop in one country and sell to the whole single market while encouraging beneficial tax competition. I do oppose special deals for specific companies though. Ireland, please stand up to the Brussels cartel!

Fun fact: There is no IKEA store in Luxembourg

And if Hell would freeze over every summer it'd be excellent : free airco if you just dig a hole in the ground.

The goal is to make it pointless to use shell companies to avoid paying taxes.

> I wish countries would give up on corporate taxes.

I really wish they won't. Right now the small companies pay corporate taxes just fine, it is the big ones that play all kinds of shell games to get out from under their obligations.

Much of the profit generated in the EU by these multinationals actually ends up largely untaxed in Bermuda/Cayman islands/... subsidiaries.

https://en.wikipedia.org/wiki/Double_Irish_arrangement

You generally can't operate a running business in EU or any other country out of the Caymans. You could have share holding companies registered there but to actually run a physical business, you have to actually have a company registered in the market (or come in as a purely imported product)

Ireland works simply because it is a member of the EU and any EU HQ business can operate anywhere else in EU.

I would argue that the benefits or difficulties of avoiding taxation are dependent on the rule of law in the states where business is actually done. If the USA or EU took a political decision not to permit such structures then they would disappear.

The USA and EU don't because the benefits to their political class have so far outweighed the problems caused by a lack of revenue, and these structures have developed and proliferated rather rapidly. Additionally the political structures required to create collaborative responses have been developed in response to different issues (the necessity of supporting development in Eastern Europe after the collapse of the wall), and the alignments necessary to operate a larger system in Europe are not yet in place.

I do believe that Brexit will facilitate this, but I think that the process will have to go further to include Macron's ideas on a single budget - a greatly expanded take and disperse for the EU. This will require a huge reform of the Commission. I invite everyone to try and engage with the commission in some process or other and then judge what kind of capability you are engaging with.

I hope that the EU will devolve the distribution of central budget items to locally accountable forums, possibly at the sub national level - perhaps six for a country like France, one for somewhere like Greece. Currently I fear that the favour networks that operate in the EU institutions would greatly distort and corrupt any large fiscal rebalancing.

The big issue is that it seems that several of the national level structures in the EU would creak in the face of this kind of new set-up. Spain and Belgium in particular, but even Italy could be pulled apart by the creation of subnational entities with revenue lines independent of the national entity. Also, what would the mechanism of accountability be ? I think that this should vary according to the tradition of the region, but what are the acceptable limits or bounds on this?

Without Brexit this is simply a non-starter, I think that the UK would have been much more compromised than any other EU state by the emergence of this kind of structure, and I think that the English part of the UK would have been a real problem in terms of subnational accountability - the sovereignty of the commons would have gone and I don't see that as politically possible in England (note the other nations are less touchy about that for some reason!)

Basic trick:

- Apple France is actually just a distributor for Apple Ireland

- Apple Ireland sells Apple France an iPhone at MSRP

- Apple France makes basically no profit because it sells "at cost"

- Apple Ireland books a profit for an iPhone sold in France

1.Have multiple subsidiaries of the same company in different countries.

2.Give intellectual property rights to one company in one country with low taxation like Ireland or a state like Maryland.

3. Make all the subsidiaries pay arbitrary patent-copyright-trademark rights to the company in Ireland-Maryland-Singapur so all the profits become zero in the different countries while transferring all those profits away.

It's been widely reported on by major news outlets over the years. Dutch Sandwitch (now defunct?) was one of them.

And the guy who helped set that up - and personally made it worse by making custom tax deals for several multinationals - is now the head of the EU commission !

This will get a lot worse before it gets better.

I don't think this is correct. It is more about case-law and the legal support system for companies in delaware. I do not believe the companies are taxed based on which state they are incorporated in. The exception is the franchise tax fee, which is a nominal amount even to a company with only six figures of revenue.

http://www.bendlawoffice.com/2011/08/01/reasons-to-incorpora...

If you have headquarters in California you pay tax here as well as a bit in Delaware

The reason to register in Delaware is because of business friendly courts there. I don't believe there is a tax advantage

California corporate law is much worse than that of Delaware. Corporations are taxed by every state where they have to register to do business. For every corporation with a California HQ, that certainly includes the Golden State.

Corporations, such as Microsoft, which are headquartered in states with nicer bodies of corporate law frequently choose to incorporate in their home state, such as Washington.

> At least 90% of the value created by Google, Facebook and Apple was created in California.

I'm trying not to be snarky but I need to say wtf.

FB & google don't make money from IP, they make money as service providers, connecting merchants on the advertisement hype train to our eyeballs.

They take money from local and transnational businesses, and present ads, aggregation and search services to individual, local, users.

How is this California related profits when I see ads for $smallbusiness in my french town? Because they host the servers there? Please. To be fair I'd concede Amazon may be different with regards to where the value they create resides but I'm sure you'll feel the same way I do when the tech giants step away from Silicon valley and it looses the sweet sweet techmonies.

This not about IP rights, corporate liberties or socialism, it's about realising when you're defending the fire that's roasting you. 'Cause google and fb don't give a F about US vs EU further than how they can leverage them to lower operating costs.

The problem with a person doing this style of tax avoidance is that the barrier to entrance is much higher than the gain.

Assuming general principals of US tax law, if you're already working as an independent contractor, you could legally set up a local company and an overseas company, have the local company bill the client, pay you a reasonable amount, and pay the overseas company the remainder for the use of its name (or whatever justification you like).

Your local company would have no net income, but may pay employer side taxes on your wages, and any minimum taxes on corporations in the local jurisdiction.

Your overseas company would have a net income, but you picked an overseas jurisdiction with low taxes, right?

You would have recognized income of the wages, and unrecognized capital gains in the overseas company. At such time as you take the money from the overseas company, that would be recognized as a capital gain.

At the end of the day, you have to run two companies, one in an unfamiliar jurisdiction, and you get to defer recognition of income and change the character of the income from normal income to capital gains. You may also have paid taxes to the overseas jurisdiction that I'm not sure qualifies for a foreign tax credit. It's a real gain, but it may not outweigh the costs.

If you're a direct employee of a company, it's also not an option, since you can't redirect your wages out of your recognized income.

No, the intent of the law is absolutely unmistakeable especially in tax-related domains. Bad-faith actors don't deserve the statutory crevices through which they divert their accounting. Fix the moral compass of their boards and officers or assign them a post-facto "we really don't like what you did there" penalty. Could be a fine, business restriction or mandatory supervision by the public authorities.

The notion that these companies should only be beholden to the strictest letter of the law is nonsensical.

Why do you think that law hasn't been fixed ...

>>Don't blame the companies for exploiting loopholes. Blame the law.

The companies may be acting legally, but the question is whether they are acting morally.

We generally expect that of people. Corporations are people, right?

The grandparent would be eligible to pay taxes at off-shore locations if he had any income generated at those off-shore locations. The IRS would treat that as foreign income and the first $100,800 of it might qualify for exclusion https://www.irs.gov/individuals/international-taxpayers/fore...

Yes - it must be this way round. If there is a clear level playing field then things will sort themselves out in the medium term. While there's a lot of nonsense and confusion bad outcomes will arise.

Who do you think helps create laws that have loopholes, and then heavily lobbies to maintain them.

So corporations are people only when it benefits them?

That's why so many corporations keep their money offshore and figure out creative ways to spend it without repatriating it.

At Google's level, transfer pricing is a negotiation game with tax authorities. Having that many employees based in Ireland helps Google's case for routing more revenue through a double-Irish arrangement and making profits disappear.

There are tons of financial firms that will set it up for you on a consulting basis. Here in the bay area, Duff & Phelps work with a lot of the big tech companies. Don't know of anyone who's automated the process or turned it into a SAAS product yet (for obvious reasons).

That would be tax evasion. Tax evasion is illegal. Tax avoidance is legal.

This is not legal advice. I am not your lawyer. Consult a qualified attorney in the appropriate jurisdiction.

Is this new ? USA split Rockefeller empire which was unbelievably huge too.

I run business in Finland and pay high taxes. Friction is not the taxes. If it were, I would have moved my business to Estonia long time ago, it's just few hours away. I could do it over internet in few hours and start within days.

There are different ways for countries compete as "business platforms". I'm not saying that some way is better than another, what I'm saying is that there are different strategies that can work.

High taxes in Nordic countries work as form of evolutionary pressure. They harm low-tech low education requirement jobs and businesses. They drive them to China and to the third world. They help high-tech companies and skilled workers, because taxes pay for great education, safety nets general well-being.

Within US different states have different strategies. High-tech hubs seem to tax more and provide more just like Nordic countries. Some states choose to compete with low regulation low pay jobs against Mexico, China and India. Good luck with that. https://en.wikipedia.org/wiki/State_tax_levels_in_the_United...

Taxation may not be natural, but it is inherent in a society.

To explain, you give some of your kill to the tribe. You share with your family, to provide for them. In return, you get a tribe or family.

The independent person without obligation to return to the social good is largely a myth and, if done, would mean extinction.

Additionally, I don't mind paying my taxes. I do mind how my taxes are spent. They are the cost of living in society.

The government is not the market, the people are the market. If the government is in the business of selling the public to multinational corporations, something is truly wrong.

Which infrastructure? What infrastructure in France, Germany, Italy, or Spain, which is used by Google to reach their customers, is built and/or maintained by the governments of those countries?

No, their courts are guided by treaty to expose citizens to action on the patents of other countries, just as courts in other countries are guided by those same treaties to expose theirs.

As far as I understand, all treaties of this sort are bilateral.

So what I'm hearing is that if you operate a website that is accessible to any person in France you should get a bill from the French government since you benefited from their infrastructure.

And Netflix should probably be getting billed from Verizon, Comcast, AT&T, L3, WOW, etc. too since they can only access their customers through their infrastructure.

> just want to get their grubby hand in those poor companies

I find it fascinating that such emotive language is used. Taxation is pretty much the least "grubby" hand a government has (military: give us all your stuff, legislature: do all our work for us, we will tell you what we think adequate compensation is); and these companies are not only not poor, they are among the richest on the planet and they got almost all of that wealth this century.

But why won't anyone think of those poor, starving, unemployed, multi billion dollar international corporations? :P

Google is not responsible for the corrupt and decadent governments in countries they don't operate out of; they're hardly responsible for it where they do operate. When China manipulates the markets so much that they collapse, and when Sweden spends its way into poverty, it will not be Google's fault, nor their responsibility to pay for it.