Death and taxes. You can’t escape them. But corporations can and do.
It’s common knowledge by now that big multinational companies exploit the inconsistencies between national tax regimes to secure the lowest possible tax rate for their profits. This is legal and deeply frustrating. In the wake of a popular backlash against profit-shifting practices, the UK government has begun to take some remedial actions. At the end of last week, Google agreed to pay the UK treasurer £130 million ($185 million) in back taxes, covering the period since 2005, and to also pay higher taxes in the future. UK Chancellor George Osborne hailed it as a “major success.” The numbers disagree.
Obviously, Apple isn’t the only one dodging taxes through shady deals. We haven’t forgotten about you, Google.
Resourceful entities always privilege of complex legislation. Sometimes competence force them to make use of those privileges. So says Google.
Parties should deny legislators on service the privilege of privacy. That’s a joke
Should be focus in a more leveled future. Every Entity -individual or societal- contributing to the sponsorship of a GoodWill Hosting State, and not asking for a match to light on the pyre, Whoever falls down.
Who DOESN’T go out of their way to dodge taxes? Individuals everywhere are always looking for ways to write things off when it comes to tax time. Why should corporations be any different? If you ran a business, would YOU exploit those loopholes, or would you actually pay more taxes than you had to?
Edited 2016-01-25 23:19 UTC
“had to”. That’s the key. Now, if I could avoid taxes by declaring myself a marine animal, I’m not sure I would feel okay doing that.
then you are an unusual person. the huge majority of the people i know, would declare themselves marine animals in a blink of the eye if that would help them to avoid taxes.
True, I am unusual, but it just seems wrong. Not that I’m saying that there is some moral obligation to pay taxes and that the companies are screwing everyone else over. No , not that.
I’m saying that the taxonomical and accounting contortions they use to accomplish low taxes is wrong. Just as it would be wrong to classify myself as a marine animal, simply because the law says that any mammal spending an hour a day in water is one. Science and common sense says that I am not.
It makes no sense to say that Google, Apple, etc are Irish companies. They aren’t. They were started in the US, and basically run the company out of the US.
It also makes no sense that almost every company that says its based in America is a Delaware corporation, again for tax purposes.
Cultures have different approaches to taxes. In some cultures, the majority of people may not want to pay taxes, may complain a lot, may vote for political parties who promise to lower taxes, but ultimately, pay taxes as expected.
Then there are some cultures where people go out of their way to avoid paying taxes, where to do so is seen as something to be proud of as “beating the system”. I’m guessing you come from such a culture (Romania?)
Compare the attitudes towards tax in Norway and Greece, for example.
However, it seems that whatever the country or culture, rich people and big businesses see it as almost a religious duty to avoid paying tax.
Corporations not paying their taxes means we are paying more tax than we have to. Furthermore, legal treatment of individuals compared to corporations when it comes to tax avoidance and evasion is different as well. Don’t for any reason dare suggest they’re equal in any way.
Corporations don’t pay taxes. They never have, and they never will. They can’t, because every dollar you tax a corporation ultimately comes from an individual somewhere…
Taxes corporations pay always results in one of more the following:
1. Increased pricing (paid by consumers)
2. Lower stock valuation (paid by stock holders)
3. Lower wages (paid by workers)
Someone (usually many, many someones) always end up with less money as a result of corporate taxes.
Individuals pay taxes, not corporations.
Every single dollar is paid somewhere along the line by an individual, and ironically the way corporate tax is structured lets the fat cats who control all the corporate capital decide who ends up paying the bill at the end of the day. It is literally the stupidest way the government can raise revenue – because it puts the ultimate control of levying the tax burden in the very hands of the people everyone thinks should be paying the damn tax in the first place.
Do you really think they decide for it to be them?
Also, your assertion is completely backwards. If Apple decided tomorrow to repatriate the entirety of their offshore capital and pay the tax bill on it, what do you think would happen to their stock price?
It would drop. A lot. A whole bunch of people would lose a whole bunch of money. They would write those loses off at the end of the year and the capital gains taxes the government would have made from them (most at higher rates than the corporate tax) instead gets wiped away and replaced by sizable deductions.
It always balances out somewhere, and it always ends up being individuals who foot the bill.
This isn’t a liberal vs conservative argument either. Tax the shit out of rich people if you want to. Just tax people. Because if you tax Bill Gates or Tim Cook, Bill Gates or Tim Cook have to pay their taxes. But if you think Tim Cook ends up footing Apple’s tax burden your crazy. He can just get with the evil finance geniuses, turn some financial dials here and there and poof – everyone else but him and his buddies take the hit.
As I said elsewhere, only if there is a monopoly or low competition environment – which is what we have and which is why they don’t pay tax. If there were enough competitors, a competitor that does not pass on the tax burden will increase market share.
The solution isn’t to lower taxes but to make it hard to escape competition.
…and lose profits. Ultimately a balance will be reached, because at zero profit (and no hope of increasing it) a corporation is no longer viable. As long as a company is profitable, it is not paying taxes. This is completely self evident, I don’t understand how anyone doesn’t get this.
So no, competition doesn’t make any difference at all. Sure, it may spread the tax burden around more, which is good, but it is still people paying the tax in the end – it always is. No amount of mental gymnastics will change that. The only exception is for overseas profits, for those some other country’s people are footing part of the bill. But its still people.
Why not just skip to the chase and tax people directly? That is all Im saying. At least that way the government can actually pin them down directly, instead of giving the super rich control of where the tax burden ultimately falls. There would be no reason for corporations to play games with overseas profits any more, letting investors get at it (and paying capital gains on it) and simplifying the heck out of the whole mess.
Corporate taxes are stupid.
I can’t really believe people call me naive. Corporations will find some way of making governments pay them with taxpayer money for being “job creators” and other such wishful thinking.
Exactly. People do that.
Corporations don’t. They earn money for people. They are proxies for their owners/share holders. Tax them.
It is way more effective.
Edited 2016-01-28 17:16 UTC
Hi,
Let me see if I’ve got this right…
Government creates laws, saying “a company must do whatever is in the best interests of its shareholders”, and then creates a tax system with huge gaping holes.
A company does everything it can to comply with those laws.
The Government complains that the tax system they created themselves has huge gaping holes.
The company that did everything it can to comply with those laws is the bad guy, and not the politicians that created the huge gaping holes?
– Brendan
Who said the politicians who created the holes were not bad guys too? You ask any “leftist”* and they’ll say the holes were created by corrupt politicians who bent to the lobbyist demands.
You’re inventing a contradiction where none exist.
* Even just in the US **sense of the word
** non
Also, which law would this be?
Hi,
It’s the same in most countries; because it’s boring old common sense that any sane person would find obvious (given that it’s not fundamentally different to a partnership, where each partner/shareholder own part of the company/business).
While I’m not that familiar with UK laws, I think you’ll find the relevant information detailing the relationship between shareholders and a company’s directors detailed (scattered across multiple places) within “Companies Act 2006”.
For something more concrete; see “Chapter 2, section 172, Duty to promote the success of the company”.
– Brendan
Edited 2016-01-26 15:54 UTC
I am also not familiar with UK law, but you perfectly pointed me in the right direction, even the S172. Now Wikipedia has a very nice summary: https://en.wikipedia.org/wiki/Companies_Act_2006#Directors
of which this is the relevant part:
Traditional common law notions of corporate benefit have been swept away, and the new emphasis is on corporate social responsibility. The seven codified duties are as follows:
S172 to promote the success of the company – directors must continue to act in a way that benefits the shareholders as a whole, but there is now an additional list of non-exhaustive factors to which the directors must have regard. This was one of the most controversial aspects of the new legislation at the drafting stage. These factors are:
1. the long term consequences of decisions
2. the interests of employees
3. the need to foster the company’s business relationships with suppliers, customers and others
4. the impact on the community and the environment
5. the desire to maintain a reputation for high standards of business conduct
6. the need to act fairly as between members
I would say that tax-evasion, even when allowed by law, would conflict with several of the above pieces of law.
Profit is not the only responsibility between directors and shareholders anymore.
Looks to me like they didn’t do everything but actually broke some (or at least bended them a lot)
You would expect companies to minimise costs. It’s the law in some countries like the UK that directors must act to maximise profits for shareholders.
But the rules, laws. They’re set by politicians.
After 20years of watching this issue in the news I’ve never seen any politician take serious action to fix the loopholes.
It’s not like they’re hard to find.
Conclusion – they don’t want to fix the holes. They benefit from the holes too.
That is the second time I see that statement here. Please tell me which law that would be because it sounds bogus. For example, that would mean that directors have to cut their salary because that would maximise profits for shareholders.
It’s called self interest. They don’t want to close the loopholes they themselves put there so they could use them, now do they?
The real problem is the tax system not loopholes. Politicians like to act tough by imposing high taxes on ‘rich’ corporations despite knowing that the taxes are totally counter-productive. The taxes are simply shifted to consumers in the form of higher prices or taken from returns to shareholders (mostly pension funds). This hurts ordinary people. The only people who benefit are lawyers and accountants who create tax minimisation schemes.
Edited 2016-01-26 10:34 UTC
Only in a monopoly or low competition environment. With enough competition, corporations can’t afford to offload their tax burden onto consumers because they would lose them to the competition who refrains from doing so.
Taxes on corporations means that if a corporation must pass that tax burden onto consumers through higher prices, it actually opens up the market with opportunities for new, maybe more efficient, sellers to come along with a better operation.
Conversely, if you didn’t tax corporations, there is no indication ever that corporations will lower their prices accordingly. We see that they definitely do NOT do that for prices that depend on exchange rates or interest rates or international market rates. They just see an opportunity for profit. The corporations that are initially more efficient will grow really big and take over the competition. They keep large cash reserves and we find they’re no longer “successful” because they’re beholden to the market – they’re only successful because they have money. Consumers lose out.
Corporations and the people that run/worship them behave psychopathically. It is ridiculous to believe they’ll start caring about consumers if only they weren’t taxed so much – especially when history shows otherwise.
You have an incredibly naive idea of businesses. Most sectors operate as unofficial cartels that avoid competition at all costs. All 13 of the coffee shops near me charge exactly the same price (within 5%). That isn’t a coincidence. They all know that discounting would be mutual suicide.
Prices are usually determined by using a multiplier factor that covers all inputs and allows a set profit margin. If the inputs (raw materials, wages, exchange rate, shipping etc) change prices change due to elasticity of demand. Airfares and fuel drop when the oil price is low and rise when the price is high.
Businesses are run by people. They sell goods and services to make money. For the most part businesses are actually pretty ethical.
Whatever you say, guy.
There was a documentary in the UK that aired last week – with an interesting take on such shenanigans. The BBC “encourages” for the purposes of a documentary, a Welsh town to use IP, offshore accounts, and apparently something called a Dutch sandwich amongst other chicanery to copy the corporate big boys and see how far they got/get in the eyes of the HMRC (UK’s tax office).
Programme link (probably UK viewable only, or use a proxy)
http://www.bbc.co.uk/programmes/b06ygl19
Earlier links describing the endeavour:
http://www.theregister.co.uk/2015/11/13/welsh_town_moves_offshore_b…
http://www.bbc.co.uk/news/uk-wales-mid-wales-34800354
Well, with rare exceptions, they don’t pay taxes in the long run. A tax doesn’t have magic pixie dust attached to it. It’s an expense like any other. Corporations are not end consumers: they are conduits for products and productivity. Corporate expenses (whether taxes or not) must be paid either by the owners, the workers, or the customers, and it’s most likely going to be one or both of the latter two. Sure, various (in)elasticities can change this, but overall that’s what’s going to happen.
Implicit in this article is the idea that profits (and high profits) are bad. This is nonsense on stilts. Sure, sometimes profits end up as superyachts, but most profits don’t. They end up as R&D, additional expansion and hiring, or savings for a rainy day, all of which are good things.
If there must be high taxes, I’d rather see them on individuals than businesses.
What was that you were saying about nonsense? Because you seem to be very good at spouting it as opposed to spotting it. I’ll give you a hint: individuals have to be able to afford products else there are no products.
Good catch. What I should have said was, “If there must be taxes, I’d rather there be high taxes on high income or high net worth individuals.”
High taxes on businesses are high taxes on the poor, because these taxes tend to raise prices and/or lower wages across the board, and do not distinguish between rich and poor. If we must have taxes, let’s not tax the engines of production. Let’s tax high net worth and high income individuals directly.
Seems like your grudge should be against the Irish, who created the tax haven, and not the companies that are using it.
You’re English, aren’t you?
No, sorry.
The REAL Heaven is the actual host State
Cayman Islands are Heaven only to the resource leakers.
As for the rest of the BRIC countries…
http://www.theguardian.com/business/2016/jan/25/mps-launch-corporat…
Though if anything will come of it, I doubt it.