US blocks crackdown on tax avoidance by net firms like Google and Amazon

http://www.guardian.co.uk/business/2013/jul/14/us-tax-avoidance-google-amazon

by iProject • 13 years ago

62 88 13 years ago

guardian.co.uk

danmaz745• 13 years ago

Let's see how this pans out. Maybe this time the UK will not play for the US team, given the outrage there about this issue, but I'm afraid that without a common EU position about this the US will be able to use their usual divide et impera tactics.

patrickaljord16• 13 years ago

I hope the US wins. I'd rather this money stays with Google and Amazon than it goes to the EU states. Why? Because the more profit Google and Amazon make, the more value they produce for society as in more work, better technology, better life etc. What does the state do with tax money? It spends it badly and ends up creating more debt. So, it creates the opposite of value, negative value or debt, and crony capitalism because everyone wants to influence the way this money is redistributed. To give you an idea of how bad it is here, people work until the 28th of July for the state here in France because of all the taxes, if you have a company it can be even worse.

EU states are already the most taxed ones in the world and they have the biggest national debts, it's clear here that the way to fix this is not "more tax" but "less spending". For the last 60 years, spending has been skyrocketing and taxes are at the highest and are killing jobs, innovations and whole economies. Why keep spending even more by making taxes even higher than they are, this is ludicrous. It's time to admit maybe we should start spending less, not more taxes, this isn't working and hasn't worked for the last 60 years.

phpnode2• 13 years ago

Your post is a tirade against taxation in general, it's not pertinent to the point at hand.

Obviously (most) governments want to avoid a situation where a foreign entity is strong enough to destroy any local competitor and on top of that, contribute nothing back to the economy in terms of tax revenue. It's completely ridiculous.

If you deliver goods and services in a country, you should expect to pay the appropriate taxes in that country. It is completely unjust that Google et al can do this kind of thing, it puts local companies at a massive disadvantage.

danmaz745• 13 years ago

The thing here is not about "more taxes" or "less taxes". It is about WHO pays the taxes, however high or low they are. Giving a big competitive advantage to these (mostly US) corporations isn't going to lower your taxes in France; on the contrary, you don't just have to pay more taxes (or create more debt).

weavejester4• 13 years ago

The idea that private industry is always more efficient than the public sector is, at best, an over simplification. One need look no further than healthcare to find an example where the public sector is vastly more efficient than a market of competing, private sector companies.

The state also spends money on things that would not be funded any other way. Pure-scientific research, such as CERN. Policing for people too poor to hire private security services. The idea that these things are "the opposite of value" is ludicrous.

Also, if you're not going to tax Google and Amazon, then that gives large international companies who can dodge tax a huge advantage over smaller national companies who cannot. That undermines the underlying principle of capitalism: competition. Either you tax no companies, or all of them - any halfway position is worse than either.

Mordor• 13 years ago

Perhaps, but isn't it better for companies like Google and Amazon to have competitors than a tax free advantage? Trickle down economics isn't a solution.

flyinRyan6• 13 years ago

Because the more profit Google and Amazon make, the more value they produce for society as in more work, better technology, better life etc.

Yea, because trickle down economics works fantastic: http://www.nytimes.com/2007/04/12/business/12scene.html?_r=0

disputin2• 13 years ago

I thought we already saw? There were some token payments, a fraction of the amount owed, sufficient to placate the majority not bothering with the details. David Cameron is weak and serves the Bullingdon types - BBC news this morning: http://www.bbc.co.uk/news/business-23273448 This is described as economic recovery.

beedogs2• 13 years ago

So, let me see if I understand this: the US is going to bat for the big software companies who don't want to pay taxes in other countries, and yet I, an expat American, am expected to file an income tax return with the IRS every single year for my foreign earnings, which may be subject to dual-taxation if I make "too much."

What a crock of shit.

dantheman• 13 years ago

Well I agree with you that the foreign earnings things completely crazy. Using one bad policy to argue against a good one is just as bad. This is a good move on the part of the US, what we also need is the ability to move corporate profit from foreign subsidiaries back into the US without facing tax.

ezequiel-garzon• 13 years ago

The moment you're trading in another country you must honor their laws and taxes. If the costs become too high and the margins too low you can always leave, or skip said country in the first place.

disputin2• 13 years ago

"This is a good move on the part of the US" - not in terms of foreign relations.

cmdkeen2• 13 years ago

You're missing a step though - which is that these corporations do everything possible to avoid paying the due tax on those foreign profits. I'm all in favour of getting to repatriate profits then - but taking the profits through a tax haven needs to be stopped first.

Take Google in the UK for instance. They don't "sell" anything in the UK according to their tax returns, so claim every deal is actually finalised through Ireland and therefore subject to lower Irish taxes. So their UK tax is minimal despite making large profits from there.

It provides a massive competitive advantage to companies large enough to full off these kind of operations. Google have possibly been caught out actually selling in the UK, but in most cases their conduct is legal - which is why the law needs changing.

If you want to make money in France, the UK, Germany or wherever you should pay local taxes to those countries. It would be grand if those situations could be simplified and made accessible for digital goods (which are more likely to be sold cross border).

foobarbazqux4• 13 years ago

It's not dual taxation. The IRS deducts the foreign tax paid. So if the foreign country has a higher tax rate, you will never pay US tax. I'm not saying it's a great policy, but it isn't as bad as it sounds. You can always renounce your US citizenship - think of it as a maintenance fee. Yes, draconian.

rorrr2• 13 years ago

That's not true. In Switzerland there's a two year line of people waiting to renounce their US citizenships, because they get double taxed.

gsb2• 13 years ago

There are also different treatments of capital gains, and phantom gains which arise only from shifts in exchange rates. For anyone of any means beyond their salary alone these both can lead to paying more combined tax to both countries than either would require individually. Thats dual taxation in my book.

Phantom gains have been particularly bad in the last decade with the falling US dollar. In Australia, house prices in my area about doubled between 2002 and 2012, but with the change in exchange rates, the IRS calculates the gain as if the price had more than quadrupled!

flyinRyan6• 13 years ago

So if the foreign country has a higher tax rate, you will never pay US tax.

If I live and work completely in a foreign country why would I ever pay US income tax under any circumstances at all? The US is one of two countries on this planet that expect people who's only tie is being a citizen (perhaps never having set foot there and not speaking the language) to file income tax and potentially pay a portion of their income.

Even worse, the US expects you to file with them the way you file in your country of residence. File join in the country you live in? You're expected to file joint with the US then. Which means your foreign spouse who has no ties to the US of any kind (outside of being married to a citizen) will potentially have to pay US tax on their income.

And worst of all, the tax is mostly an annoyance. The true problem is that you have to report every account you have signing power over. That includes pension fund. That includes your companies bank accounts that you manage (which is why an American will never hold such a position in e.g. Switzerland). Lots of banks also won't take Americans on as customers. They don't get enough to warrant dealing with US bureaucracy to report information on these accounts.

You can always renounce your US citizenship

Which is what many people are doing. The US is one of the few nations on earth that people give up citizenship from.

hkmurakami2• 13 years ago

"too much" being $80k last I checked, where you have to pay US taxes on any amount exceeding the $80k. (or wait, it might be that you pay the difference between your US tax rate and the foreign tax rate...)

flyinRyan6• 13 years ago

You're correct. If you're married and file joint I think that number is $130k. So if a dual income family makes $180 that means paying tax, a portion of which was made by someone who isn't and was never American.

Even the Mafia was never so cheeky.

rdouble• 13 years ago

"too much" being $80k

The foreign tax exclusion for a single person is $97,600 in 2013.

timbrooke• 13 years ago

Wow. How low can you go? How corrupt can you get?

forgottenpaswrd• 13 years ago

It talks about France. France is a machine of expending money right now, better said, of wasting money.

I am living in France this Summer, a very rich and beautiful country with a hole in the pocket. French people love to life well, and someone else to pay the bills, the Germans, the rich, whoever but not them.

Mr Hollande only want to do one thing, to raise taxes. But there is never enough money when you don't expend wisely.

camus2• 13 years ago

You should go back to where ever you come from or wherever it is better for you to live.

Sarkozy ruined France so yes now everbody needs to pay for it.

And the problem is not taxes,i'm happy to pay taxes. The problem is people like French liberals ( liberals are "right-wing" in France ) that gives hand outs to their friends or vote laws without financing their them , and then all they have left is blaming the poor,the homeless,the public workers,the artists or the muslims for France demise...

French people love to life well, and someone else to pay the bills,

Whatever. Or maybe you prefer US way of life, where it is me/myself/I and there is next to 0 solidarity.

patrickaljord16• 13 years ago

Sarkozy is not libertarian at all if that's what you mean by "libéral". He's just as socialist as the left when it comes to the economy. To give you an idea, Sarkozy created more than 50 taxes during his mandate [1] and didn't cut on spending while creating more social aid programs (RSA). Only in France would he be considered a libertarian or "néo-libéral" as they say just because he limited the maximum amount of tax one could pay to 50% [2]. A 50% tax makes you a libertarian, Ayn Rand disciple in France, isn't that insanity? You still have to work until the 28th of July for the State in France.

1: http://www.contrepoints.org/2012/03/07/72137-lahurissante-ac...

2: http://tempsreel.nouvelobs.com//file/318975.pdf

paulhauggis• 13 years ago

I know people that have this attitude in the US. TONS of tax dollars are wasted on government-funded programs that just don't work.

"Whatever. Or maybe you prefer US way of life, where it is me/myself/I and there is next to 0 solidarity."

I would rather live in a country like this than one that takes upwards of 70% of my money and when I ask for some accountability, I get people telling me to leave.

adventured2• 13 years ago

If by solidarity you mean the state slavery of collectivism, then you're absolutely right, Americans are often very individualistic.

If you by solidarity you mean there's no sense of nation, then you're just making it all up as you go along.

However, trying to pigeonhole the most diverse country in world history on such a simplistic basis, is impossible. Only someone that has never spent much time in the countless cultures of America, would make such a statement.

flyinRyan6• 13 years ago

The problem is that Hollande is very left wing, yet France already had one of the best income equality ratios in the western world.

It might have been better if France got someone very conservative like Obama and the US got someone from the true left like Hollande (though he wouldn't get a single thing done in the US, it would be fun to watch people like Rush Limbaugh literally die on air).

Gmo• 13 years ago

What a full load of BS.

mtgx• 13 years ago

If you make a certain amount of money in a certain country, then you should pay that country's taxes. Pretty simple concept, no?

This whole "let's reroute all our profits from all the countries into this country where the taxes are close to zero" is utter BS. If you don't like its taxes, don't do business in that country. Simple. If the government thinks they're losing businesses with high taxes, then maybe they will lower them - or maybe not. It's their and their citizens' prerogative.

vetinari• 13 years ago

Putting my accounting hat on.

It is simple concept, but its implementation is not.

What does "make a certain amount of money in a certain country" mean? EBT? (Earnings before taxes?) Well, we have this revenue from this country, we are buying intercompany services (without market subsitute)[1], so let's price them in the same amount as the revenues... And bam, there you have profit of 0 and all earnings exported to tax haven.

The entire point is, that is is not easy to define, what should be taxed. Sales or revenues are not profit. You still have to provide whatever you sold and the costs are tax deductible. For all companies, not just the big ones.

[1] It is called transfer pricing and it is checked by tax authorities.

Accounting hat off

patrickaljord16• 13 years ago

It's their and their citizens' prerogative.

No it's not. Our states are not pure democracies. If a majority of people decide by referendum that we should kill all Arabs, it would not be their "prerogative". That's because we are constitutional republics before being democracies. That is to say we all have to abide by what our constitutions say no matter what the majority say. And last time I checked, our constitution protects private and individual property. Therefor, a 75% tax or even 50% like we have in France goes against the protection of private property in our constitution and it was rejected by the supreme court here. Any taxation goes against the very basis of our constitutions and therefor should not be treated lightly or abused. Or do you think that if a majority decides it's ok to tax people 100% then that's ok because it's "their prerogative"? How about if a majority decide women shouldn't vote anymore either, would it be their prerogative too? The answer is no. Google and Amazon already pay lots of taxes in the US, if they had to pay in every single country, they'd have much less money to invest in all those products we enjoy while the government would just create more debt.

dspillett• 13 years ago

I'm not sure why people are particularly surprised by this. Most of the large international companies that make most out of tax avoidance have large US bases. While the US economy does lose some to the schemes they use (like all the cash Apple has sat outside the US, to give a commonly quoted example) it loses less than the competing economies overall so agreeing to crack down on tax avoidance could result in a net loss. Even if it didn't, those companies can also afford to buy the best lobbyists in town who in turn can buy the relevant number of votes to threaten politicians who don't toe the line.

hkmurakami2• 13 years ago

and when these US based companies eventually bring back those profits to the US (whether it be at the full current rate - unlikely - or some negotiated one time discount rate), the lower the foreign tax burden the greater the US government gains.

flexie• 13 years ago

The US IT sector is heavily subsidized. Giving Apple, Google, Facebook etc. billion dollar subsidies at home would spur trade wars. So instead the US uses its never failing ability to play European countries against eachother and its influence over smaller jurisdictions like Ireland, Netherlands, Switzerland, Guernsey, Jersey, Bahamas, Isle of Man, British Virgin Islands etc to make sure that large US corporations' foreign income - which wouldn't be taxed in the US anyways - can be kept untaxed.

adventured2• 13 years ago

Other countries and foreign companies can't and don't take advantage of legal global tax dodging jurisdictions and schemes?

I wasn't aware it was exclusive to the US. I also wasn't aware German / French / British etc. IT firms don't dodge global taxes at every opportunity.

cletus• 13 years ago

I'm no fan of the overreach of the US government that includes, but is not limited to:

- requiring all citizens and non-citizens to declare all foreign bank accounts (FBAR) including signatory authorities on trusts and companies;

- unclear rules on the aforementioned. Do you have to declare retirement accounts? Are they taxed? Nobody really knows. It's clear the only value in FBAR is in non-compliance if the government decides to prosecute you;

- requiring non-resident citizens and residents to file tax returns and pay taxes if their income is sufficiently high and either the income is in a country that has no double taxation treaty with the US or it does and its tax rate is simply lower, even for those who haven't stepped foot in the US in 20+ years. I actually know many US citizens who don't do this and it could be a real problem for them at some point.

All of this while allowing the systematic avoidance of tax by US companies on a massive scale. US companies need to report their foreign income. An individual would have to pay US taxes on foreign income. Why shouldn't a company do the same? Why can't it pay the difference between US taxes and whatever taxes they've already paid as is standard in all double taxation treaty cases?

But the move here by the French is blatantly political and narrowly targeted at US companies. You'll note the language is around the "digital economy". Well, why should such reform be limited to only Internet companies, which--surprise, surprise--are primarily US companies?

That's actually what the US (rightfully IMHO) is objecting to.

All of this is simply window dressing however. The real problem with the system is complexity. Think of tax loopholes as bugs. The more complex software, the more bugs there are and the harder it is to eradicate them. Tax law is no different.

Unfortunately there is no political appetite for true reform as every complicated exception is the result of shoring up some constituency or pork barreling or other "corruption" so as much as we need to stop, say, poring money into corn subsidies, it just won't happen for the foreseeable future.

Borders are disappearing. We already see the nonsensical effects of this such as attempts to limit content distribution to geographical regions. At some point we're simply going to have a global tax regime and, dare I say it, world government, scary as that will probably be.

culshaw• 13 years ago

So basically: "They pay taxes to us, fuck you and yours"

znowi• 13 years ago

Actually, in the same manner the US initiated a massive FUD campaign against the "evil" (non-US) forces at the ITU summit last year in Dubai. Behind the facade of "save the Internet", the agenda was to save the Internet giants like Google and keep the US control over the net. In light of NSA revelations, it has even more sinister overtones.

US blocks crackdown on tax avoidance by net firms like Google and Amazon

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