In the ZEW model, U.S. firms needed a return of around 7.6% for an investment to be profitable under pre-reform tax law, compared to an EU average of 6%, and 5.7% in low-tax Ireland.
.. Call it the Get Germany to Pay for American Jobs Act. Don’t be surprised if Germany, France and other high-tax countries follow the U.S. down the corporate Laffer Curve.
2017 Was Bad for Facebook. 2018 Will Be Worse.
The tech giant’s carefree years of unregulated, untaxed growth are coming to an end.
Facebook is projected to boost sales by 46 percent and double net income, but make no mistake: It had a terrible year. Despite its financial performance, the social media giant is facing a reckoning in 2018 as regulators close in on several fronts.
The main issue cuts to the core of the company itself: Rather than “building global community,” as founder Mark Zuckerberg sees Facebook’s mission, it is “ripping apart the social fabric.”
Those are the words of Chamath Palihapitiya, the company’s former vice president of user growth. He doesn’t allow his kids to use Facebook because he doesn’t want them to become slaves to “short-term, dopamine-driven feedback loops.”
Palihapitya’s criticism echoes that of Facebook’s first president, Sean Parker: “It literally changes your relationship with society, with each other … God only knows what it’s doing to our children’s brains.”
.. Facebook, like Google, books almost all its non-U.S. revenue in Ireland with its low corporate tax rate — and pays most of it to a tax haven for the use of intellectual property rights. The practice resulted in a 10.1 percent effective tax rate for Facebook in the third quarter of 2017.
.. On Tuesday, Facebook announced that it will start booking revenue from large ad sales in the countries they occur, not Ireland.
How Corporations and the Wealthy Avoid Taxes (and How to Stop Them)
The United States loses, according to my estimates, close to $70 billion a year in tax revenue due to the shifting of corporate profits to tax havens. That’s close to 20 percent of the corporate tax revenue that is collected each year. This is legal.
Meanwhile, an estimated $8.7 trillion, 11.5 percent of the entire world’s G.D.P., is held offshore by ultrawealthy households in a handful of tax shelters, and most of it isn’t being reported to the relevant tax authorities. This is… not so legal.
.. In 2015, $15.5 billion in profits made their way to Google Ireland Holdings in Bermuda even though Google employs only a handful of people there... 63 percent of all the profits made outside of the United States by American multinationals are now reported in six low- or zero-tax countries:
- the Netherlands,
- Bermuda,
- Luxembourg,
- Ireland,
- Singapore and
- Switzerland.
.. After learning Irish authorities were going to close loopholes it had used, Apple asked a Bermuda-based law firm, Appleby, to design a similar tax shelter on the English Channel island of JerseyAppleby duly obliged, and Jersey became the new home of the (previously Irish) companies Apple Sales International and Apple Operations International... In 2015, the Swiss Leaks revealed the owners of bank accounts at HSBC Switzerland, and in 2016 the Panama Papers revealed those of the shell companies created by the Panamanian law firm Mossack Fonseca. These showed that 50 percent of the wealth held in tax havens belongs to households with more than $50 million in net wealth.. In the Paradise Papers, we see that these are not only Russian oligarchs or Belgian dentists who use tax havens, but rich Americans too... For a long time, the bulk of it was held in Switzerland, but a fast-growing fraction is now in Hong Kong, Singapore and other emerging havens.The most compelling way to do this would be to create comprehensive registries recording the true individual owners of real estate and financial securities, including equities, bonds and mutual fund shares... One common objection to financial registries is that they would impinge on privacy. Yet countries have maintained property records for land and real estate for decades... comprehensive registries would make it possible to not only reduce tax evasion, but also curb money laundering, monitor international capital flows, fight the financing of terrorism and better measure inequality.
Tax Experts Check Out Arguments From Apple Over Ruling
The European Union wants to crack down on the ways that companies minimize their tax bills in Europe, especially in Ireland. In the 1980s, Ireland began modeling itself after Bermuda, a well-known corporate tax haven, said Khadija Sharife, a forensic financial researcher
.. Ireland’s corporate tax rate is 12.5 percent, compared with 35 percent in the United States.
.. The European Commission makes clear, and tax experts agree, that Ireland let Apple determine how much of the income that it generated in the country would be recognized and taxed there.
The rest of Apple’s income that was not recognized and taxed in Ireland could be put in other corporate structures that were effectively stateless. That meant the money in those structures was not taxable anywhere — not even in Ireland — and thus not subject to Ireland’s 12.5 percent tax rate.
While other companies have also had the right to negotiate with Ireland, the commission considers these sorts of loopholes a no-no.
.. Mr. Kleinbard said the commission is not replacing Ireland’s tax law with a view of what the commission thinks should happen. It is simply asking Ireland to enforce the tax rate that it has and close loopholes that allow companies like Apple not to recognize large portions of the income they generate in Ireland and pay even less.
.. It’s true the majority of Apple’s profits are taxed in the United States.
But Ms. De Simone said Apple has also kept more than $200 billion in accumulated profits offshore. That money could someday be brought home and taxed, but Apple is in control of whether or not that actually happens.
..
People would do well to also remember the total amount of government revenue being lost to low-cost tax deals, he said.
“If we allow companies like Apple to pick its tax haven — to place a few thousand employees in a place for a lower tax rate — we do add a few jobs,” he said. “But more widely, the taxes given up globally could be used for public service, worker training and infrastructure repair.”