The European Commission is investigating Luxembourg’s tax arrangements for Amazon and McDonald’s
.. Multinational corporations are especially worried about losing access to Cayman Island-style tax rates in European countries where they can also get rule of law, political stability and an educated professional class of attorneys and consultants.
.. In the 1950s, corporations contributed about $3 out of every $10 in federal revenue. Today they contribute $1 out of every $10
.. The National Science Foundation helped fund some of the initial work of Google’s founders. Apple’s consumer products still rely on technology that originated in federally funded research.
.. Preferential tax treatment, either through special rates or deferred due dates, creates a huge financial incentive for American companies to build businesses and create jobs abroad rather than in the United States.
.. This puts small businesses at a competitive disadvantage as they end up shouldering more of the burden of paying for education, infrastructure, research, the military and everything else our nation relies on to succeed.
How Apple—and the Rest of Silicon Valley—Avoids the Tax Man
By selling intellectual property rights to sock-puppet subsidiaries, tech giants shift profits to low-tax nations like Ireland. But that’s just a start. Sublicense the IP to a second Irish unit that books global sales, have entity B pay onerous royalties back to A (wiping out its earnings), then show that A is headquartered in the Caribbean, making its royalty income untaxable in Ireland.
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.”
Hidden assets, hidden costs
These mostly concerned the alleged smuggling of $65 million out of Argentina on behalf of its President, Cristina Fernández de Kirchner – hardly startling news if true, given the country and the person but the documents also included what really mattered: full corporate information on the 123 name-plate-only (“shell”) companies that were used to zig-zag the money surreptitiously around the world, all of them formed by a Panamanian law firm called Mossack Fonseca.
.. Not even the ultra-formidable billionaire Paul Singer, who had bought up heavily discounted Argentine debt .. could do anything about the $65 million sitting tantalizingly close to him in Nevada – but now all the data was revealed (too late for Singer because Argentina’s new President, Mauricio Macri, also a Mossack Fonseca client as it happens, had already decided to settle and pay him off, along with all the other hold-out claimants).
.. This was the beginning of a flood of 11.5 million documents containing the records of the formation and transactions of 214,000 nameplate companies, including full documentation of their initiators (passport data page scans, etc), all of whom are, or are serving, tax avoiders – in ways legal, but unethical and duplicitous
.. this is an extremely important book – this decade’s most important rather than this year’s
.. because it offers an entirely new perspective on the greatest question of the age: why has income distribution in the more developed economies become increasingly unequal pari passu with the advance of globalization?
.. disregarding the overwhelming evidence that much of that consists of the transfer of income from lower-income people in higher-income countries to higher-income people in lower-income countries.
.. we now know that globalization has caused rising inequality in quite another way than the transfer of higher-paying manufacturing jobs and all other such phenomena
.. Mossack Fonseca’s 214,000 offshore companies alone (and there are many other such shell companies, formed by many other law firms) handled not millions or billions but trillions of dollars in their totality
.. When the less affluent must pay their payroll taxes and income taxes in full, while the more affluent with offshore companies do not pay their own taxes, the total effect of the taxation system is regressive
.. Once we recognize the sheer magnitude of “offshored” income flows, and once we take into account the strongly regressive effects of supposedly progressive taxation systems, the phenomenon of rising inequality in affluent societies may not need much additional explaining – and it hardly matters if those were tax-avoidance or tax-evasion trillions.
.. Much less surprising is the abundance of Mossack Fonseca clients in the leadership of UEFA and FIFA: because football earnings are so very large it stands to reason that they should be offshored rather than wasted in paying taxes.
.. If Putin wants someone’s Moscow mega-mansion, for example, he need only let the owner know whether he wants it as it is, or cleared of furniture, and the same is true of anything else in Russia: his power is limited only by his own considerable restraint.
.. it is the outright crooks, drug-traffickers and such, who are more honest fiscally at least, because most would dearly love to pay income taxes on their earnings, if only they could do so without being arrested, thereby acquiring legal wealth they could enjoy and show off
.. the same authorities that routinely identify, track and remotely kill individual terrorists in distant countries, which they occasionally bomb for one reason or another, profess themselves impotent before the blithely meretricious officials of micro-countries that contain little else but banks that conduct no local business, whose only raison d’être is very plainly to facilitate avoidance and collude in evasion.
.. only the German tax authorities seem ready to buy it from the thieves without making a fuss, thereby recovering billions for a few million