So basically global companies have unfair advantages over domestic via tax loopholes?

Politics and religion
1

It sounds to me like all these companies who claim global sales pay virtually no corporate tax, whereas (I’m guessing) a fully domestic company with no overseas concerns pays the nominal tax rate. If this is true, it is a huge unfair competitive trade issue that drastically hurts U.S. only companies. It’s also one of the reasons we have to keep borrowing money to pay our bills. The majority of the taxes being paid are citizens via paycheck and sales tax… well and companies that don’t try to fudge their way around tax liability.

For example, if there was a company making smartphones and tablets that did the entirety of their business in the U.S. would pay 35% tax rate, whereas Apple, pays only .01% by funneling it’s funds to Bermuda, then Ireland, then Netherlands (or some such mix).

So could a company take this to the next level and file unfair trade practices against Apple since there is no way a domestic only company could compete when right ff the bat there’s a 35% split in profit? Obviously we need to fix this so domestic only pays less and global companies pay more right?

2

Even large domestic companies generally pay much less than the corporate tax rate you’d expect for their revenue. Many find a way to pay no income tax at all.

But yes, multinationals have even more resources to avoid taxes. Everyone seems to have signed some imbecilic treaties, and unlike our signatures on merely political treaties, which we abrogate and withdraw from at will, apparently the tax treaties are beyond changing for some reason that no doubt has to do with wall street interests. But the various tax dodges used by these multinationals could easily be canceled with domestic legislation if we wanted to, and if we didn’t care about the international agreements.

3

Yup. Sick, isn’t it?

There needs to be international cooperation on this. (Note many of the tax havens in question, like Bermuda, are UK-controlled. Bloody government)

4

In Denmark, Maersk is one of the biggest companies, with over 60.000 employes. Its long been common knowledge that Maersk Mckinny Møller, when he ran the business himself, told each and every new danish government that either he got to pay a reduced tax rate, or he would take his company elsewhere. And it worked, and did so for MANY years. He brought a lot of jobs and money to Denmark, but it was still extortion.

5

For one, I don’t believe he would have done it. Second, that kind of demand should be made public, the company frozen and a full audit immediately initiated.

6

What are you talking about? This is how the world is run, anyone with a bit of education behind them knows it? The example Razagon gave is just the norm for many of our largest multinationals.

This is why ‘Democracy’ as in what we think of it as running the show is not actually working, and American democracy in particular with it’s hugely influential lobby and ‘monitization of democracy’ system is the pack leader in what our world really is, a corporate oligarchy.

You don’t become President or Prime Minister without the backing of those guys. That’s politics rule one.

7

Yeah the thing is every country thinks its them that is getting screwed when its all of us except those countries these global corps base their tax payments in, like Ireland or any other super low rate tax haven or haved schemes that allow them to by pass tax.

8

Arbitrage in general is something that has always benefited the rich much more than the poor. Modern finance just makes it much, much easier- provided you have the liquidity to do it. It’s not just companies, it’s individuals.

When companies can shop for tax rates, it can easily become a race to the bottom.

I do think it’s one of the drivers of income inequality in general, and it’s something that national governments have very limited sovereignity in enforcing, which is one reason why it’s a strong driver. That said, regulating it will lead to inefficiencies in the market, so it’s a really tricky and touchy area. Protectionism could solve the problem, but that brings in its own nasty problems.

9

I’m not a fan of Corporatism. Sorry.

Alstein - That’s why some companies are frosted over EU tax harmonisation plans, yea. It’s a good non-protectionist way of handling it.

10

LoL. You don’t have to be ‘a fan’ of it Starlight, it is just how the world works.

11

No, it’s the system you support. There’s a sharp difference. And it’s failing, badly, Capitalist.

12

I don’t know if anyone here is truly interested in knowing how this works. Our accounting people recommended this approach for upcoming projects but I wasn’t comfortable with the idea so we didn’t.

But here’s how it works:

You set up a shell company in two places: The Bahamas (or Bermuda) and say the Netherlands. Your American company makes a product but licenses it to a Netherlands shell company at a very tiny royalty. So technically, your product is being sold by say TechSoft Netherlands. The income from that, however, is then paid to another shell company in Bermuda.

The Netherlands has no tax on ROYALTIES and Bermuda has no tax on income and the two countries have the appropriate trade treaty. The money then stays in the Bermuda entity until you want to bring it over to the US (at which point it will be taxed).

However, you never need to bring it over because instead, in Bermuda, you invest the money in various mutual funds (last year 18% return). Meanwhile, in the United States, you fund everything via loans which can be borrowed (with proper collateral) at Libor plus 25 (which is currently at 0.63% annually + 0.25%).

Now, there are other combinations that work. You can do something similar in Ireland and Denmark. But the principle is the same.

13

Brad, that’s the “double Irish with a Dutch sandwich,” right?

14

Probably. I haven’t followed it in the news. I’m just going by what the accountants proposed on some of our upcoming projects since they are IP based. I just don’t like the idea of companies who benefit from being in the United States (i.e. owe their very existence to the luck of having their founders born here) skimping out on taxes like that. You don’t like the tax laws, then win elections. Don’t game the system (I’m not suggesting what they’re doing is illegal but come on, it’s just such a slap in the face to your fellow citizens).

15

Agreed. Hell, there’s plenty of effective ways for huge companies to structure their tax obligations without resorting to cheap tricks.

16

Which is why an international agreement on all this stuff would be a good way to make corporations and capitalism actually pay their way and give back to the societies they earn their profits from. But.

17

The question is how do you stop this from happening?

18

Our complicated tax code is one thing making it so easy for this stuff to happen. When the IRS goes to audit a large company, they’re presented with tens of thousands of pages of documents to try and unravel. For instance, I’ve heard GE tax pro’s pride themselves on having books so complicated no one outside the company could ever figure out what they mean.

American’s who want their HQ’s outside of the US should forfeit their ability to vote or influence politics. TO think that our nation’s largest defense contractor, Halliburton, run by mostly Americans who have massive influence on Washington and still vote in our elections… do not pay ANY corporate taxes through their company. They also don’t pay social security taxes to their employees (Americans) nor Medicare. A company like Halliburton should be viewed as a security threat to the United States since their allegiance is now to a foreign government and not the United States.

Tax the “movement” of money to shell companies and overseas subsidiaries that do not have comparable tax structures. So moving money to Japan to expand business there would not be taxed, but moving money to United Arab Emirates, Ireland, Cyprus, Netherlands, pretty much all Caribbean islands, Costa Rica, Monaco, Lichtenstein, Andorra, Luxembourg, Cook Islands, Switzerland, Gibraltar, Belize, Qatar, Brunei would have be taxed at a higher rate than corporate tax here in the U.S.

Lower American Corporate Tax rates by 5% and create a new trade agreement where all nations have the same tax rates towards corporations. Those countries who do not participate will have heavy taxes or be embargoed. I think we could count on Germany, France, Canada, Japan, Brazil, Mexico, Chile, New Zealand, Poland, Sweden, Finland, Denmark, & South Korea to go along with this. That should be enough economic muscle to get other countries to follow suit or have multi-national companies expunged from their borders since it would hurt their bottom line. The companies who refuse to play along will be supplemented by new companies who are based in a member state.

19

Put it on the same principle as VAT. If there’s an agreed rate of tax, which would be equal to the domestic rate…otherwise, the OTHER rate applies!

20

I don’t think you’d get those countries to go through with this TBH, and places like Bermuda will laugh at it, and embargoing is considered an act of aggression (sometimes justified)

The idea of requiring corporate entities to be headquarted in the US would be nice, but I suspect companies would still easily be able to play games around it.

I do think tax codes should be simplified in general- I’d even argue for abolition of corporate income tax and replacing with a corporate property tax. That would be unfair to some businesses though.