[dailo10]

There are multiple aspects at play here:

1. Fiduciary responsibility - Corporations have a financial objective to minimize their tax burden, in order to maximize shareholder value. Sure.

2. Legality. There are numerous loopholes that are technically legal. And it's remarkable how much gray area there is when it comes to tax law. This is why you have the big teams of lawyers to figure out how to best game the system and avoid taxation, while just barely staying on the legal side of the line.

3. Legal Consequences. And if they go to far and get caught breaking the law? No big deal. They can go to court and then settle. Sure, there will be a fine, but they knew that was a risk.

4. Jurisdictions and Multinationals. Countries can only make laws that take effect within their borders. But MNCs operate across multiple countries, and can effectively play jurisdictions off against one another.

5. Spirit of the Law. While lawyers may argue what they're doing is technically legal, it is certainly against the spirit of the law. The law did not intend for corporations to shift all the profits from where they are made to low tax haven jurisdictions.

Governments are trying to address these issues, as corporations will be doing their best to stay one step ahead of the law. This is why the OECD has started the BEPS movement to come up with a coordinated response. One of their initial goals is to create some transparency, so they can at least get some visibility into what's going on. That seems like a good first step.

[developer2]

1. This is why capitalism built on "everything to maximize revenue for shareholders" is broken. Maximize revenue by generating more revenue, not by evading - or avoiding - taxes. If your company cannot remain afloat without dodging taxes, your business is not viable and does not deserve to exist.

2. The fact that you can "game the system" and remain squarely in the "legal" column makes the system broken.

3. Considering that fines are typically a fraction of what they should be, again the system is broken. Consequences should threaten the ability of a company to remain afloat, not be a slap on the wrist that doesn't even dent the bottom line.

4. You perform business in a country? Pay the taxes for all revenue factually originating in that country, not technically based on loopholes. If revenue originates from a customer/client/subsidiary in country X, you pay taxes in country X; you don't get to have customers in country X, but pretend like your business in country Y really took their money. Simple as that.

5. Exactly this. The fact that it is not intended, but is possible, makes the system broken.

Governments need to crack down on this sort of thing - HARD. The laws need to be rewritten from the ground up, but this will never happen because of another ugly facet of capitalism - at least in the US - lobbying. Also, self-interested politicians - how many of the politicians who could rewrite the laws have their own businesses that are avoiding taxes which implies a conflict of interest? Large companies that threaten to abandon doing business because state X or country X makes them pay tax? Farewell, we don't need you. This also applies to incentives, which some states are famous for. Individual states should not be competing for companies' business by reducing taxes or offering reimbursement programs.

[FollowSteph3]

Although great in theory how do you collect the pay the taxes for revenues collected in every country? A big business like Google can handle this but a smaller business will be crushed by it. Imagine a 1-2 person. Imagine a 1-2 person business selling online. Are they capable of paying taxes in a hundred countries? That burden alone would crush them. Try managing the tax rules for 100 countries as a 1-2 person shop. Good luck.

Ignoring that who will enforce it? If say a Russian owes taxes to the US how will they get the payment if the person doesn't want to pay?

But even then why should the taxes go to that country? All the infrastructure to allow your business to operate in the first place is in your country. The roads to get your employees to work etc.

That being said if your going to open factories or offices in another country than I believe you should be required to have a corporation in that country and pay taxes in that country for the revenues those entities make. But even that is challenging. It's honestly a very hard issue to resolve...

[FollowSteph3]

Also just to add to the complexity what happens for online websites. If you're from Australia and visit Google and the server is in the US and you click on an ad, the a houldnt the revenue, and hence taxes, be paid in the US because the server is located in the US. That's were the revenue was made. Assuming that's true then wherever you host the server is where you should be taxed. And in that case certain countries would be more beneficial to put your hosting servers in.

Basically all I'm saying is that it's not an easy problem and there are no easy and obvious answers :(

[MR4D]

I up-voted this because it highlights the legal issue so clearly to any of us techies.

Clearly the tax has to be paid somewhere, and I'll bet every jurisdiction has an argument why theirs is the right place to collect it. No wonder tax or trade treaties take so long to negotiate.

[mhenr18]

> Try managing the tax rules for 100 countries as a 1-2 person shop. Good luck.

The same justification could be made for accepting international credit card payments online, but companies like Stripe are happy to provide you with a service that takes away the hassle. If they can do that, then I'd say they would be perfectly willing to solve the local tax problem for you.

[yummyfajitas]

* You perform business in a country? Pay the taxes for all revenue factually originating in that country, not technically based on loopholes. If revenue originates from a customer/client/subsidiary in country X, you pay taxes in country X; you don't get to have customers in country X, but pretend like your business in country Y really took their money. Simple as that.*

You seem to be wanting a consumption tax rather than an income tax. This is known by economists to be the least distortionary tax, for the exact reason you argue.

It's also highly criticized by left wing types since it taxes people in proportion to the benefit they receive from society rather than what they produce for society. Typically poor people consume more than they produce, while rich people produce more than they consume.

Large companies that threaten to abandon doing business because state X or country X makes them pay tax? Farewell, we don't need you.

Except that very often, we do. Just look at Austin - as a result of their little feud with Uber/Lyft, they are now providing below sub-developing world level services.

[MichaelGG]

1. This "fiduciary responsibility" is trotted out and misunderstood. There's not a requirement to do things that might be harmful for the company. People say this responsibility like it's some law that companies must do any and everything that shows any possibility of short-term profit. But it'd be totally fine for a company to decide to do something else. Justification can be as simple as "This increases trust towards our brand".

But the rest of the points are accurate. They are doing nothing illegal and it's stupid to expect people to pay more tax than they owe. If countries want them to pay more tax, then change the law. It's silly this is even a discussion.

[edc117]

The truly frustrating part to the average taxpayer is the one-sidedness of how the law develops. I have politicians telling me that TTP is vital and needs to pass, so we get strong protections for IP, more revenue for these american companies, blah blah. But when it comes to making laws to tax those same companies, well there's lots of issues, it's very complex, we need to study it for a long while.

It's very clear who lawmakers are looking out for.

[newjersey]

> The truly frustrating part to the average taxpayer is the one-sidedness of how the law develops. I have politicians telling me that TTP is vital and needs to pass, so we get strong protections for IP, more revenue for these american companies, blah blah. But when it comes to making laws to tax those same companies, well there's lots of issues, it's very complex, we need to study it for a long while.

Just to clarify, did you mean TPP, TTIP, both, or something else?

https://en.wikipedia.org/wiki/Trans-Pacific_Partnership

https://en.wikipedia.org/wiki/Transatlantic_Trade_and_Invest...

[ionised]

They'e both terrible attempts to enrich the already entrenched even further.

[cortesoft]

Point #1 is silly.... Minimizing your tax burden does not always translate to maximizing shareholder value. Decision makers at corporations can (and should) take everything into account when deciding how to maximize shareholder value; the PR costs of evading taxes, the potential costs of settlements, etc.

I have never heard of a successful shareholder lawsuit over corporate leadership failing their fiduciary responsibility because they didn't find all the loopholes for limiting their tax liability.

[khuey]

Most of the problem is defining "where [the profits] are made".