I wonder how these "office raids" would work for remote first companies that don't have much of an office presence and with little or no physical documents and everything being stored in the cloud somewhere.
That's basically what happened when they tried (twice I think ?) to raid Uber offices in France, their boss pressed a kill switch and everything went down in seconds. It completely blocked the investigation.
Afterward Uber helped Macron campaign who then ordered National Financial Prosecutor's office to "stop bothering them" so I don't think anything new happened since.
Edit: Some sources in below replies for infos on both. Turn out I'm wrong for 2nd part it started earlier than his campaign.
Not a lawyer, but let’s say the cops were searching my house. If I threw the keys to my unbreakable safe out the window, such that they could never be found, I doubt a judge would care for the distinction. That the evidence exists but cannot be accessed is still going to find you in contempt.
You are aware of the fact that tax evasion means these companies are freeloading on the tax money the rest of us (including: you) are paying? Especially in the case of uber which is essentially using public infrastructure to make their money having them pay taxes should be normal.
I agree that customer data needs to be protected, but it is bold to assume that is the case at all with these powerful corporate entities: if they lie to the state when filing taxes what makes you believe they are ernest when it comes to the protection of their users privacy?
Maybe it is a weird ideology I am holding here, but the more powerful an entity is, the more transparent it should become — nowaday we got this completely reversed with poor people being naked in front of the state and big corps literally fooling everyone.
Edit: some also seem to think the state is the behemoth that jumps on the poor little companies here. To that I just have to think about the account of the German public prosecutor Bäumler-Hösl (of wirecard fame) where she told about a raid on a bank where she and 4 collegues were opposed by 130 (!) company lawyers.
In general this is not what they do. What they do is read the tax code carefully and structure their operations in such a way as to minimize taxes, e.g. because tax is paid on "profits" (revenues minus expenses) so they shift more expenses into jurisdictions with high tax rates etc., causing "profits" to go down in those jurisdictions and up somewhere else.
Then they don't pay any taxes in the jurisdictions with higher tax rates and politicians go on TV and complain about the companies following the laws that the politicians enacted. Because if they actually fixed the laws, the taxes would be paid based on the extent to which the company does business in that jurisdiction, and then companies could only avoid taxes by not doing business there (costing the country jobs) or, for taxes associated with local sales, by raising prices there. Neither of which the politicians actually want to do, so instead they pass laws that allow companies to avoid taxes and then complain about it when the companies do it.
Thinking the systems that a company has are so sensitive that the company is basically above the law is the insane thing.
It is just a company--a group of people granted certain rights. They have databases...fancy filing cabinets. Just because the company is famous shouldn't preclude their filing cabinets from being searched (presuming legal processes are used and not abused).
> They have databases...fancy filing cabinets. Just because the company is famous shouldn't preclude their filing cabinets from being searched (presuming legal processes are used and not abused).
That analogy doesn't work, because the "filing cabinets" are actually sitting somewhere else, possibly in another country/continent. It's not obvious that authorities in one country has authority over documents stored in another country.
I and many others think the government should have 0 business in my filing cabinet. That difference in world view might be what makes this topic more complex than you seem to think.
The problem is deeper than that. When a physical space is raided, its scope is obvious. Digital spaces don't have that characteristic. There can always be hidden indexes.
Yeah it's hard to see how any French official would have authority to conduct searches 10 meters beyond French borders, let alone over all of Uber's computers located in dozens of other countries.
Hard to see how a company can imagine it can do business in a country and not follow that country’s record keeping laws and be subject to criminal and civil statutes in that country.
If a company is doing business here, the actual location of file is irrelevant.
Also when the government is really motivated, he can arrested the founders or executives directly (Pavel Durov). Which is what they should do to Netflix execs if they are doing business illegally.
> Afterward Uber helped Macron campaign who then ordered National Financial Prosecutor's office to "stop bothering them" so I don't think anything new happened since.
Why should it be illegal? Isn't it akin to "right to remain silent"? Why the need to present any information to police unless it is asked by court. Assuming that they didn't delete the data, just moved it to somewhere safe where it couldn't directly be taken away.
We had a raid in one of my previous company due to copyright violation due to a user uploaded content. Authorities came in to take in all the codebase, reports and even employee devices. Basically once given court permission, police would try to collect all the unrelated things which could be taken in the permission, so that they could extort you later.
Denying access to data that could still be specifically subpoenaed isn't destruction of evidence, it's a normal security measure. They still have the warrant to search everything in the office, but not the right to use those computers to access uber's entire worldwide infrastructure.
I have no idea what french law says about it but I think it's morally fine and don't care that uber did it.
Because the government already has a warrant to obtain this evidence(they can't raid the office otherwise) and you as the company pushing this button are failing to turn over that evidence.
Presumably the French police aren't randomly deciding on a Tuesday for no reason to check the company for proof of them being tax cheats without some court somewhere requesting it, but even if they were, we're talking about a company here, not a person. A person has the right to remain silent, it doesn't make sense for a company to have that same right.
And the 2nd half just reads like pure corruption to me, they paid off some politician (who just so happens to wield the most power in the whole country) to pressure him to get them to stop their investigation into their illegal acts? In what universe could that 2nd sentence be construed as anything other than slimy, corrupt behavior?
> And the 2nd half just reads like pure corruption to me
Why did you conclude that?
There were some user uploaded pirated content in our platform. As far as I know, some media company won approval by some judge for a raid to discover the extent of piracy. It's just in the police rulebook to get everything during the raid where there could be pirated content, including employees laptops.
I'd imagine you'd get done for not being tax compliant. At least in Ireland you have to able to show all tax accounting for the last four years on request by Revenue. If you can't produce this and all the files 'have gone missing' or 'we can't find the cloud keys' I'd would expect to be fined out of existence and ordered to cease trading immediately. So that would be worse that getting dragged through the courts while you pay lawyers to figure out to mitigate any fines or sentences passed down. I think it can even result in prison time for the CEO and other company officers.
I'd expect it to something along the lines of "sorry Mario, but the princess is in a different castle" bit of shell game. "no no mister Revenue man, we have that information you want, but it's in a different office".
This is why companies are required to have registered addresses. As far as the law is considered, that address is where all your records can be accessed, and requested from.
If the state turns up at that address, and you tell them they’re at the wrong address, then the directors start becoming liable for fraudulent behaviour.
There is only so much you can play whack a mole -- virtually nobody 'cheats' the taxman. There are plenty of legal loopholes etc. if you are smart enough to use them.
If you aren't -- you'll find the enforcement end of the tax authorities in ANY country are pretty efficient. Even in third world countries where many services are falling down the tax authorities will be a well oiled machine as the stability of the entire country rests on the government even corrupt ones to collect taxes.
Accounting audits are done by the FISC agency in France. But those are just audits, not raids. This raid was ordered by a judge, which can probably be seized by FISC if they believe that the documents they have are falsified.
There was an interview with Anne Brorhilker, who used to be state's attorney and was investigating in CumEx cases. She stated that it is a huge pain, because you always need to ask the foreign agencies for assistance, which you sometimes simply won't get.
It was a good listen. At first she needed to go empty handed, but then teamed up with competent tech guys. After that the smug faces stating, that the amount of data would be to much to handle for her little department quickly turned into concerned faces.
That sounds fascinating, do you happen to have a link? (I'm getting a lot of German results, which unfortunately I don't have the fluency to parse to find the 'right' one.)
that's fine! I can handle translating an individual page (or interview) if I've high confidence it's the right/relevant one, just parsing search results is harder cross-language (for me, anyway).
Holy crap that’s an interesting interview. Genuinely hilarious comment from that CIO as well. I knew nothing about this case before. Thanks for sharing.
Sounds like it would make it easier for law enforcement. They no longer need a warrant against/for the company they're investigating, just the place where their data is stored. Get the warrant, raid the place and grab the drives, then continue the investigation. Done the right way, the company under investigation wouldn't even notice it.
Isn't most data in the cloud heavily distributed and broken into shards across many racks and drives and such? And encrypted so is useless outside of the custom block storage system employed by the cloud provider?
They would need to decrypt and assemble the shards to get usable data out.
I have no clue how they would even know which drives out the tens of thousands to grab, and they would also have other customer's data on them.
That is why countries are increasingly demanding (and mandating) those data (of citizens and business done there or that involves that nation or its citizens) to be stored inside their borders.
Completely for show since they even make press releases about it.
And its sad to see the atrocious quality of the BBC article. Even high school students learn that a journalistic piece, should make sure it touches the Five Ws of good journalism...
First the data is stored in another country. Second are they really going to raid and take the drives at an AWS data center that has other customer’s information? How will they know which drive to take?
Plus you can engage in some jurisdiction arbitrage where all the documents pertaining to country A is stored in country B, and all the documents pertaining to country B is stored in country A.
> Second are they really going to raid and take the drives at an AWS data center that has other customer’s information?
You can also ask AWS to produce the files/documents for you.
Data stored in another country: are their reciprocal prosecution agreements with that country?
Raiding AWS: call Amazon, provide subpoena, Amazon can either give access to the account or provide copies of data. This would only allow access to non-customer encrypted data.
I played with encryption schemes and obfuscation pretty heavily for a long time, but at the end of the day companies operate within the legal frameworks of the countries they reside in. If you don’t cooperate, you could end up in jail anyway.
I think the conclusion I’ve come to is that you have to play by the rules. If you don’t like them, is it really worth falling on the sword for a corporate entity?
It depends on the type of business. In the EU, VAT registered companies are usually mandated to have a physical location and local representative within the country of operation. So you can be remote all you want, as long as your company and fiscal representative can be reached at a physical location.
A homeless person wouldn’t qualify as they don’t have a fixed address which is mandatory.
Ultimately, if you really have bad intentions, you find a way. It’s a question of risk and responsibility if you want to put yourself in such a position or not.
Actually, in many countries, homeless people have IDs with their last address on. Having a home and having an ID with an address on it are two different things.
I don't know how it works in other countries, but in the US you likely still need to provide a real address for many purposes (tax, immigration if applicable, etc)
The police could just find the correct targets and raid their home instead.
I have a virtualmailbox.com address - all my banks, the IRS, state voting commission and USCIS (immigration authorities) are all perfectly fine with it.
Can't say for sure. I opened all my bank accounts while still having a proper residential address, but after relocating to another country changed the address to a virtual one, no one said a word.
If everything is synchronised to third party could storage an "office raid" can be as easy as getting a court order telling the cloud provider to make a snapshot of everything stored available to the police.
Is there a product allowing for client-side encrypted mounts? Or just use a SAAS outside of the country that doesn't allow for exporting any data under any circumstances?
The whole point (or at least the main point) of the tax paperwork is to be able to produce them to tax investigators.
If you don't want to share anything, then it's easier not to do the accounting. Which I guess is severally illegal globally.
Being unable/unwilling to produce mandatory records is fraud. Technical measures to be unable to produce records (e.g. offshore and encrypted archival) are evidence of criminal intent and possibly separate crimes.
So why did every company in the world start auto-deleting emails ~10 years ago? I don't believe many people were sued for fraud. These days cloud services have auto-delete based on time functionality?
It's called "object lifecycle management", because I guess fraud was too catchy.
If you can get access to someone's laptop with SSO login access to the cloud storage (or their email inbox and Slack messages), then you have what you need.
How does that work if it's a cloud system and you're denied access because the IT admin from another continent locked you out? Are you going to keep the executive around as a hostage in hopes of getting them to release the files?
It doesn’t. Especially with multinationals, and doubly so as crypto gains adoption. Hence why the governments of the world are in a panic. Decentralization is a huge threat to bureaucracy since their tools of intimidation and control are less effective.
Multinationals yes, crypto not really. The problems with crypto are just an extension of the existing "war on drugs" that has never really succeeded at anything besides justifying why lots of tax money should be spent murdering citizens.
The authorities asks for access to these online documents? Similarly to how they ask to access to physical documents (they don't break down doors and break locks on file cabinets). If the personel of the company does not disclose some of the online documents, and these documents come up later (e.g. because they are referenced in some of the documents that did get disclosed), the people who did it get charged with tampering with an tax investigation.
What do you think "the cloud" is? I'm reminded of an old meme, "the cloud is just someone else's computer". They could raid a data center and seize machines. They could also subpoena data they are looking for.
It resulted in another company essentially being shut down, and suing for their data back. Crazy. There has to be a better way of doing that digitally (I assume there is, these days, and we won't see something like this again).
I wasn’t thinking about that at all and don’t think it would -
I was mentioning how things have moved to the cloud these days, and what the implications are for innocent unrelated parties’ data, given that the cloud involves this overlap of data on one device.
I mean, that would be way easier for the government agencies, no? Just send a subpoena to the service providers, they hand over all the data and you're done?
People with guns forcibly going through your things with threat of prison time tends to erase desire for revenue. See international business climate in China.
Them not paying taxes where I live means they can stay out till they do. Why should I have to compete with multinationals that don't play by the rules?
I expect my polkticians not to let themselves be dazzled by the complexity of their tax schemes and tax them the same amount they would if I sold that service here.
Around ~2012 we were chilling on the terrace of a fancy office in the brisk morning (after a quick server migration in the datacenter on the ground floor, which of course turned into an all-nighter) as people were coming in to work, and then suddenly the folks coming in all looked the same, greenish uniform, some had SMGs, oh well.
We worked for a small company, so we knew that they're here for the big company that does credit card transactions, but it was both surprising and ... absolutely uneventful, they didn't even talk to us. (As we were leaving we didn't even run into them - at least I don't recall any interaction.)
Later the sysadmins of the big company had amazing stories about how the tax authorities wanted copies of every hard drive. And when they told them that, sure, sure, but things are on a RAID and without the config and the card it'll be useless. They didn't care of course :)
If it’s predictable, they can plan for it. Don’t do tax fraud => no raids. I would say that some businesses just make a risk evaluation mistake and end up being raided.
China is a little more arbitrary and political, that makes it less predictable and bad for business.
Dutch are extremely business friendly with streamlined simple bureaucracy but they won't tolerate tax evasion. The correct approach would be to negotiate with the tax service.
As a non-European, it seems like these raids happen regularly to large companies' offices in Europe (mostly US companies). Maybe some Europeans can chime in and answer something that's been bothering me: Does this happen to smaller companies, too? Is it a serious problem to getting work done, not knowing if regulators are going to shut you down and rifle through your filing cabinets?
Getting raided can happen to companies of any size, Mullvad comes to mind as an example of a company that's small, European and got raided, but it is incredibly rare. It's hard to overstate how exceptional it is, you need to either be on the police radar with a serious issue, or breaking the tax law considerably, or etc. I think the main reason you see this happen to a lot of American companies is that they expand to Europe, but try to do business the same way they did back home. Both the legal landscape and the moral landscape wrt it are very different in Europe, and trying to willingly evade taxes for example is tended to with a very heavy hand. If I'm not mistaken, that's what's happened to Netflix here: they already got caught evading taxes once, and now there's a suspicion that they're doing it again/still.
Large multinational companies are accustomed to openly breaking the law and getting away with it in the USA; when they try to do the same in Europe they are very surprised when the law actually comes after them.
They also raid anyone else they don't like, such as people who run Tor exit nodes... but random small businesses are not in that group.
Maybe this explains why the US is out ahead in GDP, income, and is doing much better pre and post covid than Europe.
It's not so much breaking laws, but unnecessary restrictions and harassment by Europeans states.
The US is business friendly. It's industry friendly. We don't needlessly harass the business of sovereign individuals, and the state apparatus isn't being used as an excuse as to exert power or influence over the population. Not to the same paternalistic extent of Europe.
In Europe the liberal state apparatus that replaced the monarchies are acting an awful lot like the monarchies.
You call a tax fraud investigation "needlessly harassing the business of sovereign individuals?"
You're right, the U.S. is very business and industry friendly, which explains why the American people have been getting poorer and poorer while corporations and their shareholders get richer and richer.
The Average American is getting richer and richer, especially compared to European wage stagnation. I don’t think non-Americans understand how rich middle class americans are.
Americans have been getting richer and richer according to most recent studies. At the same time, other socialist countries are getting, on average, poorer. I think you may be confusing social inequality with overall wealth.
As an American surrounded by Superfund sites I would like some of these unnecessary restrictions and harassment by the state. The US is so beholden to private interests we can't even repair the roads or mandate healthcare without making it into a market.
A raid is a lot of work and only happens when you know you find something.
For 99,9% of companies, you get audited every 5—25 years by getting a visit from your local tax authority.
Remember: Small/medium companies have comparable companies and you can easily spot the tax dodgers. Or tax dodging is unofficially tolerated to some degree — think restaurants only accepting cash.
Most companies are not as blatantly illegal as Uber..
> Last year, French media outlet La Lettre reported that until 2021, Netflix in France minimised its tax payments by declaring its turnover generated in France to the Netherlands.
> investigators are trying to determine whether Netflix continued to attempt to minimise its profits after 2021.
Wasn't Uber or some other US company found doing something similar? First they were found to be in violation of some law/dodging taxes, said they'd fix it and later found to not have done anything about it? Is that behavior perhaps more accepted in the US than Europe?
Well no that's not really what happens, what happens is that legally the french entity is just a service provider for the irish HQ. They pretend it's a simple marketing agency and that the real value is provided by the irish entity
Doesn't matter - you can't make any judgement without knowing these numbers. They may have actually paid a higher tax rate than previously - we don't know.
Funny how it works, they lose money everywhere but one of the smallest country they operate in banks 50% of their worldwide revenues, it probably is just a coincidence that this is a tax heaven... we just don't know I guess
The French branch made 160k of profit while the Irish branch made more than all the other EU countries combined
FYI: france is the second market for airbnb after the US... do you really think they would even bother if they did make 160k there when they make 300m+ per year globally ? Do you really think their second market nets them < 0.1% of their total net income ? Do you really think the most touristic country in the world in absolute numbers brings 160k euros per year to airbnb ?
I hope so. And that's not only USA-copanies phenomenon. I worked for a french company in Montreal which payed close to zero tax amount even though they are doing more than OK financially world-wide, including Canada.
All spending should be taxed instead of income. Income is too easy to move and hide. Spending tax could be unified framework encompassing all financial activity. If you purchase anything, labor, imports, energy, stock, politicians, you should be taxed.
Spending is the moment when the money shows its ugly head and does harm.
I don't think so. Rich people buy vastly more. Not just food, shelter and entertainment but also real estate, entire companies and financial instruments. They'd end up paying vastly more tax.
Correct, and it could be implemented as a power law formula that makes it impossible for the super rich to avoid tax (since they are the only ones that can spend a lot). It also aligns incentives with environmentalism and reducing waste and consumption. And poorer people are automatically exempted from tax since the power law formula parameters be set to slowly ramp up.
This is also easily accomplished now that almost all payments are happening digitally, assigned to a taxpayer ID#. We can easily replace a W-2 or 1099 with total spending instead of taxing working.
Of course, this should also be paired with similarly designed land value and estate taxes to disincentivize hoarding.
So my effective tax rate on consumption is indexed on my ability to hide my assets?
Maybe my household LLC should buy all my groceries while I work for the LLC which employs me as the sole contractor and live in the house that I rent from the LLC which I am the sole owner of. For major purchases, I can hire a low-income person to do the purchase and then sell the item to me, or maybe they lease it to me.
I'm not a tax lawyer but it's pretty easy to see the many loopholes in alternative tax proposals.
>So my effective tax rate on consumption is indexed on my ability to hide my assets?
Where are you getting this from? Sales tax has nothing to do with one's assets. Also, land value taxes make hiding assets moot, since all real assets have to be stored on land. Of course, copyright protections would need to be reformed to be for far shorter durations of time.
>Maybe my household LLC should buy all my groceries while I work for the LLC which employs me as the sole contractor and live in the house that I rent from the LLC which I am the sole owner of.
Why should LLC's be exempt from the tax?
>For major purchases, I can hire a low-income person to do the purchase and then sell the item to me,
How does this help? You are still purchasing the item. If you are referring to purchasing it with cash and committing tax evasion, the same is possible with income tax today.
>or maybe they lease it to me.
Renting something is still considered a sale. You get charged sales tax at hotels. Renting apartments is not usually subject to sales tax, but that is a policy choice.
Ownership can be tracked. You're tax rate can be proportional to all of your assets along the ownership tree (tax already paid by the branches on what they own can be deducted).
You can of course "own" things informally but then you don't get any support from courts when the paper owner decides you really own nothing.
Purchase tax would work like reverse VAT. Companies could be awarded tax credits for their sales (not 100% though) and pay tax on their purchases. This would be harder to evade and additionally incentivise companies to do more with less which might be good for environmental transition.
Why not 100%? How is that even supposed to work in low-margin markets like construction, where the profit is 100x less than the costs, so even 1% tax would erase it? But any markets really, this makes innovation and business so risky that I'd probably close down my IT company too.
...or you can just use a VAT, which are also paid at purchase. Tech companies have high margins and low expenses, so if the point is to tax tech companies, taxing purchases and giving a credit to sales is literally the exact opposite of what you want to do.
> Literally every single company that can afford to setup these tax transfer schemes, are actively evading taxes.
Yeah, but I think that's different than what happened in this case with Netflix. Declaring earnings from one country in another country is not just "tax optimizations" but straight up illegal. It's not using/abusing legal loopholes like most larger companies do, but going against the law.
Honestly, I’m not sure. I find the premise of such tax laws to be illogical at a basic level. There are apparently always multiple ways to create legal loopholes.
If we consider the Irish sandwich mechanism that was recently “stopped”, somehow that hasn’t materially affected any of the innumerable companies that were using it. As we saw in the Apple vs EU case, most practices might’ve never been actually legal either.
So my personal opinion is that (almost) all tax “optimization” is at the minimum immoral, but most likely illegal too.
Edit: This reminds me of the idea of temporarily embarrassed millionaires. Your personal optimization is not what I’m talking about - corporations have legal teams the size of SMBs lobbying/creating/looking for secret loopholes, and people are talking about public self service methods.
I'm sorry for my immoral behavior of generally holding investments for more than a year, contributing to my 401(k) and HSA accounts, buying an EV, and installing energy efficiency upgrades in my house, all of which are driven by tax optimization (at least in part).
If a government “says”? These large companies actively campaign, draft, and lobby for the legal frameworks and loopholes that they exploit. The government and the companies are the same and are fighting for the same pot of tax money.
That's rich coming from French. Long time ago France Telecom bought Polish top phone network. Immediately rebranded it to Orange (despite the fact that the company had one of the strongest brands on market where it operated).
Unsurprisingly the licensing fees for using Orange brand that the Polish company had to pay to France Telecom amounted to large percentage of taxable profits that the Polish company had. Overt theft from Polish company and Polish taxpayers.
Is that related to the privatization wave after 1989? If so, the culprit here is the corrupt political caste that sold companies below their true value for kickbacks. Corruption has been an endemic problem in the east.
It isn't. That happened some time around 2000. Unless your theory is that ~11 years isn't enough to change generations in which case there's more than that, right? Then give other examples.
Governments can block acquisitions and mergers for various reasons. Why this didnt happen in this case I dont know. Maybe they didnt understand the impact maybe regulators got paid off.
Ohhh the memory of their atrocious and extortive services still raises my adrenaline. The French bought the position of monopolist in the telecom market. That's (and similar privatization frauds) how the only true Russian-style oligarch in Poland was created - Jan Kulczyk. Thanks, French!
No but seriously, this doesn't sound surprising? Why should France be against a French company buying up other companies and bringing revenue back to France
I don't understand the problem honestly. I'd understand it if Poland stepped in and didn't let the company be bought out, but this just seems like bog standard normal globalized free market stuff? It would be extremely weird for France to step in and prevent a French company from buying a Polish company due to fears of stoking Euroscepticism among the polish population wouldn't it? And I don't even know what this has to do with the EU, companies have been buying up companies from other countries both in and out of the EU forever?
I also don't expect nothing other from thief then continuing to steal.
I also expect thieves to be protective of their own assets.
I'm just saying they are still thieves and any outrage in their name is misplaced.
Screw the French when they are robbed for the benefit of other countries, because they steal from other countries using their public companies as well.
It's hard to accurately measure secretive crimes like this, but the estimates seem to put corporate tax evasion by percentage of GDP at either similar levels between the EU and US or actually higher in the EU.
They obviously target the companies the highest revenues. Also you would be suprised. For example Klarna, a Swedish company, is often in trouble with the Swedish tax authorities.
A few years ago they had to pay huge amounts of money to the Swedish government because of some tax-dodging loophole was deemed illegal by court-order. So Klarna went into a desperate attempt to last-minute cut costs to not tank the stock value due to much lower expected returns that quarter.
It was kinda funny because the employees of Klarna are unionized they couldn't just fire anyone on short notice like that, but they did let go pretty much all consultants in one swoop. If this was the US the CEO would have just fired a bunch of people because the CFO f-ed up. For a few months there was a major glut of former-Klarna consultants around in Stockholm, two of them ended up at my company at the time.
I couldn't find details about this tax dodging online (it was around 5 years ago), but here is another article about Klarna being in trouble over GDPR violations:
It isn't really accepted anywhere, but there is a group of people who will make it their goal in life to get up to any shady practice to try to shortchange or dodge their local host polity to their ultimate advantage. The tax dodge, if you will, becomes something of a pass time and point of pride for them.
This becomes more difficult as more tax authorities better integrate with one another, which admittedly, is something many in in the U.S. fidget over, even if it is realized that the need for it is almost entirely a byproduct of these types of people's actions that necessitate that happening.
Yeah there's the so called "Dutch Sandwich"[1] which is a well-known tax "planning" methodology that corporates use with the so called "Double Irish" being another one. There's also a slightly less-well known one involving Mauritius and India. They're all ways of moving profits between companies in order to exploit tax treaties that countries put in place. In the case of the Dutch sandwich I think the Netherlands has a treaty with the Netherlands Antilles or something so people have a company in the Netherlands which then shifts things off-shore to the Antilles and avoids tax that way.
It's nonsense of course. Companies should (in my opinion) shoulder their fair share of tax because otherwise that burden falls disproportionately on individual income tax.
No, it’s much more complicated than that. If you scroll a bit further:
> After pressure from the EU,[22] the Double Irish BEPS tool was closed to new users in 2015,[citation needed] however, new Irish BEPS tools were created to replace it:[23][24]
Not only do the original evaders get to continue doing it, they’ve also found new loopholes already.
Right. Also I wasn't trying (nor am I equipped) to give some kind of current guide to tax dodging. I was explaining the basic sort of thing people do. The specifics change all the time because there is a sort of whack-a-mole that tax authorities try to play to get people to pay and people pay ever more and more inflated fees to various accountants and tax "planning" experts for ever more byzantine and artificial schemes of one kind or another.
My own experience with tax experts has left me pretty jaded about tax advice. It seems to me that often these companies have maybe 1 dude who actually understands tax and an army of people with powerpoint going out selling the "solution". I had a complex tax situation when setting up a business in the UK and US and got tax advice from one of the big four firms not to dodge tax but to make sure I understood the US system correctly and was paying everything I should. I paid so much tax that I got investigated in both the UK and US because they thought there must be some sort of fiddle because I seemed to be paying way more than I sholud be (this was what I told the accountants). I ended up getting rebates from the IRS and from the UK HMRC after the investigations but it took a couple of years to get it all sorted out.
None of these tax "planning" schemes are available anymore.
Moreover, tax authorities have increasingly taken the position that the use of these planning methods constitutes tax evasion. The Dutch Sandwich and Double Irish were grandfathered in (meaning, not treated as criminal tax evasion) but a company utilizing similar schemes today would ultimately result in one or more of their executives spending time in jail.
Critically, most of tax law is actually regulation that implements statutes. Tax planning schemes that satisfy the technical letter of regulations but which violate the plain intent of the written statute can, and have, been deemed illegal years or even decades later (see, for example, the Bermudan tax loss harvesting scheme), and this has repeatedly passed constitutional muster.
No rationale for that, but likewise no rational reason that corporates sholud be able to use multinational structures to completely avoid tax, which is what these planning structures are all about. Typically there are inter-company transfer pricing arrangements that mean that the companies in the taxed jurisdictions pay fees to each other so their profits are minimised and as much profit as possible is expatriated to low- or no-tax jurisdictions.
I know I'm likely alone in this opinion, but corporate income tax seems like a poorly designed tax to me. Why should companies pay taxes in a year with high profits, even if they face losses for the next ten years? Why should I pay corporate income tax when dividends and income are taxed anyway? Corporate income tax also seems to heavily influence business strategies as a consequence, which wasn't its intended purpose.
The world of tax is complex. Business exist in many shapes and sizes. So...
- because companies heavily use government resources like roads and stuff.
- because losses can be offset against profits. These tend to be middled out over multiple years. You can port losses to other years.
- a lot of companies (holdings etc.) don't pay out income tax and are basically just letterbox companies. These companies need to pay tax on dividends otherwise they would literally pay zero tax.
> - because losses can be offset against profits. These tend to be middled out over multiple years. You can port losses to other years.
These losses expire (different from country to country)!! Plus, inflation is not taken into account.
> a lot of companies (holdings etc.) don't pay out income tax and are basically just letterbox companies. These companies need to pay tax on dividends otherwise they would literally pay zero tax.
Tax on dividends is not corporate income tax. Dividend tax is classified as capital gains tax, which is entirely separate. My point is that anyone taking out money must pay taxes through personal income tax or dividend tax. So corporate income tax is just money that would be taxed anyway - or invested/used by the company. So no real purpose other than producing another cash inflow for the government.
Why shouldn't companies pay taxes? Especially since income is taxed already and your average Joe gets screwed way more than the poor downtrodden billion dollar companies.
Because a company just invests the money. You can't take out money from a company as an owner without taxing it anyway (because you anyway have to pay capital gains tax / personal income tax). My point was that I don't see a point in having corporate income tax (that's just an additional tax that prevents companies from investing in the business and employees).
"Invests the money" means it sits in their bank account until they've convinced enough politicians that the money should be taxed as it comes into the company, not when it goes out, and then they issue a massive dividend.
Any corporation uses roads, mail, police, courts, and other public services, and this usage is not offset by individual income taxes on that corporation's employees, since the employees also use these things. In fact I suspect more resources are spent on serving corporations than serving individual taxpayers - with the important caveat that I am specifically excluding government social insurance programs. But those are often a totally separate tax system.
It is baffling to think that for-profit corporations should be allowed to use public services without paying for them: before a company makes further internal investments with new revenue, it should chip in to society for building the infrastructure that made the revenue possible. A corporate income tax is perfectly natural.
Whether you earn and save a given dollar as a W2 worker or through a business you own seems pretty incidental, right? Your net worth is going up just the same; society has the same interest in containing inequality.
Everything is double, triple, etc taxed. The corp->shareholder thing is an arbitrary point to focus on.
Some amount of revenue must be raised. Suggest an alternative. Not taxing corp profits will result is less overall tax income (it wont be made up in shareholder taxes).
given that money is printed/created at the federal level, we don't need a complicated tax enforcement system nor need to tax everything under the sun at the federal level. corporate taxation is a waste of time.
Why not advocate for taxing only corporations, rather than the more oppressive direction of taxing only humans? Corporations intrinsically run on accounting report paperwork, meaning tax forms are an incremental cost rather than a novel burden. And they receive massive benefits from the state - liability protection, outsized access to the legal system, and often direct subsidies.
Because corporate taxes are paid on profit (revenue-expenses). So as a company I can claim a lot of stuff as a expenses. Executive salaries? Anything left after that? Lemme quickly create a separate company in some low tax jurisdiction and pay them for marketing expenses, and suddenly I have no profits, and nothing to tax. Regular people can't do that.
You also generally can't tax the revenue instead of profits (except perhaps few percent of revenue as the minimal tax), because different companies have hugely different amounts of revenue and expenses.
None of that is really a show stopper when talking about an overhaul of the tax system and what it targets.
Speaking of taxing revenue instead of profits, that's another reason the current tax regime is so galling (at least speaking from a USian perspective). Individuals essentially are taxed on revenue and can't deduct things that would otherwise be straightforward deductions in a business context, as necessary and proper expenses required to earn that revenue.
You do know my income has already been taxed? Why am I paying double tax when buying alcohol? Why is my income taxed when the companies revenues were already taxed?
There is no double taxation. Transactions are taxed, not money.
Then you would be in favor of only taxing retained profits. Corporations keep piles of money for future use. It would make sense to allow deductions for dividends distributed to shareholders. But could also fix the stock buyback loophole by not allow deduction.