What a crock of shit.
Take Google in the UK for instance. They don't "sell" anything in the UK according to their tax returns, so claim every deal is actually finalised through Ireland and therefore subject to lower Irish taxes. So their UK tax is minimal despite making large profits from there.
It provides a massive competitive advantage to companies large enough to full off these kind of operations. Google have possibly been caught out actually selling in the UK, but in most cases their conduct is legal - which is why the law needs changing.
If you want to make money in France, the UK, Germany or wherever you should pay local taxes to those countries. It would be grand if those situations could be simplified and made accessible for digital goods (which are more likely to be sold cross border).
Phantom gains have been particularly bad in the last decade with the falling US dollar. In Australia, house prices in my area about doubled between 2002 and 2012, but with the change in exchange rates, the IRS calculates the gain as if the price had more than quadrupled!
If I live and work completely in a foreign country why would I ever pay US income tax under any circumstances at all? The US is one of two countries on this planet that expect people who's only tie is being a citizen (perhaps never having set foot there and not speaking the language) to file income tax and potentially pay a portion of their income.
Even worse, the US expects you to file with them the way you file in your country of residence. File join in the country you live in? You're expected to file joint with the US then. Which means your foreign spouse who has no ties to the US of any kind (outside of being married to a citizen) will potentially have to pay US tax on their income.
And worst of all, the tax is mostly an annoyance. The true problem is that you have to report every account you have signing power over. That includes pension fund. That includes your companies bank accounts that you manage (which is why an American will never hold such a position in e.g. Switzerland). Lots of banks also won't take Americans on as customers. They don't get enough to warrant dealing with US bureaucracy to report information on these accounts.
>You can always renounce your US citizenship
Which is what many people are doing. The US is one of the few nations on earth that people give up citizenship from.
Even the Mafia was never so cheeky.
The foreign tax exclusion for a single person is $97,600 in 2013.
I wasn't aware it was exclusive to the US. I also wasn't aware German / French / British etc. IT firms don't dodge global taxes at every opportunity.
I am living in France this Summer, a very rich and beautiful country with a hole in the pocket. French people love to life well, and someone else to pay the bills, the Germans, the rich, whoever but not them.
Mr Hollande only want to do one thing, to raise taxes. But there is never enough money when you don't expend wisely.
This whole "let's reroute all our profits from all the countries into this country where the taxes are close to zero" is utter BS. If you don't like its taxes, don't do business in that country. Simple. If the government thinks they're losing businesses with high taxes, then maybe they will lower them - or maybe not. It's their and their citizens' prerogative.
No it's not. Our states are not pure democracies. If a majority of people decide by referendum that we should kill all Arabs, it would not be their "prerogative". That's because we are constitutional republics before being democracies. That is to say we all have to abide by what our constitutions say no matter what the majority say. And last time I checked, our constitution protects private and individual property. Therefor, a 75% tax or even 50% like we have in France goes against the protection of private property in our constitution and it was rejected by the supreme court here. Any taxation goes against the very basis of our constitutions and therefor should not be treated lightly or abused. Or do you think that if a majority decides it's ok to tax people 100% then that's ok because it's "their prerogative"? How about if a majority decide women shouldn't vote anymore either, would it be their prerogative too? The answer is no. Google and Amazon already pay lots of taxes in the US, if they had to pay in every single country, they'd have much less money to invest in all those products we enjoy while the government would just create more debt.
It is simple concept, but its implementation is not.
What does "make a certain amount of money in a certain country" mean? EBT? (Earnings before taxes?) Well, we have this revenue from this country, we are buying intercompany services (without market subsitute)[1], so let's price them in the same amount as the revenues... And bam, there you have profit of 0 and all earnings exported to tax haven.
The entire point is, that is is not easy to define, what should be taxed. Sales or revenues are not profit. You still have to provide whatever you sold and the costs are tax deductible. For all companies, not just the big ones.
[1] It is called transfer pricing and it is checked by tax authorities.
Accounting hat off
- requiring all citizens and non-citizens to declare all foreign bank accounts (FBAR) including signatory authorities on trusts and companies;
- unclear rules on the aforementioned. Do you have to declare retirement accounts? Are they taxed? Nobody really knows. It's clear the only value in FBAR is in non-compliance if the government decides to prosecute you;
- requiring non-resident citizens and residents to file tax returns and pay taxes if their income is sufficiently high and either the income is in a country that has no double taxation treaty with the US or it does and its tax rate is simply lower, even for those who haven't stepped foot in the US in 20+ years. I actually know many US citizens who don't do this and it could be a real problem for them at some point.
All of this while allowing the systematic avoidance of tax by US companies on a massive scale. US companies need to report their foreign income. An individual would have to pay US taxes on foreign income. Why shouldn't a company do the same? Why can't it pay the difference between US taxes and whatever taxes they've already paid as is standard in all double taxation treaty cases?
But the move here by the French is blatantly political and narrowly targeted at US companies. You'll note the language is around the "digital economy". Well, why should such reform be limited to only Internet companies, which--surprise, surprise--are primarily US companies?
That's actually what the US (rightfully IMHO) is objecting to.
All of this is simply window dressing however. The real problem with the system is complexity. Think of tax loopholes as bugs. The more complex software, the more bugs there are and the harder it is to eradicate them. Tax law is no different.
Unfortunately there is no political appetite for true reform as every complicated exception is the result of shoring up some constituency or pork barreling or other "corruption" so as much as we need to stop, say, poring money into corn subsidies, it just won't happen for the foreseeable future.
Borders are disappearing. We already see the nonsensical effects of this such as attempts to limit content distribution to geographical regions. At some point we're simply going to have a global tax regime and, dare I say it, world government, scary as that will probably be.
It might have been better if France got someone very conservative like Obama and the US got someone from the true left like Hollande (though he wouldn't get a single thing done in the US, it would be fun to watch people like Rush Limbaugh literally die on air).
Sarkozy ruined France so yes now everbody needs to pay for it.
And the problem is not taxes,i'm happy to pay taxes. The problem is people like French liberals ( liberals are "right-wing" in France ) that gives hand outs to their friends or vote laws without financing their them , and then all they have left is blaming the poor,the homeless,the public workers,the artists or the muslims for France demise...
> French people love to life well, and someone else to pay the bills,
Whatever. Or maybe you prefer US way of life, where it is me/myself/I and there is next to 0 solidarity.
1: http://www.contrepoints.org/2012/03/07/72137-lahurissante-ac...
"Whatever. Or maybe you prefer US way of life, where it is me/myself/I and there is next to 0 solidarity."
I would rather live in a country like this than one that takes upwards of 70% of my money and when I ask for some accountability, I get people telling me to leave.
If you by solidarity you mean there's no sense of nation, then you're just making it all up as you go along.
However, trying to pigeonhole the most diverse country in world history on such a simplistic basis, is impossible. Only someone that has never spent much time in the countless cultures of America, would make such a statement.
EU states are already the most taxed ones in the world and they have the biggest national debts, it's clear here that the way to fix this is not "more tax" but "less spending". For the last 60 years, spending has been skyrocketing and taxes are at the highest and are killing jobs, innovations and whole economies. Why keep spending even more by making taxes even higher than they are, this is ludicrous. It's time to admit maybe we should start spending less, not more taxes, this isn't working and hasn't worked for the last 60 years.
The state also spends money on things that would not be funded any other way. Pure-scientific research, such as CERN. Policing for people too poor to hire private security services. The idea that these things are "the opposite of value" is ludicrous.
Also, if you're not going to tax Google and Amazon, then that gives large international companies who can dodge tax a huge advantage over smaller national companies who cannot. That undermines the underlying principle of capitalism: competition. Either you tax no companies, or all of them - any halfway position is worse than either.
Obviously (most) governments want to avoid a situation where a foreign entity is strong enough to destroy any local competitor and on top of that, contribute nothing back to the economy in terms of tax revenue. It's completely ridiculous.
If you deliver goods and services in a country, you should expect to pay the appropriate taxes in that country. It is completely unjust that Google et al can do this kind of thing, it puts local companies at a massive disadvantage.
Yea, because trickle down economics works fantastic: http://www.nytimes.com/2007/04/12/business/12scene.html?_r=0
http://www.publicserviceeurope.com/article/1876/french-elite...
Out of curiosity, what is the other country?
The difficulty is in defining what "trading in another country" actually means.
If you sell a physical product, there are some unambiguous facts that can be considered: where was the product made, where did its components come from, where was it delivered, that kind of thing.
If you're selling information, say an e-book or an MP3 download, things are slightly more ambiguous.
If you're providing services of some kind, things get much more complicated, as anyone who has to deal with VAT in Europe can testify. There is a concept of the "place of supply", and trying to come up with a standard way of determining that place of supply that is both practical and reasonably fair to all concerned is still a work in progress.
And that is just for sales taxes/VAT, where the parties involved tend to be obvious (someone paid money, and someone received it). With multinational business structures, where you might have revenues and expenses in many jurisdictions and somehow you have to decide how to balance everything up and declare profits, there's an entire extra layer of ambiguity to contend with.
I worked for a Canadian company that sold niche hardware primarily into the US market. We were based entirely in Canada and just shipped to the US using UPS.
We regularly had to convince US business buyers that they didn't need a W-9 from us, nor did they need to withhold taxes.
Are we back to talking about sales or other revenue-based tax here? The major dispute we were originally talking about in this HN discussion was to do with where profits are declared and corporation tax or the equivalent is paid; I only mentioned the sales/VAT angle as an example of how easily tax rules can get complicated when you have to decide where some intangible thing happened.
The second article of the Déclaration des droits de l'Homme clearly states that private and individual properties ought to be protected. Where is the respect for private property when 50% of your property is taken by force by the State every year. Our whole revolution was about fighting unfair taxation, privileges for the few and insane State spending... and now we're back to square 1.
1: http://www.guardian.co.uk/world/2012/nov/12/france-nutella-a...
Whether the French tax rate is too high or not is not relevant. The question is, should a foreign company be given an unfair advantage compared to a local company? I would hope your answer is 'no'.
But to answer your question, I think that as a French citizen I pay too much tax and I'm glad Google and Amazon are able to get away with it. I applaud anyone who manages to not feed the beast. I, on the contrary, feel guilty for paying so much tax and helping keep this monster of State alive. The answer is less tax for everyone, not more tax especially on the company that actually manage to make a lot of money and create a lot of work. And yes, local companies are dying here because of the crazy taxation, and taxing Google and Amazon more wouldn't change anything for local companies.
As for policing, I don't think anyone disagrees that it should remain public. Justice and Police and Military security are what the state exists for. Not for subsidizing movie producers or a dying paper media industry like we do here in France. I'm ok with a low flat tax that everyone would pay to sustain the basic functions of the state. It would probably be cheaper for Google and Amazon compared to whatever they're paying their accountants to design their tax schemes and give them huge gain in time wasted for bureaucracy.
I also suspect you'd have a hard time finding private companies willing to spend $9 billion on a particle accelerator with no foreseeable profits.
I'm generally against subsidising any industry, but letting Google and Amazon get away with dodging tax is effectively the same thing as a subsidy. Speaking as someone who owns a small company, I'd rather the playing field be level.
http://www.securite-sociale.info/
http://reachfinancialindependence.com/french-healthcare/
FYI: it's forbidden by law to leave social security in France and to encourage others to do so. Best system ever indeed, once you get it you never leave it unless you're ok with jail time.
And health care is most definitely more expensive in Switzerland than France. It's privatized but there are strict regulations on how much money insurance companies can make and all citizens are required by law to have insurance.
> Not for subsidizing movie producers
France makes great movies, but they could never compete against Hollywood financially. I for one am quite glad that France does what they need to to make sure good, original French movies (ok, not all of them, but much better than Hollywood) don't lose out to fast-food garbage the US is pumping out.
Even though their activities directly increase your own tax bill. You have an odd way of thinking.
>> taxing Google and Amazon more wouldn't change anything for local companies.
Of course it would, their tax avoidance games mean nobody else can compete.
You can argue that lower tax for everyone is a good thing, but I really don't see how you can argue for the perpetuation of special exemptions for those that can afford it.
The French State creates € 12 billions in debt each month [1]. If you think them paying any more taxes would decrease my tax bill in any way, then you have an odd way of doing math.
1: http://www.planetoscope.com/comptes-publics/315-compteur-de-...
> Of course it would, their tax avoidance games mean nobody else can compete.
Are you seriously saying that the reason Google has no competition in France is because they pay less taxes? Even Microsoft, the multi-billion dollar company failed to do so with Bing but if only Google paid its full taxes then French companies would be able to take over is what you're saying? I very much doubt that.
> I really don't see how you can argue for the perpetuation of special exemptions for those that can afford it
As long as there is no low flat-tax but unfair and complicated tax system. People will always try to avoid it. Get rid of your insane tax system and you'll get rid of these special exemptions. Just like getting rid of alcohol prohibition got rid of the bootlegging problems.
Them paying more would either relieve the burden on other parts of society, slow down the debt accumulation (even just a little bit), or allow the government to spend more on public services. All of these three have an impact on your life. If you think it would have no effect at all then you have an odd way of doing math.
>> Are you seriously saying that the reason Google has no competition in France is because they pay less taxes?
Maybe, who knows? But what we have at the moment is market distortion and monetary advantages for multinationals that can play these games. Certainly the likes of Starbucks (who pay little to no UK tax) have a direct financial advantage against smaller operators and local chains.
>> As long as there is no low flat-tax but unfair and complicated tax system.
This is a pipe dream, and any flat tax I've ever seen proposed is highly regressive, loading the burden onto the middle classes (and away from the very wealthy). What I find most amusing about it is how the very wealthy have so many cheerleaders who are in effect arguing for higher taxes for themselves.
>> People will always try to avoid it.
Yes, but you seem to be supporting your own country getting screwed by large corporations and transferring that burden to yourself, French companies and French citizens.
>> Get rid of your insane tax system and you'll get rid of these special exemptions. Just like getting rid of alcohol prohibition got rid of the bootlegging problems.
It's not quite that simple unfortunately.
[1] http://www.amazon.com/Treasure-Islands-Uncovering-Offshore-B...
(Disclaimer: That's an affiliate link via my college library. Feel free to strip it if you don't like such things)
Of course in this case most of the development is not happening in Ireland, but how can you decide if the fees are reasonable or not? You'll either end up with a very complex tax code with loopholes (which is non-desirable), or you'll give arbitrary power to tax bureaucrats to enforce arbitrary taxes to certain companies (and this will in practise create non-just tax decisions and corruption).
I'd say that very little (probably zero) development is done in Ireland, but I get the impression you think that development is the taxable activity (I don't know if it is or not). However, there are 1,700 people doing something in Ireland (from http://www.idaireland.com/google/index.xml, 1/2 way down):
A site reliability/engineering team supporting Google’s European hosting and search activities; Multilingual customer support for Google’s AdWords advertising product; On-line relevancy testing and Google product support; Shared Services to support Google’s EMEA operations.
As an Irish person, I'm getting a little weary of the constant references on HN implying that Ireland is little more than a tax haven. There is a significant number of jobs attached to the US multinational presence here, viz:
- Apple: 4000 employees (http://venturebeat.com/2013/05/22/ireland-were-no-tax-haven-...)
- eBay: 3000 (http://www.irishtimes.com/business/sectors/retail-and-servic...)
- Google: 1700 (see above)
- Facebook: 500 (http://www.irishtimes.com/business/sectors/technology/facebo...)
I could go on, but I have stuff to do, and I feel like I've already done more research than most journalists commenting on this area. For those interested, there's a list of foreign ICT companies operating in Ireland at http://www.idaireland.com/business-in-ireland/information-co...
Edit: Removed woe-is-me comment following a trigger-happy downvoter.
I think the issue is that companies are currently able to get away with murder in terms of structuring debt and those brand type fees to funnel profits away. Some kind of "reasonableness" test certainly wouldn't go amiss when it comes to judging measures taken by companies. There's already a movement against measures taken solely for the purpose of tax avoidance.
It doesn't matter whether a specific company uses tax havens or not. The problem is that tax havens exist (and there are reasonably good definitions of how to recognise one).
Companies, who's role is to maximise shareholder value/profits etc, will use them within the extent of the law. That means it's the laws that need to change.
The only reasons there are tax havens is because there are tax hells.
Trust me, if there was a simple way to fix this, it would be fixed.
In the case of Amazon, when some sales staff is in the UK (evidence coming from whistleblowers, for instance http://www.guardian.co.uk/technology/2013/may/16/amazon-whis...), when warehouses are in the UK, and Luxembourg seems to be used only for signing the official contract, how is that not tax avoidance?
I don't think anyone would have a problem with that. The problem is running your operations in France, supplying to customers in the UK, but declaring all of your profits in The Democratic People's Republic of South West Nowhere (corporation tax rate: 0.075%) where your corporate headquarters (head count: 1 lawyer (PT), 1 accountant, 3 board members who also sit on the board of 97 other businesses run by that lawyer and that accountant) is based.
But this is exactly what I'm saying, the more taxes we pay, the more the government spends and create debt. The only way out of this vicious circle is _less_ spending, not more tax. We've been doing more taxes for 60 years and we have more debts than ever.
> Are you seriously saying that the reason Google has no competition in France is because they pay less taxes?
>> Maybe, who knows?
Ok, you're just not being honest right now just to win the argument. Or you're delusional.
>> This is a pipe dream, and any flat tax I've ever seen proposed is highly regressive, loading the burden onto the middle classes
I don't know in what world you live in, but here in France, the burden is already on the middle class. The rich are all domiciled outside of France where they pay much less (around 10 to 15%). A low flat tax around 10 to 15% would bring them back as they would have no interest in going abroad. Many countries have a flat tax http://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_fl...
>> Yes, but you seem to be supporting your own country getting screwed by large corporations and transferring that burden to yourself, French companies and French citizens.
No, I think you are. By setting too high taxes, you make the rich run away and pay their taxes elsewhere, leaving the burden on the middle class who's dying.
>> It's not quite that simple unfortunately.
It is actually. Just not in the interest of the current governments (both left and right are socialist in France).
I'm not sure there's a causal relationship there.
>>The only way out of this vicious circle is _less_ spending, not more tax. We've been doing more taxes for 60 years and we have more debts than ever.
Lower taxes all round is a fine idea. Letting some multinationals off from their tax bill is not a step in the right direction to achieving it.
>> Ok, you're just not being honest right now just to win the argument. Or you're delusional.
I'm being totally honest, the effective tax breaks given to multinationals via their various international financial games are a market distortion that disadvantages smaller players and breaks competition.
>> I don't know in what world you live in, but here in France, the burden is already on the middle class. The rich are all domiciled outside of France where they pay much less (around 10 to 15%). A low flat tax around 10 to 15% would bring them back as they would have no interest in going abroad. Many countries have a flat tax
That list isn't a particularly prestigious club...
Many would say that they should stay abroad if they're not willing to pay to be part of the society we're creating in the west.
As a counterpoint, most people seem to agree that some small percentage of earners pay over half of income tax in most western countries anyway (the threat of rich flight is always used as an excuse not to raise taxes further). Any flat tax that brought in the same amount of money as the present system would relieve this burden from them. Any flat tax that didn't bring in the same amount of money is pointless to argue about because we could reduce the overall tax take in any of a huge number of ways.
Whether the absent rich would return in sufficient numbers to make any impact at all is really a matter of speculation.
You can't practically lower taxes enough to compete with tax havens.
In general they have low populations and the companies don't actually do any major activity there (there are few societal costs), so the country can survive and thrive with a very low percentage tax take from many effectively non-resident companies.
Contrast this with countries that have much larger populations. The number of profitable corporations per capita is going to be lower than a country that attracts corporations in simply on the basis of their low tax rate.
You'll notice where countries like Ireland are involved, that do have a population to support, they seem to eventually regret the tax haven arrangements they agreed to in the good times.
>> If companies could spend the millions they spend on setting up these schemes on a low flat tax rate instead it would be worth it for them even if they ended up paying a bit more than by putting the money in a tax haven because of the time being saved and the good publicity + the positive effect that reasonable low taxes have on the economy.
You can't really believe this?