Correct. I'm in Amsterdam and bought from amazon.de last night. I'll usually compare with amazon.co.uk for price and occasionally pay more because the supplier won't ship internationally.
There are plenty of Dutch online retailers (e.g. bol.com and coolblue.nl) but their prices are significantly higher (even factoring the slight difference in VAT). Considering we're supposed to be in a "single market", I've never been able to figure out why that is.
I think the Original Poster that you're responding to mean presence literally, as the word is usually used. As in "Does Amazon have any facilities/staff etc in Austria?".
I live in Vienna, and I order a few orders from amazon every day. Last year I had over 600 amazon.de orders. Generally I try to order only Prime stuff.
The vast majority of orders (over 90%) come from Salzburg, Austria, although in a few occasions I even had same day shipping, those came from somewhere even closer.
The location printed on the label is the place they hand over the package (trucked from somewhere). I'm a bit surprised they seem to do that in such a volume in Salzburg. Previously they mostly used Allhaming (usually called Linz on packages).
For example, most my packages in Germany are labelled "Radefeld - Direct" but they originate from Poland or the Czech Republic, not the Amazon logistics center near that.
They also print a return address on the labels which is often another place distinct from outbound delivery (mostly Graben for me). Amazon uses multiple locations to accept packages and forward them to their warehouses.
I don't know anything about their same-day logistics though. It's the first time I hear that for Austrian addresses and no mention on their homepage, too.
Multiple conflicting people about where their packages are coming from? What's the chance there is a wharehouse but they can't list it for obvious tax purposes. They might be subcontracting to another company?
Part of this makes an intuitive sense, a sausage stall has one trivially accessible "throat to choke", whereas Austria's access to e.g. Jeff Bezos is much more difficult.
Starbucks, though, I'm assuming they've got retail shops in Austria? That just means they can afford better tax lawyers.
Or this is a establishment politician with a weak hold on power who has not necessarily got his facts right, or if he's talking about absolute numbers vs. rates is probably lying through his teeth, but knows bashing foreign companies is a crowd pleaser.
And maybe they overtax those sausage stalls, lots of/most every? country has tax regimes with lots of insanity. Apple wouldn't be playing the games it plays with the US if we didn't have the 2nd highest or so corporate tax rate in the world (e.g. see https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates when you factor in state tax rates only Cameroon is perhaps higher).
While I was doing the search for that, I noted that as a region Europe has the lowest, but that's no doubt not accounting for VATs, which the US is allergic to, at least unless one of the big other categories of taxes is totally killed off (like, with a "this time we mean it" Constitutional amendment).
Anyway, my point is that all this results in all sorts of distortions. For example, when the Reagan individual tax rate cuts kicked in, I noticed my parent's business and investing strategies change as tax avoidance became much less important. In his working lifetime, the top rates went from 91% ("We Like Ike???") to 70% (which as I recall was split between 50% or more for "earned" and 70% or more for "unearned" (investment) income), to 38.5%, to 28%, before it started going up again (even the George W Bush tax rate cuts only dropped them 4.6% to 35%).
And going back to the distortions, the family exemptions allowed a normal family prior to JFK's 1964 supply side rate cuts to survive with the lowest bracket being 20%; those weren't adjusted for inflation until Reagan's reforms, which turned them into a pretty minor thing with how inflation savaged the dollar during that long period (the CPI peaked at like 13-14% around the time Reagan entered the Oval Office).
>Apple wouldn't be playing the games it plays with the US if we didn't have the 2nd highest or so corporate tax rate in the world
How low do you think that tax rate would have to be? Ireland's corporation tax rate is just 12.5%, but Apple didn't pay that either. They had a special deal under which their effective tax rate was as low as 0.005% to 1%. This is the deal that the EU has now ruled against under furious protests from Tim Cook personally and the US government.
So yes, if the US lowers its corporation tax rate to effectively 0% then Apple will stop playing games.
Apple's latest report said that they paid a little over 6% in taxes, whereas the 0.005% number came from someone looking to score political points (without any evidence); do you have a trustworthy source for either the 0.005% or 1% numbers?
My understanding is that EU documents estimate that number for the Irish tax take as percentage of total global revenue, it isn't their total effective tax rate (on profits as is common for corporations). The parent used a meaningless number in a misleading fashion.
I think it was completely obvious in the context that I wasn't talking about Apple's global effective tax rate but only about the taxes they pay in Ireland where all of their European sales are booked.
My understanding is that the numbers I quoted (in good faith) are derived from the profits Apple would have made in Europe had they not been allowed by the Irish government to use unrealistic transfer pricing.
The numbers are certainly not meaningless, but whether or not they are misleading is for a court to decide. It was certainly not my intention to mislead and I do not have all the information to come up with more reliable estimates of Apple's real profits in Europe.
Also, as someone who is liable to pay personal taxes on top of profits already taxed through corporation tax I don't feel particularly biased or inclined to score political points in favor of higher taxes.
It is simply my opinion that shifting government income from one tax to another isn't necessarily going to improve avoidance overall. It is also my opinion that taxes always have to be compared to what they buy us, in terms of actual services and also in terms of being humane.
Echoing nickff, obviously they're going to seek out the lowest tax rate they can find for the greatest amount of money they can put there.
But surely you can see that 35% is so high a rate they'll focus more on tax avoidance than is healthy for any of these parties, including themselves?
The item I saw about regions indicated Europe was at around 18%. The nickff cited 6%, 12%, 18%, all those are reasonable, as well as 0%, since the taxes they pay by definition eventually get passed on to others. Some wags had commented WRT to the Christian duty to tithe, "If 10% is good enough for God, why isn't is good enough for the Federal government?"
That they and so many other US based companies have accumulated such huge offshore pots of money is one of those distortions I go into in my rather long post you're replying to. I submit to you it wouldn't be so huge if repatriating it to the US wouldn't automatically cost them 35% of it. By policy endorsed by no less a moral authority than the US Supreme Court, it's their right, if not their duty, to avoid as much tax as they can.
>But surely you can see that 35% is so high a rate they'll focus more on tax avoidance than is healthy for any of these parties, including themselves?
I don't want to defend the US corporation tax structure, but I don't think corporation tax should be considered in isolation. Other countries have a low corporation tax and make up for it by high employer contributions to social security or other taxes.
So your parents payed more than they had to by not gaming the system as much as they could have, because they are good people, and maybe apple would also 'play nice' if the coroprate tax rate wasn't that high. I believe that in reality if you're an individual you should pay your taxes where you live, to the gouvernment that provides its services to you, and if you don't like their deal you should try to emigrate. Similarly as a business you should be properly taxed in each market that you're operating in. All of this shouldn't depend on bargining and good will. There's no use in talking about tax rates as long as we only pay them out of the kindness of our hearts and they don't apply to all the big fish anyways.
The Austrian franchiser probably pays a lot for using the Starbucks brand and franchise concept to an offshore company (not in the US) owned by Starbucks, that pays a kickback to another offshore entity owned by the franchiser.
Now all the profit is offshore. Everybody happy, except the Austrian government (who don't get corporate tax because the franchise hardly makes any profit in Austria) and sausage stands (who wonder if they could make more money if they join the Starbucks franchise)
This is interesting because Starbucks doesnt franchise in the US [0]. They do have one alternative that's what you see in most airports and in coffee shops with the sign "proudly serving Starbucks coffee", for example Barnes & Noble cafes are this style. These third party stores, for instance, cannot accept payment from the Starbucks mobile app and offer only a subset of drinks. I'm not sure what the term for this is but it is some kind of licensing deal.
B&N serve full Starbucks menus in most of the states, not just Starbucks coffees, but everything else...they are effectively franchised Starbucks. Marriott franchises a lot of Starbucks in airports but also some hotels. In other China, Starbucks in tier one cities are mostly JV-owned, while in tier 2 cities they were able to convince the CCP to let them do fully owned stores.
They serve frappachinos and chai tea lattes, so the menu licensed goes way beyond coffee. Food differs drastically between each Starbucks districts anyways.
I think my comment was unclear. By "coffee", I was referring to the whole slew of basic coffee- and espresso-based drinks. However, B&N does not serve every flavor of every drink, stock every syrup, etc.
You can see that B&N lists 12 items under Espresso-based beverages (even that is an overestimate because they include normal coffee and iced tea lemonade) [0], while Starbucks Espresso-based list has 31 items [1]. Newer items like the Flat White are not at B&N cafes.
Source: Spent a lot of time at Starbucks in college while my girlfriend was a barista.
I couldn't get chai tea lattes or every flavor syrup in Beijing anyways, so it is hard for me to judge. At least when I went to a B&N cafe Starbucks in the states, they had way more drink selection than a real Starbucks in Beijing.
I talked with a girl that worked at a Starbucks in a Fred Meyers in Oregon. They are technically Fred Meyers' employees, but the deal with Starbucks includes things like the fact that they cannot wear anything except the Starbucks uniforms. On Halloween, Fred Meyers' employees are allowed to wear costumes... except for the ones that man the Starbucks because of the deal.
Tax heavens like law breakers may have critical roles in a stable system allowing it to adapt. But one can not let them run the show as a whole.
International trade is not a new problem. Car manufacturing has been internationally for a while. Rules for transfer pricing have been established. The challenge is with this construct of intellectual property where arbitrary valuations disconnected from any underlying real trade are easier to get away with.
It used to matter less. It matters more now and tax innovations are getting more scrutinized.
> Never understood that either, it always seemed to be a double taxation scheme to me.
Corporations are legal persons, and income accruing to distinct legal persons is subject to tax. E.g. I get paid by my employer, and then pay tax on that. Then I pay my nanny with post-tax dollars, and she pays tax on that. That's not "double taxation"--just the nature of an income tax.
Imagine that instead of forming a corporation, a bunch of investors nominated Bob to be the legal entity in charge of the whole business. Bob held all the bank accounts, directly employed everyone, and booked all revenue minus his expenses as his income. A series of contractual arrangements required Bob to pay out the profits to the investors. Under that circumstance, there would be no doubt that profits would be taxed when they initially accrued to Bob, then again when he paid the investors.
It should be noted that nothing precludes companies from organizing as something other than a corporation. Partnership income, for example, is only taxed when it is received by a partner.
I'm going to quibble a bit, hopefully not in an annoying fashion.
The distinction is that the tax system does not give a deduction to individuals who are spending their money on personal "consumptive" reasons. By and large, the system does give deductions for expenses incurred for business.
In this light, the double taxation of corporations is unusual. Clearly, the dividends are to pay back investors, just as interest is part of paying back lenders. But interest is deductible; why not dividends? Many theories have been advanced to justify this double tax, but none have won wide support among scholars.
(Interestingly, in your example, what probably would happen is that Bob would essentially be the effective managing partner of a general partnership. So we would be under partnership tax rules.)
A last quibble: partnership tax actually taxes partners even while the income is held by the partnership. (Well, generally; there apparently are some odd trust schemes that sort of avoid this.) in general, Partnerships must allocate the income to the partners, who bear the burden of tax. Then, they must later distribute the income in accord with how they've allocated it.
Payment of dividends isn't either interest or a repayment of principal, since there is no obligation to pay dividends. They're also not expenses, since the company would generate the same revenue with or without paying dividends.
You are assuming that the company could obtain financing while never buying back stock or paying dividends? This seems to be an implicit (and often explicit) part of the fiduciary duty of the corporate officers (maximizing shareholder returns in the short or long term). I would not purchase stock from a corporation that promised never to return money to shareholders.
That will mean that the money Facebook makes around the world is just taxed at whatever country Mark Zuckerberg lives. It doesn't look like it can work in such a globalized world.
Meaning Austrian people pay money to a US corporation, the money is lost from the Austrian circulation, and won’t be taxable either.
That issue – of global profits all being moved into the US or taxhavens – has happened for many years now, and is severely hurting the economies of many countries.
One solution I've heard proposed is taxing revenue. If a business, like Apple, Starbucks or Amazon sells something in a country, they pay a percentage of the revenue, not the profit.
It would be a very drastic change, and may items would need to have their prices adjusted, as low profit items could be a problem.
The clever bit is that tax heavens are not longer possible, because it's not important where you move your profit to.
This is not a solution, and it is not clever but stupid.
If someone in power is so stupid to do it, companies will stop operating on their country but the world will continue going around and tax heavens will continue existing.
Governments are bankrupt totally now, expending way more that what they earn, with 5% deficits or more and want to raise more and more money in taxes, but there is a limit on what they could extract, as people can stop working if they become slaves.
I honestly don't believe that a country would stop having companies, or not have access to certain products because of such a tax. Remember your country would have no corporate income tax, it's the consumers of your product who are effectively paying the tax. Only companies not making a profit would take issues with such a scheme.
Take Q8, they own gas stations in Denmark. Apparently they've made no profit in Denmark, EVER. That is of cause a blatant lie. They've just moved the profit abroad. Taxing the revenue, directly at the pump, would either drive a lying company out and make room for more honest ones, or they would start paying their share.
There's ALWAYS someone who see an opportunity. Coca Cola leaving because they refuse to pay your tax? Fine Pepsi will swoop in that same day.
What you're suggestion is that companies will only ever operate in countries that makes it possible to be creative with taxes.
Why would any business stop operating in a country when they can simply raise prices to cover the tax? Everyone else will have to raise prices as well so nobody would be at a competitive disadvantage.
If someone in power is so stupid to do it, companies will stop operating on their country
It depends, for we have a state level test of this, Washington State and Boeing, which has a very boom and bust pattern of profitability. Of course, political muscle was used on them when they last tried to expand outside of the state, but I'm sure that initially, when the gross receipts tax was imposed, it just cost too much for them to move their factories elsewhere.
Of course, this tax does nothing good for other companies that it hits (there's a lower threshold as I recall, otherwise few would ever start up a company in the state), that aren't so profitable.
VAT isn't a sales tax. But yes, it's moving the entire taxation of companies to the sales tax level.
The US already have sales taxes, at least in some places. The US generally, as is my understanding, doesn't have a VAT. VAT is a consumption tax, sales taxes are taxing the sellers purchase.
The US has sales taxes in most places, and there's a bewildering number of them, e.g. in my home town that I've retired to, I could be paying the state sales tax, I'm sure some states allow counties to do it, the city sales tax (and my city spans two counties), and a special tax for the shopping area, each of decreasing size.
There's also exemptions or lower rates for things like food, and even sales tax "holidays" when certain classes of items are free of sales tax for a few days. All of this complexity is one reason Internet companies don't want to collect it.
If we have a VAT, no one's told me about it (a general one, anyway)! The concept does get mooted every once in a while.
Because corporations thrive purely on the society they are making money from. No company lives in a vacuum.
However great and driven Elon Musk might be, he would never have made a single cent if he had started Paypal in Somalia. And what differentiates a market in Somalia from another market like, let's say, France?
Let's take this further. Zuckerberg makes a lot of money in France solely thanks to the technological infrastructure built by the society living there. Why would the French public let Facebook exploit this environment for his personal profit, while not paying its fair share to maintain the very same socio-economic environment that allows it to make money in the first place (and that everybody else is contributing towards)? Anyone would describe this behavior as parasitism.
Let's imagine you spend ten years building a shoe factory. After ten years, a stranger comes in and starts to use your factory at night to make shoes and sell them for his profit. Are you going to let him use your factory for free?
Even if your answer to this is "Well maybe there shouldn't be any public infrastructure in the first place", it simply shifts the problem somewhere else: if a private company would be managing the infrastructure, rest assured they would also ask for usage costs...which is precisely like a tax. A feodal tax.
Is your argument that owners would just not take any money out of the company so as to not pay the taxes? In OPs example the company would still be taxed but just at different times
I don't see how. Most owners are not taxable residents of the country where companies operates. If I'm personally taxable in the Bahamas, but I make all my capital profits from a company operating in a country with no corporate taxes, that country will never ever see a single tax cent from me, despite me leveraging their infrastructure and society for profit (for virtually free). I would directly profit from their roads, their transportation, their education, their Internet, their police, their laws, their justice, while never contributing to it.
> Even if your answer to this is "Well maybe there shouldn't be any public infrastructure in the first place", it simply shifts the problem somewhere else: if a private company would be managing the infrastructure, rest assured they would also ask for usage costs..
I wouldn't say there shouldn't be public infrastructure. For the last part, though, mightn't Facebook consider charging the company managing infrastructure for the ability of their customers to access Facebook? I think people would be a lot less likely to subscribe to an ISP that didn't facilitate access to Facebook.
That is what Estonia does. Corporate income tax is 0%. They tax companies, on a flat rate, on the dividends paid out. This encourages reinvestment and growth.
And that is how it should be. But the US and EU tax codes are such a bodge. F500 CEOs are taking $1 salaries because why pay 55% on a $20mm salary when you can pay 15% on preferred stock
dividends.
The 15% is actually not as cheap as it looks, because it is double-taxed as it is taken out of retained earnings (which is taxed at the corporate level), whereas salaries are an expenditure, thus the money is not taxed at the corporate level. To the individual, 1 MM in dividends is better than 1 MM in salary, but paying dividends or salary are almost the same to the company and the government. This is why sole proprietorship corporations often pay their owners a salary instead of only dividends (or buybacks).
>Mr Kern, who heads Austria's Social Democrats and the country's coalition government, also said Facebook and Google had sales of more than 100m euros each in Austria.
I'm not an expert on Austria but this suggests to me that this person can propose and possibly pass laws in Austria. He is not just an activist who only has the power to give interviews to BBC. If he thinks that Amazon and Starbucks are not paying enough tax to Austria, why doesn't he change Austrian law to charge them more tax? Don't give me some bullshit about how corporate lawyers will find loopholes - you run the government! Do your job! Change the law! Or at least make a show of trying.
Kern only came into power in May, the social-democrats (SPÖ) have been in a "great coalition" with christian-democrats (ÖVP) since 2007. This coalition has been on rickety legs for many years now and there's not much the two parties agree on. There have been no noteworthy reforms for a decade.
There's also the threat of the populist far-right FPÖ, which has been gaining power again after two failed coalitions with the ÖVP 15 years ago (The FPÖ have been polling at ~30% for several months now, which is the largest approval of all parties).
Several members of the ÖVP-government and regional bodies are actively working against the great coalition and undermining the head of the ÖVP, sympathising with going back in a coalition with the fascists.
For all these reasons, Bundeskanzler Kern is not as powerful in legislature as would be desireable. Also I understand his remark as suggestion for a discussion and possibly a proposal for an EU-wide discussion on unifying tax laws. And he's probably fishing for votes with public statements on popular topics.
Personally I think he's the most promising Bundeskanzler we had in a long time, as he's an intellectual and is charismatic enough to potentially neutralize the threat of a far-right government.
From a US perspective, it's common for our top politicians, when talking about a problem, to present a specific proposal for legislation they would use to fix the problem. It makes their words more credible to me. It is easy to complain that things are bad, harder to describe in detail how things could be better. To be cynical, these plans are written by staffers and the politician may just memorize the key points. But it at least demonstrates there is some commitment to the issue.
> If he thinks that Amazon and Starbucks are not paying enough tax to Austria, why doesn't he change Austrian law to charge them more tax?
Because Austria is a member of the EU and businesses in the EU but outside of Austria can operate there while paying taxes from their profits to their "home" country (VAT must be paid in Austria).
Now this is all good if the system wasn't so easy to exploit. Typical arrangements (like "double irish" or "dutch sandwich") have four, five or more subsidiaries in different legislations, each with their own locally negotiated tax breaks, doing complicated loan arrangements and IP licensing schemes that result in effectively zero tax (or a flat fee) and all the profits esacpe to Bermuda and Caymans.
There seems to be an Europe-wide crackdown on practices like this, and the Apple decision from earlier this week is just the beginning.
I'm really glad that this exploitative practice is (hopefully) coming to an end and the multinationals start paying their fair share.
So the EU will not allow Austria to pass, for example, a tax on internet advertising in Austria (in the article the Chancellor complains that Facebook and Google don't pay advertising duty in Austria)?
Amazon and Starbucks spend a lot of money to hire highly competent tax attorneys and other staff to minimize their payment of taxes. Instead of complaining, countries need to pay more money to hire even brighter people to write better tax laws. Citizens of these countries need to elect officials who will do the hiring and not have obstructive laws that prohibits the payment of the large salaries and fees necessary to hire these competent people.
Oh wait. The difference is there's no EU-wide corporate tax, whereas US federal corporate taxes are relatively large compared to the state levies. So there's a much larger incentive for companies to seek out EU states that are willing to undercut their neighbors.
Well, you can threaten to throw them out of the EU if they don't fix their unfair (to other member countries) laws.
The EU should have more statutory authority for laws like this just as in the case of the US Federal Government over State governments.
At any rate, don't blame Amazon, Starbucks, but rather blame wealthy governments that refuse to spend the money for talent that can fix the laws (or iteratively "refix" them).
The tax attorney thing is a red herring. Wal-Mart averaged a 29% tax rate from 2008 to 2012--higher than your average American and much higher than companies like Apple and Google. You think Wal-Mart can't afford good tax lawyers? Or to lobby aggressively for tax breaks?
No, the problem both Wal-Mart and the local sausage cart have is they're "meat space" businesses. They can't shift profits to low-tax jurisdictions by parking key IP there. Their ability to arbitrage otherwise reasonable tax laws is limited by the physical nature of their businesses.
The countries simply need to pass laws or use some sort of legal intervention that counter this abuse of the law.
Many US firms were buying out foreign firms and transferring their HQ to the bought out firm, simply to avoid taxes, not for any other strategic or operational reasons. Pfizer going to have a $160 billion merger with Allergen for this very reason, called an "inversion" but the US government intervened and the merger and Pfizer's tax avoidance was called off.
The countries simply need to hire higher competent people to construct their laws including addressing those newer types of firms such as Apple and Google. Since Wal-Mart and Starbucks are both "brick and mortar" it seems strange that Starbucks can have favorable taxes but not Wal-Mart.
Countries simply need to hire very competent people to construct the laws. Their problems with taxes is one of market competition for intelligent people to write the laws with Amazon and Google who hire people to "legally" skirt the laws, often acting in "grey" areas and loopholes.
Hi, I am Austrian and I read the original interview in an austrian newspaper. It was very unspectacular and I am quite amused that it got international attention.
Our prime minister is wrong or at least slightly populist here. Yeah, Facebook/Google are not paying advertising duty. But no one does, at least in the internet. You only have to pay this duty if you advertise in TV, Radio, newspaper, etc. but it does NOT apply for the internet! See for yourself on the homepage of the austrian finance ministry (unfortunately in german): https://www.bmf.gv.at/steuern/a-z/Werbeabgabe.html. The law is from 2000, so probably before advertising in the internet became big.
Even if they change this law to include the internet, the Austrian companies that want to advertise would have to pay this tax (5% btw) since Google/Facebook do not have any offices in Austria (see chapter "Abgabenschuldner" in the link above). Google/Facebook don't even need to care about this law! (apart from that extending the law could make advertising in the internet more unattractive).
Why should they even pay corporate taxes in Austria? As already said they don't have any offices here.
The smaller you are as a business, the closer you are to being an individual and less of a business. Of course, as an individual, basically any money you earn is taxed. You don't get to not pay tax on the $1,500/mo rent for your apartment where as as a business, you can deduct your offic rent.
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[ 2.7 ms ] story [ 113 ms ] threadThere are plenty of Dutch online retailers (e.g. bol.com and coolblue.nl) but their prices are significantly higher (even factoring the slight difference in VAT). Considering we're supposed to be in a "single market", I've never been able to figure out why that is.
I only know about it from those people because they order so much on amazon.
They may be using amazon.de, but so are most central euro countries.
In Denmark, people generally either buy from .de or .co.uk.
Certainly people order less from amazon than in the states, but the presence is still pretty huge.
I live in Vienna, and I order a few orders from amazon every day. Last year I had over 600 amazon.de orders. Generally I try to order only Prime stuff.
The vast majority of orders (over 90%) come from Salzburg, Austria, although in a few occasions I even had same day shipping, those came from somewhere even closer.
The location printed on the label is the place they hand over the package (trucked from somewhere). I'm a bit surprised they seem to do that in such a volume in Salzburg. Previously they mostly used Allhaming (usually called Linz on packages).
For example, most my packages in Germany are labelled "Radefeld - Direct" but they originate from Poland or the Czech Republic, not the Amazon logistics center near that.
They also print a return address on the labels which is often another place distinct from outbound delivery (mostly Graben for me). Amazon uses multiple locations to accept packages and forward them to their warehouses.
I don't know anything about their same-day logistics though. It's the first time I hear that for Austrian addresses and no mention on their homepage, too.
Starbucks, though, I'm assuming they've got retail shops in Austria? That just means they can afford better tax lawyers.
And maybe they overtax those sausage stalls, lots of/most every? country has tax regimes with lots of insanity. Apple wouldn't be playing the games it plays with the US if we didn't have the 2nd highest or so corporate tax rate in the world (e.g. see https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates when you factor in state tax rates only Cameroon is perhaps higher).
While I was doing the search for that, I noted that as a region Europe has the lowest, but that's no doubt not accounting for VATs, which the US is allergic to, at least unless one of the big other categories of taxes is totally killed off (like, with a "this time we mean it" Constitutional amendment).
Anyway, my point is that all this results in all sorts of distortions. For example, when the Reagan individual tax rate cuts kicked in, I noticed my parent's business and investing strategies change as tax avoidance became much less important. In his working lifetime, the top rates went from 91% ("We Like Ike???") to 70% (which as I recall was split between 50% or more for "earned" and 70% or more for "unearned" (investment) income), to 38.5%, to 28%, before it started going up again (even the George W Bush tax rate cuts only dropped them 4.6% to 35%).
And going back to the distortions, the family exemptions allowed a normal family prior to JFK's 1964 supply side rate cuts to survive with the lowest bracket being 20%; those weren't adjusted for inflation until Reagan's reforms, which turned them into a pretty minor thing with how inflation savaged the dollar during that long period (the CPI peaked at like 13-14% around the time Reagan entered the Oval Office).
How low do you think that tax rate would have to be? Ireland's corporation tax rate is just 12.5%, but Apple didn't pay that either. They had a special deal under which their effective tax rate was as low as 0.005% to 1%. This is the deal that the EU has now ruled against under furious protests from Tim Cook personally and the US government.
So yes, if the US lowers its corporation tax rate to effectively 0% then Apple will stop playing games.
My understanding is that the numbers I quoted (in good faith) are derived from the profits Apple would have made in Europe had they not been allowed by the Irish government to use unrealistic transfer pricing.
http://europa.eu/rapid/press-release_IP-16-2923_en.htm
The numbers are certainly not meaningless, but whether or not they are misleading is for a court to decide. It was certainly not my intention to mislead and I do not have all the information to come up with more reliable estimates of Apple's real profits in Europe.
Also, as someone who is liable to pay personal taxes on top of profits already taxed through corporation tax I don't feel particularly biased or inclined to score political points in favor of higher taxes.
It is simply my opinion that shifting government income from one tax to another isn't necessarily going to improve avoidance overall. It is also my opinion that taxes always have to be compared to what they buy us, in terms of actual services and also in terms of being humane.
But surely you can see that 35% is so high a rate they'll focus more on tax avoidance than is healthy for any of these parties, including themselves?
The item I saw about regions indicated Europe was at around 18%. The nickff cited 6%, 12%, 18%, all those are reasonable, as well as 0%, since the taxes they pay by definition eventually get passed on to others. Some wags had commented WRT to the Christian duty to tithe, "If 10% is good enough for God, why isn't is good enough for the Federal government?"
That they and so many other US based companies have accumulated such huge offshore pots of money is one of those distortions I go into in my rather long post you're replying to. I submit to you it wouldn't be so huge if repatriating it to the US wouldn't automatically cost them 35% of it. By policy endorsed by no less a moral authority than the US Supreme Court, it's their right, if not their duty, to avoid as much tax as they can.
I don't want to defend the US corporation tax structure, but I don't think corporation tax should be considered in isolation. Other countries have a low corporation tax and make up for it by high employer contributions to social security or other taxes.
Now all the profit is offshore. Everybody happy, except the Austrian government (who don't get corporate tax because the franchise hardly makes any profit in Austria) and sausage stands (who wonder if they could make more money if they join the Starbucks franchise)
And the population of Europe, who does missing out on taxes from these large corporations. This is not an Austrian issue, but one of the whole EU.
[0]: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-f...
Bakery & cafe food is definitely their own [0]. They also don't offer the full drink menu.
[0]: http://www.barnesandnoble.com/mobile/h/cafe
You can see that B&N lists 12 items under Espresso-based beverages (even that is an overestimate because they include normal coffee and iced tea lemonade) [0], while Starbucks Espresso-based list has 31 items [1]. Newer items like the Flat White are not at B&N cafes.
Source: Spent a lot of time at Starbucks in college while my girlfriend was a barista.
[0]: http://www.barnesandnoble.com/h/cafe/espresso-beverages
[1]: http://www.starbucks.com/menu/catalog/product?drink=brewed-c...
International trade is not a new problem. Car manufacturing has been internationally for a while. Rules for transfer pricing have been established. The challenge is with this construct of intellectual property where arbitrary valuations disconnected from any underlying real trade are easier to get away with.
It used to matter less. It matters more now and tax innovations are getting more scrutinized.
A corporation has effectively only a few things to do with their revenue which are or can be directly taxed more effectively.
It can hire more people, or pay it's employees more, which means that money is taxed as income.
It can invest the money directly which means that return on that investment can be taxed as capital gains.
It can pay out dividends to it's shareholders which means that this money can again be taxed directly as capital gains.
It can invest that money internally to expand which again can be taxed at various levels, sales tax, income tax, property tax etc.
Corporations are legal persons, and income accruing to distinct legal persons is subject to tax. E.g. I get paid by my employer, and then pay tax on that. Then I pay my nanny with post-tax dollars, and she pays tax on that. That's not "double taxation"--just the nature of an income tax.
Imagine that instead of forming a corporation, a bunch of investors nominated Bob to be the legal entity in charge of the whole business. Bob held all the bank accounts, directly employed everyone, and booked all revenue minus his expenses as his income. A series of contractual arrangements required Bob to pay out the profits to the investors. Under that circumstance, there would be no doubt that profits would be taxed when they initially accrued to Bob, then again when he paid the investors.
It should be noted that nothing precludes companies from organizing as something other than a corporation. Partnership income, for example, is only taxed when it is received by a partner.
The distinction is that the tax system does not give a deduction to individuals who are spending their money on personal "consumptive" reasons. By and large, the system does give deductions for expenses incurred for business.
In this light, the double taxation of corporations is unusual. Clearly, the dividends are to pay back investors, just as interest is part of paying back lenders. But interest is deductible; why not dividends? Many theories have been advanced to justify this double tax, but none have won wide support among scholars.
(Interestingly, in your example, what probably would happen is that Bob would essentially be the effective managing partner of a general partnership. So we would be under partnership tax rules.)
A last quibble: partnership tax actually taxes partners even while the income is held by the partnership. (Well, generally; there apparently are some odd trust schemes that sort of avoid this.) in general, Partnerships must allocate the income to the partners, who bear the burden of tax. Then, they must later distribute the income in accord with how they've allocated it.
Meaning Austrian people pay money to a US corporation, the money is lost from the Austrian circulation, and won’t be taxable either.
That issue – of global profits all being moved into the US or taxhavens – has happened for many years now, and is severely hurting the economies of many countries.
It would be a very drastic change, and may items would need to have their prices adjusted, as low profit items could be a problem.
The clever bit is that tax heavens are not longer possible, because it's not important where you move your profit to.
If someone in power is so stupid to do it, companies will stop operating on their country but the world will continue going around and tax heavens will continue existing.
Governments are bankrupt totally now, expending way more that what they earn, with 5% deficits or more and want to raise more and more money in taxes, but there is a limit on what they could extract, as people can stop working if they become slaves.
Take Q8, they own gas stations in Denmark. Apparently they've made no profit in Denmark, EVER. That is of cause a blatant lie. They've just moved the profit abroad. Taxing the revenue, directly at the pump, would either drive a lying company out and make room for more honest ones, or they would start paying their share.
There's ALWAYS someone who see an opportunity. Coca Cola leaving because they refuse to pay your tax? Fine Pepsi will swoop in that same day.
What you're suggestion is that companies will only ever operate in countries that makes it possible to be creative with taxes.
It depends, for we have a state level test of this, Washington State and Boeing, which has a very boom and bust pattern of profitability. Of course, political muscle was used on them when they last tried to expand outside of the state, but I'm sure that initially, when the gross receipts tax was imposed, it just cost too much for them to move their factories elsewhere.
Of course, this tax does nothing good for other companies that it hits (there's a lower threshold as I recall, otherwise few would ever start up a company in the state), that aren't so profitable.
The US already have sales taxes, at least in some places. The US generally, as is my understanding, doesn't have a VAT. VAT is a consumption tax, sales taxes are taxing the sellers purchase.
The differers is very subtle.
There's also exemptions or lower rates for things like food, and even sales tax "holidays" when certain classes of items are free of sales tax for a few days. All of this complexity is one reason Internet companies don't want to collect it.
If we have a VAT, no one's told me about it (a general one, anyway)! The concept does get mooted every once in a while.
However great and driven Elon Musk might be, he would never have made a single cent if he had started Paypal in Somalia. And what differentiates a market in Somalia from another market like, let's say, France?
Let's take this further. Zuckerberg makes a lot of money in France solely thanks to the technological infrastructure built by the society living there. Why would the French public let Facebook exploit this environment for his personal profit, while not paying its fair share to maintain the very same socio-economic environment that allows it to make money in the first place (and that everybody else is contributing towards)? Anyone would describe this behavior as parasitism.
Let's imagine you spend ten years building a shoe factory. After ten years, a stranger comes in and starts to use your factory at night to make shoes and sell them for his profit. Are you going to let him use your factory for free?
Even if your answer to this is "Well maybe there shouldn't be any public infrastructure in the first place", it simply shifts the problem somewhere else: if a private company would be managing the infrastructure, rest assured they would also ask for usage costs...which is precisely like a tax. A feodal tax.
I wouldn't say there shouldn't be public infrastructure. For the last part, though, mightn't Facebook consider charging the company managing infrastructure for the ability of their customers to access Facebook? I think people would be a lot less likely to subscribe to an ISP that didn't facilitate access to Facebook.
>Mr Kern, who heads Austria's Social Democrats and the country's coalition government, also said Facebook and Google had sales of more than 100m euros each in Austria.
I'm not an expert on Austria but this suggests to me that this person can propose and possibly pass laws in Austria. He is not just an activist who only has the power to give interviews to BBC. If he thinks that Amazon and Starbucks are not paying enough tax to Austria, why doesn't he change Austrian law to charge them more tax? Don't give me some bullshit about how corporate lawyers will find loopholes - you run the government! Do your job! Change the law! Or at least make a show of trying.
There's also the threat of the populist far-right FPÖ, which has been gaining power again after two failed coalitions with the ÖVP 15 years ago (The FPÖ have been polling at ~30% for several months now, which is the largest approval of all parties).
Several members of the ÖVP-government and regional bodies are actively working against the great coalition and undermining the head of the ÖVP, sympathising with going back in a coalition with the fascists.
For all these reasons, Bundeskanzler Kern is not as powerful in legislature as would be desireable. Also I understand his remark as suggestion for a discussion and possibly a proposal for an EU-wide discussion on unifying tax laws. And he's probably fishing for votes with public statements on popular topics.
Personally I think he's the most promising Bundeskanzler we had in a long time, as he's an intellectual and is charismatic enough to potentially neutralize the threat of a far-right government.
From a US perspective, it's common for our top politicians, when talking about a problem, to present a specific proposal for legislation they would use to fix the problem. It makes their words more credible to me. It is easy to complain that things are bad, harder to describe in detail how things could be better. To be cynical, these plans are written by staffers and the politician may just memorize the key points. But it at least demonstrates there is some commitment to the issue.
Because Austria is a member of the EU and businesses in the EU but outside of Austria can operate there while paying taxes from their profits to their "home" country (VAT must be paid in Austria).
Now this is all good if the system wasn't so easy to exploit. Typical arrangements (like "double irish" or "dutch sandwich") have four, five or more subsidiaries in different legislations, each with their own locally negotiated tax breaks, doing complicated loan arrangements and IP licensing schemes that result in effectively zero tax (or a flat fee) and all the profits esacpe to Bermuda and Caymans.
There seems to be an Europe-wide crackdown on practices like this, and the Apple decision from earlier this week is just the beginning.
I'm really glad that this exploitative practice is (hopefully) coming to an end and the multinationals start paying their fair share.
The EU should have more statutory authority for laws like this just as in the case of the US Federal Government over State governments.
At any rate, don't blame Amazon, Starbucks, but rather blame wealthy governments that refuse to spend the money for talent that can fix the laws (or iteratively "refix" them).
No, the problem both Wal-Mart and the local sausage cart have is they're "meat space" businesses. They can't shift profits to low-tax jurisdictions by parking key IP there. Their ability to arbitrage otherwise reasonable tax laws is limited by the physical nature of their businesses.
Look at IKEA. They operate as a non-profit, but transfer money to a holding company which licenses the IKEA brand to the non-profit.
Many US firms were buying out foreign firms and transferring their HQ to the bought out firm, simply to avoid taxes, not for any other strategic or operational reasons. Pfizer going to have a $160 billion merger with Allergen for this very reason, called an "inversion" but the US government intervened and the merger and Pfizer's tax avoidance was called off.
https://www.washingtonpost.com/business/economy/pfizer-aller...
Countries simply need to hire very competent people to construct the laws. Their problems with taxes is one of market competition for intelligent people to write the laws with Amazon and Google who hire people to "legally" skirt the laws, often acting in "grey" areas and loopholes.
What is really not acceptable is that a small company will pay 1 or 2 order of magnitude more tax than the giant they directly compete against.
Our prime minister is wrong or at least slightly populist here. Yeah, Facebook/Google are not paying advertising duty. But no one does, at least in the internet. You only have to pay this duty if you advertise in TV, Radio, newspaper, etc. but it does NOT apply for the internet! See for yourself on the homepage of the austrian finance ministry (unfortunately in german): https://www.bmf.gv.at/steuern/a-z/Werbeabgabe.html. The law is from 2000, so probably before advertising in the internet became big.
Even if they change this law to include the internet, the Austrian companies that want to advertise would have to pay this tax (5% btw) since Google/Facebook do not have any offices in Austria (see chapter "Abgabenschuldner" in the link above). Google/Facebook don't even need to care about this law! (apart from that extending the law could make advertising in the internet more unattractive).
Why should they even pay corporate taxes in Austria? As already said they don't have any offices here.
http://www.telegraph.co.uk/news/worldnews/europe/eu/11902939...