
Welsh village adopts multinational tax tactics - sofaofthedamned
http://www.independent.co.uk/news/uk/crickhowell-welsh-town-moves-offshore-to-avoid-tax-on-local-business-a6728971.html
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stevetrewick
The article doesn't make it clear or explicit which particular methods are
being used here, but the methods used by the companies mentioned to 'avoid'
tax are not 'loopholes' they are standard tax regs for providing companies
with access to the EU single market.

That you can (for example) register a company in a single jurisdiction and
only pay tax there, and the whole transfer pricing thing are _not_ oversights
or loopholes, they are the point and purpose of the law.

Now, one may in good conscience take a position that this should not be so -
though that amounts to an argument for leaving the EU - but tax activists make
fools of themselves by insisting that companies behaving in ways the EU
_explicitly intends_ them to behave are somehow cheating.

If any of the Welsh traders sold goods or services into another EU country
they would themselves automatically be using the same 'loophole' by only being
taxed in the UK. This happens on purpose.

Modulo VAT MOSS which is just stupid.

~~~
ZenoArrow
> "are not 'loopholes' they are standard tax regs for providing companies with
> access to the EU single market."

Focusing on the legal technicalities of what constitutes tax evasion/avoidance
is kind of missing the point. The rule should be that you pay tax in the
country that you earned the money, based on the tax laws of that country. Any
games that involve laundering earnings through foreign subsidiaries in order
to avoid paying tax that would be owed based on the tax laws of the place
where profits were made is tax avoidance. I do not care whether laws have been
put in place to encourage tax avoidance, that does not excuse the behavior.

~~~
moonchrome
>The rule should be that you pay tax in the country that you earned the money,
based on the tax laws of that country.

So now instead of following one tax code and dealing with one tax authority
you have to deal with 28. The whole point of EU is to cut down on stuff like
that and reduce the cost of doing business between members.

~~~
ZenoArrow
Yes, if you trade in 28 countries then you should have to deal with the laws
chosen by 28 different governments.

Trade harmonisation is one option a government can pursue, but the more you
follow this path the further you give up the autonomy of the member state, in
this case it's debatable whether the medicine is worse than the disease.

Should also point out that despite the harmonisation goals of the EU, tax
avoidance still occurs within the EU by exploiting differences that exist,
such as the infamous Double Irish with a Dutch sandwich:

[http://www.investopedia.com/terms/d/double-irish-with-a-
dutc...](http://www.investopedia.com/terms/d/double-irish-with-a-dutch-
sandwich.asp)

~~~
moonchrome
> Yes, if you trade in 28 countries then you should have to deal with the laws
> chosen by 28 different governments.

Except that increases the cost of doing business even further. The whole point
of EU was increasing and simplifying trade and creating a open market so that
Europe can be more competitive.

~~~
ZenoArrow
> "Except that increases the cost of doing business even further."

Yes, but there's a tradeoff at play here between what's best for companies and
what's best for the citizens of each of the countries. If a law protects the
will of the citizens but also hinders companies then so be it. Company profits
are not the be-all and end-all.

~~~
lucaspiller
This is exactly what the VAT MOSS regulations have done, and it's been a total
failure. The only people it has really affected are small businesses who don't
have the resources to deal with it, so it comes out of their bottom line.

~~~
ZenoArrow
A failure? Sounds like if it's a failure it's because it's only a partial
solution, it's not fair to have these tax laws if you still allow big business
to circumvent them. If the loopholes can be closed can you see it working
then?

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buserror
I love Crickhowell, lovely little town - I have a base not very far in
Newbridge-on-wye.

I love the idea too, we were just discussing how the .gov is trying to squeeze
the IT contractor field, while at the same time still leaving the obvious
loopholes used by the megacorps to screw the system.

Seems that the lobbyists of the megacorps are still earning their keep...

~~~
sofaofthedamned
Yeah, IR35 started off that beating by the Government.

~~~
chillydawg
I think that was a perfectly valid change, frankly. Acting like a full time
employee and claiming the tax and pay perks of a contractor was obviously not
the intent of the law.

~~~
sofaofthedamned
I'm 50/50 on it. Was a contractor at the time and it was a blunt hammer
instrument that denied me the benefits a multinational would get when I
plainly wasn't a disguised employee.

It's like with the tax credits thing at the mo - I think people would stomach
the cuts more if the government was as ravenous about squeezing large
multinationals as the smaller guy.

------
roel_v
Talking about interesting tax tactics: the other day I got an email from an
Indiegogo project saying 'we ship directly from the EU, so EU customers don't
pay VAT.' At first I was like 'huh?', but after a while it turned out to be
true: they are supposed to charge VAT only if they are selling from within the
EU. They're not, they're a US company, collecting money through Indiegogo (not
sure if Indiegogo is a reseller or not, but doesn't matter for this case). So
they don't have to charge VAT to their customers. But VAT for foreign
purchases is charged only by customs; if they ship from within the EU, no VAT.
Meanwhile, if their EU production facility is a subsidiary of the US one (or
of an umbrella concern), they can still both reclaim VAT they paid, plus they
can shift profit offshore. No VAT paid anywhere (by anyone - not even the
customers, so a 20% competitive advantage!), low corporate taxes if they
choose so, it's awesome.

So I wonder: why don't more companies do this? I can see that for mass
produced cheap trinkets the 20% would not be profitable vs how much cheaper it
is to produce in China; but say for high-end furniture, manufactured in the
EU. Why don't they just 'sell' from their online (US, or Hong Kong for all I
care) shop which would give them a legal 20% advantage?

~~~
tiatia
Shipping time? Billing cost? Custom clearing? Don't forget, many customs have
quite low thresholds before they tax the hell out of imports. In Germany I
think you can have an item shipped up to 20 Euro. Also, many products could be
confiscated (dietary supplements, "medicine", food, electronics
(certifications)). Try to ship ANYTHING to Brazil. Good luck with that. And
hope you don't have to return anything.

Furniture? Good idea. I don't know what "high end" means but the shipping
costs are likely going to kill you.

On the other handL I shipped once a pallet from LA to Germany via Airfreight.
If you use a small provider, costs are quite low. The provider buys a kg air
freight US<>Europe around 1 US$ and resells it to you with a mark up. Still,
you have to clear customs and have to get it to the airport and then again
from the airport. Funny thing: The company who delivered it for me to the
airport included a bill for their services. It was only for finalizing the
product that I shipped to them. The EU customs charged him import taxes based
on that bill, not mine. Hence my customer saved a shit load of money.

~~~
roel_v
No, you'd ship from within the EU, so no customs clearing, low shipping time,
etc. My point was, it seems that as long as you sell via a company outside the
EU, but produce and ship from within the EU, you don't have to charge your EU
customers VAT.

~~~
tiatia
Why does this get down-voted?

Within the EU? True. But who has left money in this hyperfragemented market?
Many different languages, regulations, power supplies.

It is easier for Germans and Italians to sell to Americans than to each other
(at least B2C).

~~~
roel_v
It's not like 500 million ppl just sit around and buy nothing...

------
iamben
Do you know what? It didn't bug me so much that Facebook paid ~5k tax by
playing the system. It bugged me that my tiny company paid more because they
couldn't afford to play the system. As it stands small business has a huge
disadvantage because it can't afford the amazing accounts and legal team. It's
somewhere between sad, annoying and painful.

------
kspaans
Quite clever! I wonder if their plan really is easy enough for other small
businesses to follow with minimal overhead. I couldn't find any other sources
for this yet, though.

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adaml_623
It's inevitable that more companies will follow the lead shown here and the
difficulty of doing this will drop exponentially. At that time the government
will have to act and the best thing is that the game of follow the leader will
follow until either the tax regs are rational OR their are explicit rules put
in for the bigger companies.

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aries1980
Weird idea, but individuals pay taxes based on their income not on their
profits. What would happen if companies would pay taxes after their revenue
broken down per country not after their profits? I think the tricking the tax
system problem would be solved.

~~~
aries1980
Kiwis just introduced something like this: [http://www.nbr.co.nz/article/tax-
net-tightens-offshore-purch...](http://www.nbr.co.nz/article/tax-net-tightens-
offshore-purchases-video-music-first-governments-gst-sights-b-181673)

