
40% of multinational profits are shifted to tax havens each year - Mopolo
https://missingprofits.world/
======
cs702
Wow.

 _Power_ , in all its forms -- economic, cultural, social, political -- is
highly concentrated among impersonal giant corporations today.

For this kind of _legal_ tax avoidance would be impossible without mutual
understanding, collaboration, and coordination across national boundaries
among many disparate groups of people, all serving their corporate masters in
one way or another (as their employers, as their customers, as taxpaying
entities, etc.).

Consider only how many people and organizations must be involved to make tax
treaties and regulations around the world amenable to this kind of tax
avoidance.

Whether this kind of _concentration of power_ is good or bad for society, I'm
not sure.

My best guess is _no_ \-- but I'm not certain. For there is also evidence that
large-scale, concentrated business investment has been a force for good
worldwide.[a]

\--

[a] See, for example, Marc Benioff's book, "Trailblazer: The Power of Business
as the Greatest Platform for Change" at [https://www.amazon.com/Trailblazer-
Business-Greatest-Platfor...](https://www.amazon.com/Trailblazer-Business-
Greatest-Platform-Change/dp/1984825194)

~~~
buboard
The corp. tax loss is 10%

Its becoming clearer that the world is shifting towards coordinated world-wide
tax rates, similar to how central banks are coordinated. Modern trade is
complex and almost always multinational. Clear and easy tax rates will
actually allow anyone to enjoy fair taxation, instead of the current unequal
situation in which megacorps can use complex schemes to drastically reduce
their rates, while normal businesses can't.

Incidentally , the most unequal territory in terms of shifted profits is
Europe. An EU-wide corporate tax of 20-25% would be good for business

~~~
gamblor956
Tax rates are clear and easy. Corporations were taking advantage of loopholes
that increasingly no longer exist.

~~~
buboard
They are really not. E.g. i have to use a US business to collect in-game
payments because accounting for all the various taxes and VAT is a f’in
nightmare.

~~~
gamblor956
I did not say tax _compliance_ was easy. But figuring out the _rates_ is a
simple table lookup.

Also, using a US business to collect in-game payments no longer lets you avoid
VAT compliance if you sell to EU customers. Which is why you can now use an EU
VAT compliance "one-stop shop" which _does it all for you_.

~~~
Mirioron
Does that one stop shop have reasonable VAT minimums yet?

~~~
gamblor956
The one-stop shop will work with you whatever your VAT liability is.

If you mean do the EU countries have reasonable thresholds, then that's a
country-by-country issue. As it should be...

In that respect, tax is no different than each platform or website having its
own API and TOS. We don't make every Facebook and Google use the same API and
TOS, so why should we force countries to use the same tax thresholds?

~~~
Mirioron
> _If you mean do the EU countries have reasonable thresholds, then that 's a
> country-by-country issue. As it should be..._

When did they make this change? Because initially when the system started the
mini-one-stop-shop did not allow you to use VAT thresholds. That was one of
the big points of contention about it.

~~~
gamblor956
We're talking about 2 very different things.

It sounds like you're talking about a one-stop shop where _you_ get to decide
when you want to use it based on your own thresholds. You can certainly do
that, it depends on the specific one-stop shop as to how much is manual vs
done for you. Some are more technologically advanced than others.

I'm talking about the VAT thresholds at which you're required to collect VAT
(and thus would consider using a VAT one-stop-shop). At the time the one-stop
shops were introduced, there were no minimum thresholds.

Generally, beginning in 2019, EU members are supposed to have a EU 1000
threshold for requiring VAT compliance. But like all EU rules, this rule
requires local implementation and it hasn't yet been implemented by all member
states. So in some countries, you need to do at least EURO 1000 of business
before needing to deal with VAT compliance...but in others, its still EURO 0.

~~~
Mirioron
1000 euros sounds so incredibly low that it might as well not exist. I'm
actually amazed how poorly that's thought out.

~~~
gamblor956
There is a huge difference between 1000 euros and 0 if you're selling into a
country from elsewhere.

The threshold is high enough to not impact incidental foreign sellers but low
enough that it's not worth the costs of creating new sales entities to evade
VAT compliance.

------
systemtest
I am fairly certain 40% of all citizens would shift their income to a tax
haven if possible.

~~~
disintegore
This is a good point, actually. Attributing the blame to an extreme minority
of people (billionaires) is counter-productive. The problem is not their
individual moral failings (however numerous) but the system that permits them
to exist and incentivizes their parasitic and exploitative practices.

~~~
Redoubts
That extreme minority of people have a lot more power to influence the system
than the common man. It makes one wonder how the system got to be the way it
is in the first place.

~~~
disintegore
I don't mean to diminish their effect on the world. What I'm saying is that if
we take down Epstein and lapidate Bezos and whatnot, some other unscrupulous
person will take their place.

~~~
Red_Leaves_Flyy
That's a bridge to cross when it's arrived at. As it is impossible to foresee
every eventuality we can only deal with the problems at hand taking reasonable
precautions in the process.

------
mcv
Corporations being able to book their profits wherever they find it most
convenient to book them, is utterly unreasonable. They make their profits in
specific markets, and should be paying their taxes there. Profits made from
selling in the US should be paid in the US, profits made from selling in
Germany should be paid there.

The problem is, profits are the end result of a lot of complex corporate
operations across many countries. Who's to say which bit of which revenue was
used to pay for which costs, while other bits are pure profit?

There is another corporate tax that is entirely linked to the market they're
selling to, though: VAT. The problem is: it's only over revenue made from
selling to consumers, not to other businesses, and it's always completely
offloaded to those consumers, and therefore not really a corporate tax but a
consumption tax.

So how about treating profits that way? In every market, you count the revenue
made from selling in that market, and subtract the costs made by buying,
hiring, etc in that market. The difference is the profit you made in that
market, and you've got to pay your corporate tax over that amount to the tax
authority in that market.

That way you can't book your profits in a country where you didn't make any
revenue. And if somehow you do make your revenue in a country where you didn't
make incur costs, you pay tax over the entire amount. If you don't make
revenue, then tough. You could have made some tax-free revenue there.

I'm no international tax lawyer, though, so there are probably problems with
this idea. I like the principle, though: they've got to pay back to the market
they're profiting from, and not to a completely unrelated country that offers
them tax breaks for coming there.

~~~
Nasrudith
The problem with that is the expenses are already arbitrary with international
businesses. It is Hollywood accounting of making movies "never turn a profit"
writ large and arguably more honest. If say Amazon UK "rents" their branding,
storefront, and similiar from Amazon US the value.

Essentially unfixed value goods + deductions = massive loophole. Unfixed fuzzy
values are also very valuable to money launderers.

It is nastily entangled with other issues where a fix would carry major side
effects. It is a metaphorical lodged bullet against the heart wall - its
current existence is problematic but just yanking it out would do way worse
damage.

Removing all deductions wouldn't be viable from many other business models.

For simpler amateur closes I can see a simple close being an explicit "your
own external owned subcorporations never count as expenses" or "if you sell
these exploitable things they must be open market bid and are transaction
taxed" which would lead to lots of weirdness.

~~~
aembleton
That's why I think corporation tax should be applied to UK Sales - UK Costs.

\- Buy in the branding from the US? That can't be deducted.

\- Import from China? Can't be deducted.

\- Employ more people. Deductible

\- Buy more from UK suppliers. Deductible. Now go on and export more with
that. Those export sales won't affect your tax.

~~~
danaris
Unfortunately, that would make some entire categories of business non-viable.
Any business that relies on importing raw materials would be hit with
punishing taxes—unless their margins were huge, or their local & labour costs
were orders of magnitude higher than their import raw material costs, they
would likely not be able to operate.

Effectively, you would be taxing them on revenue, rather than profit.

~~~
mcv
They wouldn't get to deduct the costs of importing those raw materials, but
they would get to deduct the costs (labour, probably) of refining them and
making something out of those raw materials. And if they sell back to the
country they imported raw materials from, they get to deduct the raw material
costs from those profits (assuming that country uses a similar scheme).

But you're right, for a company that makes their revenue in a different
country than where they make their costs, it's effectively a tax on revenue.
So it would encourage countries to make their costs in the same countries
where they sell. It might stop companies from moving all their jobs to low-
wage countries.

I admit raw materials would be an issue; those are not equally available
everywhere. But at the same time, it would effect every company in that
industry equally, so I don't think the end result would be that much of a
problem. I guess it'd discourage extracting raw materials from poor countries.
Would that reduce their exploitation by western companies, or would that deny
them the exports they need to grow their economy? I don't really know.

~~~
IAmEveryone
That's totally unworkable. That banana you buy in the supermarket is imported
and sold with a gross margin in the low single-digits. Taxes the revenue at
income tax levels would effectively raise prices by the tax rate, i. e. 30% or
so.

If the supermarket doesn't buy the banana directly from the plantation, that
tax would accrue _at every step of the chain_. You'd effectively be
prohibiting trade and people would switch to monthly drives to local farms and
an entirely potato-based diet.

~~~
mcv
Many products already have a VAT tax of 20%, and that doesn't seem to stop
them. True, bananas would probably get more expensive, but again, countries
could mitigate this through trade deals with countries they believe have a
fair tax system.

But it's true, local products would have a significant fiscal advantage over
products from other countries, especially products with complicated supply
chains across many different countries, some of which countries are tax havens
that the target country doesn't consider having a fair tax system.

The change would probably be a shock to many companies, but it'd also make it
impossible for companies to shift their profits to tax havens.

------
ccvannorman
Remember when the Panama Papers came out and absolutely nothing happened?

On the plus side, exploitation of the system by the richest has been going on
for millennia, the only difference is that today more people are aware of it.

~~~
arethuza
That's not quite true - a _lot_ of stuff happened see:

[https://en.wikipedia.org/wiki/Panama_Papers](https://en.wikipedia.org/wiki/Panama_Papers)

Also, Mossack Fonseca was shut down.

Mind you - nothing happened to the basic approach of offshore shell companies
- which is the real problem.

~~~
ccvannorman
Oh my gosh, this is AMAZING! I was wrong, and thank you for this correction.

Hope in humanity restored, a little bit.

~~~
arethuza
I can _strongly_ recommend the Panama Papers book:

[https://www.amazon.co.uk/Panama-Papers-Breaking-Story-
Powerf...](https://www.amazon.co.uk/Panama-Papers-Breaking-Story-
Powerful/dp/1786070472)

------
rayiner
> This shifting reduces corporate income tax revenue by nearly $200 billion,
> or 10% of global corporate tax receipts.

To put that into perspective, the OECD has $50 trillion in GDP, and raises
over $17 trillion in tax revenue. So we are talking about 1.2% of total tax
revenue. Even taxing all multinational corporate profits at 50% with no tax
havens would only add up to less than 5% of all tax revenue.

I wonder what the agenda is when we spend so much time and political bandwidth
talking about rounding errors.

~~~
tapland
Because a yearly tax rate isn't a flat fee and yearly rates compound.

For example, from the widely shared article from business insider the other
week.

If there was a 3% tax on money past $1B Jeff Bezos wouldn't have beat $86B in
fortune, but he's at $160B today.

That's a 100% increase caused by what you call a 'rounding error'. Over not-
even-that-many-years.

~~~
rayiner
The vast bulk of taxes in the OECD are payroll and income taxes, which do not
compound yearly. Taxes on property account for just 2% of tax revenue in the
OECD: [https://www.oecd.org/tax/tax-policy/revenue-statistics-
highl...](https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-
brochure.pdf).

As to Jeff Bezos--what is the point of taxes? Raising money to pay for public
services, or trying to make Jeff Bezos have less money? I'm in the former
camp. I don't care how much money Jeff Bezos has, I care about raising revenue
to pay for public services.

Estimates are that an 8% wealth tax would raise between $60 billion and $430
billion annually: [https://www.manhattan-institute.org/issues-2020-taxing-
the-r...](https://www.manhattan-institute.org/issues-2020-taxing-the-rich-
wont-fix-the-deficit). Total U.S. government spending (at all levels) is
somewhere between _12 and 86 times_ as much as what an 8% wealth tax would
raise. (Of course, an 8% wealth tax would be completely insane and we would
never do it. Sweden and France topped out at 1.5% before they realized it was
a stupid idea and ditched it.)

I don't see the point of doing battle with billionaires (and potentially
driving them all to Canada, or Sweden, or France) to maybe optimistically
collect 8% more tax revenue, and realistically more like 1-3%. We could raise
$500 billion+ (an extra 10% of revenue) by adopting a Canadian style VAT.
Which has the major advantage that it's not insane and everybody else in the
OECD has one.

------
ifthenelseend
Tax heavens have MUCH lower taxes, but they also have other benefits like very
little bureaucracy, better privacy and better protection from lawsuits.

You will also have a lot of freedom managing your company. For example, if you
try to move a German company to another country and that country has lower tax
rate, then Germans will put additional punishing taxes on your company for the
next 10 years, despite you are not living there anymore. You will never have
that issue with offshore corporations.

~~~
ifthenelseend
If you need an offshore corporation, it can be opened for a few hundred $, but
if you need to do the same for example in Germany, then you have to pay 25000
EURO to found a GmbH.

~~~
icebraining
You don't _pay_ 25000€, you invest them in the company. And from what I can
tell, there's a "mini-GmbH" model that avoids even that requirement.

------
throwawaysea
FYI this isn’t new info; this research was published approximately 1.5 years
ago.

Personally I’m not certain that a government would put this extra money to
good use. Gabriel Zucman (advisor behind Warren’s wealth tax, whose doctoral
advisor was Thomas Piketty) is one of the people behind this website, and
seemingly has an ideological problem with personal and corporate wealth
accumulation. But I haven’t seen cogent arguments (from him or Piketty or
Emmanuel Saez) as to why accumulation of having a tax strategy is _wrong_.
Everyone would avoid taxes if they could, and governments aren’t exactly known
for putting capital to efficient use. Furthermore theee corporations have to
pay taxes when money is repatriated so this is more of a tax rearrangement
strategy. See [https://www.investors.com/politics/editorials/overseas-
profi...](https://www.investors.com/politics/editorials/overseas-profits-
return/)

~~~
mcv
> " _Everyone would avoid taxes if they could, and governments aren’t exactly
> known for putting capital to efficient use._ "

Those are different issues, though. Firstly, of course governments _should_
put their tax revenue to good use. When they don't, it's a failure of
democracy to hold the government accountable. Of course in a non-democratic
country or a severely compromised democracy, it's hard to impossible to hold
the government accountable. Either way, the thing to complain about is the way
taxes are used or misused, not their existence at all, as governments won't be
able to function without them. If you don't want governments or countries at
all, then argue for that directly, and I will sympathise. But you don't get
any sympathy from me if you want to live in a nice country but don't want to
pay any taxes for it.

And secondly, just that everybody would avoid to pay taxes if they could,
doesn't mean it's okay for corporations to be able to do so. It merely
underscores the inequality between people and corporations.

------
fedups
It's a bit odd seeing Zucman as a contributor here, considering his recent
economic advice has been criticized for assuming that tax avoidance isn't a
thing.

------
mamon
I think it is a good thing, like a free market for tax laws - you can choose
the one that best suits your needs :)

More seriously though, tax havens are necessary: governments are just as
greedy as corporations, so we need some means of tax avoidance, otherwise
politicians would just pass a law introducing 100% tax rate on everything.

------
Faint
What typically happens to corporate profits that are declared in a tax-haven?

Naively, when those profits are moved out of the tax-haven, they will create
income, profits or dividends on the entities they are transferred to, and
those will be taxed in turn. But there are probably ways around these taxes,
what would the point be otherwise?

------
cascom
If you want to go down the rabbit whole - read the link below...

[https://www.taxpolicycenter.org/briefing-book/how-does-
curre...](https://www.taxpolicycenter.org/briefing-book/how-does-current-
system-international-taxation-work)

------
theredbox
I am honestly not surprised. In my country the current government came up with
the idea to slam an additional tax on banks because they "think they earn too
much" and they need to share with the society.

------
cascom
My guess is that’s and approximation of the U.S. companies’ foreign source
income that they don’t want to be double taxed on...were the double taxation
to go away there wouldn’t be a need to play this game

------
buboard
the exact next line is rather underwhelming:

> This shifting reduces corporate income tax revenue by nearly $200 billion,
> or 10% of global corporate tax receipts.

Companies sometimes have to shift profits through tax heavens because many
'proper' countries are too bureaucratic when it comes to things like IP or
international profits handling. "Multinational" no longer means that it's a
megacorp - we live in a connected globe. Perhaps we should talk about why tax
compliance is such a big burden for mid-size businesses.

Seems Germany is losing more than everyone

------
mrfusion
Weren’t the corporate tax cuts supposed to help with this? Has it been
helping? Isn’t the us corporate tax rate now basically competitive with other
countries?

~~~
IAmEveryone
It helped in the way that legalising murder would lower the crime rate.

------
zacharytelschow
Breaking news: Businesses avoid taxes to maximize their profits just as
individuals do. More at 9.

------
mistrial9
the forty percent number here is quite ironic -- that is about the same
percentage of your total income you will pay in California as a high-value
working professional person.. high-tech engineer and a company, registered
nurse at a huge health company.. like that .. forty percent of you check is
-gone-, roughly.. you might get some back at tax time (yearly) if your papers
are a certain way..

------
onion2k
I'm surprised it's not more.

------
seibelj
Corporations already pay myriad income taxes and distributed profits (capital
gains and dividends) are taxed, paid by the recipient. Corporate tax is double
taxation and is inefficient. The optimal corporate tax rate is zero and I wish
people would understand this.

35% corporate tax rate the US had before the tax cut was completely absurd and
the only corps that paid it were small ones that didn’t have in house staff to
get around it. Even your favorite socialist European countries have far lower
rates than 35%.

If we set the rate to 0% companies would stop playing all these stupid games
and fire all the people who spend their lives waging this war. It drives me
bananas!

~~~
jessaustin
I think the idea is that taxes aren't only evaded at the level of the firm.
Shareholders _also_ evade taxes, but through "double taxation" they might
still end up paying _something_.

~~~
throwawaysea
I don’t think the designs of tax structures are that clever or principled. I
think it’s more like “we want to spend more and so let’s find the most
politically expedient revenue source we can get away with”. Over time, the
legislation (and spending habits) put in place by all the politicians that
come and go results in an inefficient, inscrutable mess that is modern
taxation and government spending, along with requisite anomalies like taxing
the same dollar several times.

------
vixen99
Not to stray into politics but in general terms, I'm wondering if decided
views on the topic (either way) would be altered for folk living in a country
which then democratically elected a government with a no-bones-about-it
Marxist agenda. Interestingly enough, I believe such an experiment might take
place shortly.

------
Wh1skey
Reduces taxes. Problem solved.

