
Amazon and Starbucks pay less tax than sausage stall, says Austria - dberhane
http://www.bbc.co.uk/news/business-37259278
======
readittwice
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](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.

------
hga
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.

~~~
mschwaig
Being able to pay tax lawyers that are so great that you basically don't have
to pay taxes kind of breaks the concept of taxation though.

~~~
hga
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](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).

~~~
fauigerzigerk
_> 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.

~~~
nickff
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?

~~~
Marazan
It's in the EU documents.

~~~
nickff
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.

~~~
fauigerzigerk
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.

[http://europa.eu/rapid/press-
release_IP-16-2923_en.htm](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.

------
davidf18
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.

~~~
rayiner
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.

~~~
davidf18
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.

~~~
kuschku
Or they should, like France, enforce the spirit of the law, not the letter of
the law.

------
heisenbit
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.

------
j_m_b
Why do we even tax corporations instead of just the income that its owners
receive from the corporation?

~~~
axlee
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.

~~~
oh_sigh
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

~~~
axlee
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.

------
zaidf
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.

------
jkot
Does amazon even have a presence in austria? I thought it is handled from
other countries.

~~~
hackerboos
Searching for Amazon Austria brings up Amazon Germany's website, that site
also serves the Dutch it seems.

~~~
dwightgunning
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.

------
skafjvhs
Something about this story seems off to me.

>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.

~~~
peletiah
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.

~~~
skafjvhs
Thanks for the context, it's very useful.

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.

------
SixSigma
You need to ask EU president Junkers about that, though he has the corrupt
politician's memory lapse in the face of evidence.

[http://www.telegraph.co.uk/news/worldnews/europe/eu/11902939...](http://www.telegraph.co.uk/news/worldnews/europe/eu/11902939/EUs-
Juncker-releases-secret-Luxleaks-tax-advice.html)

