
Starbucks and Fiat Chrysler tax deals 'illegal' in Europe - tellarin
http://www.bbc.com/news/business-34591476
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jedrek
Good. I don't understand why companies need to be bribed to come to markets.
Want to sell your goods, great, pay the same taxes every other company pays.
This is nothing more than government subsidies for specific private companies.

~~~
Shivetya
I have no problem if an area is trying to land a major contributor to the area
in jobs and future revenues. Giving tax breaks to get such tend to pay back in
that you get support businesses cropping up to support the original
beneficiary.

These deals however just don't appear to provide any benefit to the areas
affected, only to the companies. Is there a big pool of political
contributions in countries like these? Do they have the equivalent of PACs and
such?

~~~
the-dude
Starbucks has a roastery in The Netherlands, so that means jobs at least.

~~~
gizi
Modern business only hires profiles that are in short supply already. So, they
went to The Netherlands to exacerbate the shortages of skilled labour while
doing nothing for the insufficiently skilled unemployed ones. "Jobs" are never
a valid motivation to do anything, because the ones who don't have them, will
never have them.

~~~
xixi77
Does coffee roasting really require that high-skill labor?

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gizmo
Just for the record, the Netherlands has been proudly advertising their tax
deals for years.

See this presentation[1], slide 12. Right from the horses mouth:

    
    
        Reason 7 [to have a holding company in Holland]:
        Fiscal climate: Very competitive tax climate from
        its far-reaching tax treaty network to the
        possibility to conclude socalled[sic] advance
        tax rulings.
    

Utterly blatant. And notice the logo of Starbucks next to it. The Dutch
government _advertises_ that Starbucks pays practically nothing in tax, in
order to undercut other EU countries.

These tax deals usually take the form of a fixed tax guarantee: the company
agrees to place their holding company in the Netherlands and pay X euros in
tax for the next N years (2 to 5), regardless of their actual revenue or
profit. For the Dutch government this is just free tax revenue and if they
don't make a sweetheart deal with the multinational the holding company would
end up in Luxembourg or Ireland instead. This way the multinational can make
the countries fight for the most preposterously low offer.

[1]:
[https://www.rijksoverheid.nl/binaries/rijksoverheid/document...](https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/publicaties/2014/05/09/presentatie-
over-het-nederlandse-vestigingsklimaat/presentatie-over-het-nederlandse-
vestigingsklimaat.pdf)

~~~
solidangle
Starbucks also promised to create jobs in the Netherlands by locating their
European coffee bean processing plant there. Extra jobs and tax revenue sounds
like a pretty good deal to me.

~~~
Drakim
The problem is the "race to the bottom" as countries have to offer better and
better deals to outbid each other. It's a tragedy of the commons issue.

~~~
stevesearer
Just throwing this out there with no idea of the reality of it, but maybe it
is a good thing to have some downward pressure on tax rates from large
multinationals because without that it could end up just being a 'race to the
top' with countries continually ratcheting up rates unchecked.

~~~
_delirium
What's more common is that the large multinationals get a targeted carve-out
only usable by large multinationals, with the tax burden shifted to
individuals and small businesses. A small business cannot practically take
advantage of arrangements like "double Irish with a Dutch sandwich".

~~~
gnopgnip
The corporate tax rate is not as important because taxes will still be paid on
payroll and other uses of the money. The effective tax rate is not going to
change much as the corporate tax rate changes because so much of the companies
expenses are going to payroll and bonuses.

~~~
Retric
The goal of corporate taxes is to collect revenue from profits when a foreign
entity own the company. Taxing people only works when the owners live in your
country. Worse, high personal tax rates can encourage wealthy people to leave
your country either on paper or directly.

PS: If your corporate tax rate is zero, then your country is often better off
discouraging foreign investment.

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bpodgursky
In 100 years we're going to look back and realize what a waste of time and
effort corporate income taxes are. And what amount of time was wasted trying
to levy and avoid them.

In the end, you can recover the same money by taxing dividends and income
accordingly, and it's far more difficult to hide those (a person's residency
is less ambiguous than a corporation; and while you can try to play games,
with proper enforcement you will end up in jail for doing it).

Of course any politician will get castigated for suggesting removing the tax
entirely, but that's just politics and not sound economic policy.

~~~
toyg
The problem is that you remove corporation tax and next thing you know,
everybody has a personal "corporation" owning all his belonging, totally
untaxed. Something most people do already, btw, because corporation taxes are
usually much lower than income ones.

 _> a person's residency is less ambiguous than a corporation_

Lol, the opposite is actually true. A corporation is required to have a legal
address, without which it simply doesn't exist; a person can have "no fixed
abode" and still exist just fine. In fact, a favourite tax-dodging trick is to
be officially registered as living on a boat, or not spending more than a
certain amount of time in any country.

 _> with proper enforcement you will end up in jail for doing it_

That's very unlikely, when you directly or indirectly influence most people
making the rules... which you always do, if you're rich, regardless of age or
country.

~~~
AnthonyMouse
> The problem is that you remove corporation tax and next thing you know,
> everybody has a personal "corporation" owning all his belonging, totally
> untaxed.

Property tax is independent of corporate income tax. Moreover, putting income-
generating assets in the hands of a corporation to avoid personal income tax
is what happens today (the corporation is just incorporated overseas), so no
change there.

> Lol, the opposite is actually true. A corporation is required to have a
> legal address, without which it simply doesn't exist

He's using the wrong word. It isn't that a corporation's address is ambiguous,
it's that it's arbitrary. You can incorporate your business in whichever
jurisdiction has the most favorable taxes. You can't file your personal taxes
there unless you actually live and have citizenship there.

> In fact, a favourite tax-dodging trick is to be officially registered as
> living on a boat, or not spending more than a certain amount of time in any
> country.

Which is clearly illegal unless you actually do. And I don't think that works
in the US since US personal income tax is collected from everyone with US
citizenship regardless of residency.

~~~
toyg
_> Property tax is independent of corporate income tax._

Politically, it's very much not, at least not anymore. As we said, property is
now a concept almost entirely linked to companies, on the scale we're talking
about. Very few people directly own the personal corporate jets they fly
around in (this is just an example, please don't nitpick -- you can replace it
with pretty much any item of significant value you can think of, with very few
exceptions).

 _> You can incorporate your business in whichever jurisdiction has the most
favorable taxes. You can't file your personal taxes there unless you actually
live and have citizenship there._

That's unfortunately not the case. The UK has non-dom arrangements for non-
citizens spending significant time there; most countries will have something
similar -- the only exception being the US, which can sort-of strong-arm its
own citizens because of its exceptional power and reach. In most cases, the
global elite can shop around for their preferred residency, Montecarlo being
the pioneer in this sort of market.

 _> [living on a boat] is clearly illegal unless you actually do._

Unless you're famous enough that authorities can easily clock the time you
spend here or there, determining where you live X days per year in this day
and age is extremely difficult.

This is why a lot of famous people move to Montecarlo then have to eventually
switch back: unlike your average industrialist, they're very easy to keep
track of, being a small elite with entire industries dedicated to tracking
their movements and publicise them. Why did they think of moving to Montecarlo
in the first place? Because that's perfectly normal among the "regularly
rich".

 _> And I don't think that works in the US_

Yes, the US is an exception. Most other countries accomodate this exception in
their legal code, because their interest is to attract wealthy US citizens to
their shores. You cannot extend this norm to all countries, nor would it be
likely to survive the day the US stopped to be the dominant superpower it
currently is.

~~~
xixi77
\- Corporate jets are not the kind of property that is taxed in most places
(are there _any_ jurisdictions that tax this kind of property?!) -- in all
cases I know of, property tax is applied to real estate, and I suspect is
mostly borne by individuals.

\- Shopping for preferred residency is not what this is about -- if you
actually live in Monte Carlo, it only stands to reason that you would be
paying taxes in Monte Carlo.

\- This exact time clocking actually happens everywhere all the time (e.g.
take Florida residency as an example, or US tax residency for that matter)

~~~
tonfa
Switzerland has "property" (wealth) tax over all assets (movable or not).

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hellofunk
There are a lot of stories lately that throw the idea of "union" in "European
Union" into question. The tax discrepancies are just part of the picture; the
varied immigration policies are also getting a lot of attention. Hopefully the
EU can find a way to see itself as a truly unified whole, which would be of
great benefit to the world.

~~~
im3w1l
The European Union is very diverse, with many different peoples and cultures
and languages. This can be a source of strength but we also have to be mindful
of our different needs. We saw that during the "PIIGS" crisis.

The Mediterranean countries badly needed to inflate their currencies to
alleviate their crippling debt burden. Germany on the other hand wanted a
strong currency. Because they all had the same currency only of those two
parties could win. That was Germany and we still see the repercussions in the
southern Europe.

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ricw
Up to €30 million repayments since 2012? Is that it? these companies have
billions of revenue and yet that's all they have to pay? How about fining them
and the countries for doing so? This just seems wholly unfair.

This may be a small step in getting global players to play fairer, but from
what I can tell this is still cheating the system and depriving countries and
their citizens of badly needed tax income. All while competing unfairly with
smaller non-global companies.

I don't get why the EU still hasn't managed to get this under control.

~~~
fauigerzigerk
It's profits that get taxed, not revenues. By the way, Starbucks had an
effective tax rate of close to 35% in 2014. So it's not like they aren't
paying any taxes. The whole issue is about that mythical concept of a "fair
share" of taxes.

My idea of "fair" would be to make taxes porportionate to the extent to which
public infrastructures of a country are used. That may be easier to achieve
through fees than through taxes, which would come closer to your idea of
taxing revenues.

~~~
datashovel
I'd posit that a far better way to judge tax contributions would be to compare
them to a company's market cap. That's where we'll likely see stark
realization that multi-national corporations are living the good life.

~~~
xixi77
The problem with that is that changes in market cap don't directly translate
to taxable income -- and when they do, they do already get taxed through
capital gains.

~~~
fauigerzigerk
Capital gains tax is paid by the owners of the company when they dispose of
shares, not by the corporation itself.

But I agree that using market cap is not a good basis for taxation. Most
companies don't even have a market cap as they are not publicly traded. And
among those that do it would hurt the most innovative companies
disproportionatly.

Companies would start paying dividends way too early to keep the share price
low instead of investing and growing the business. Tesla has a market cap of
$27bn. They would pay more than half of what GM pays in taxes if market cap
was used as a basis.

I'd rather they use that money to keep innovating and tax them later on when
they make a real profit and use a greater share of public infrastructures.

~~~
datashovel
I'm definitely not suggesting it's necessarily the correct way to approach
taxation.

I think it's probably a "more fair" alternative to the current state of
things. And perhaps worthy of being part of the discussion.

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forrestthewoods
Sounds like the states should be on the hook rather than the corporations.
Sneaky sneaky Netherlands and Luxembourg. Betraying your own union for self
gain! How unsocial of y'all.

~~~
TeMPOraL
Indeed; as a matter of fact, they should be. This is a textbook coordination
problem.

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SixSigma
We should value companies not by earnings but by tax contributions.

~~~
detaro
Hm.... cap dividends relative to tax payments?

~~~
tobltobs
Or just tax dividends with a not neglect-able rate.

