
OECD unveils proposals to curb corporate tax avoidance - signa11
http://www.reuters.com/article/2014/09/16/uk-oecd-tax-idUKKBN0HB19F20140916?feedType=RSS&feedName=topNews
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Someone1234
This is very good news and about damn time.

While legal, this tax avoidance hurts competition (as smaller companies pay
tax normally, while larger ones do not) and also means that some countries can
actually lose money while hosting a business (e.g. business uses national
infrastructure but doesn't pay towards it).

You often hear companies use their employee's income tax as a way to justify
the business's tax avoidance, but that is utter nonsense: employee's
individual income tax goes to paying for infrastructure and service that that
employee utilises, not the additional infrastructure cost imposed by the
business itself.

One thing that does need to happen is that it needs to become easier for SMBs
to pay tax to dozens of different countries while operating in the digital
space. If they really want things like sales tax/VAT to be paid then they need
to make it relatively EASY to do. Otherwise SMBs just might start rejecting
customers from smaller countries (as paying the tax for a single transaction
is never worth the cost of setting it all up).

~~~
humanrebar
> employee's individual income tax goes to paying for infrastructure and
> service that that employee utilise

With all due respect, that is nonsense. There is nothing magic about the tax
dollars I pay to enforce that they go to the things I use. It's all one big
bucket of money.

Case in point: The social security surplus the U.S. ran when the baby boomers
were young will be really useful as the baby boomer start retiring. That money
ended up being spent just like any other tax dollars.

I agree with your point about tax loopholes being easier for large actors to
take advantage of. That seems like a good case for simplifying tax codes,
though, not a case for adding even more regulations that rich corporations
will inevitably circumvent.

And don't get me started on VAT. That stuff is just a big loophole from the
get-go (arbitrary tax rates based on arbitrary categorizations, etc.).

~~~
Someone1234
> With all due respect, that is nonsense. There is nothing magic about the tax
> dollars I pay to enforce that they go to the things I use. It's all one big
> bucket of money.

Yes, it all goes into a big pot of money. That doesn't preclude the fact that
infrastructure and services cost money, companies utilise both, that generates
additional expenses (due to wear and tear, etc). The rest of society winds up
paying for the company's share.

You don't really even attempt to argue why companies shouldn't pay. Unless the
"big pot of money" is your argument then in which case I am not following it.

> I agree with your point about tax loopholes being easier for large actors to
> take advantage of. That seems like a good case for simplifying tax codes,
> though, not a case for adding even more regulations that rich corporations
> will inevitably circumvent.

This just reads like a generic libertarian talking point. Currently the
regulations/agreements are: "You shouldn't tax companies twice on the same
profits." Getting rid of those regulations wouldn't solve tax avoidance, it
would just generate other problems (e.g. over-taxation, double-taxation, etc).

Interestingly I cannot imagine libertarians taking too kindly to double-
taxation given their views on taxation in general. But that's what
international de-regulation would result in...

Your solution is no solution at all. It is just giving up and hoping the
problem solves itself. Which is very naive to say the least.

~~~
innguest
Instead of defending my case I'll ask you this: why not stop taxing profits
and instead start taxing consumption? Seems much easier, no? And the
incentives would be in the right place.

~~~
notahacker
Because in general, consumption drives economic growth which makes life better
for everyone, whilst retained earnings allow complacent corporations to avoid
innovating because they have big enough war chests to scare potential
competition away. I can't fathom why you consider that to be a better
alignment of incentives.

~~~
bjterry
If there were no tax on capital gains and income, which is the whole point of
a consumption tax, businesses would have an incentive to distribute much more
of their retained earnings to shareholders. Part of the reason war chests have
gotten so big is because dividends are disadvantaged to capital gains in the
current tax code for many classes of investors. It's not totally clear that
the scenario implied by innguest's comment was one of taxes on capital gains
and income being removed, though. Keeping (a) income tax, and (b) tax on
capital gains/income, and (c) adding a consumption tax, while removing the
corporate tax on profits, doesn't seem like a particularly attractive
scenario, especially as compared with moving completely to a consumption tax
(which is the most favored tax among a consensus of tax economists).

~~~
dragonwriter
> If there were no tax on capital gains and income, which is the whole point
> of a consumption tax, businesses would have an incentive to distribute much
> more of their retained earnings to shareholders.

That's kind of a twisted way of looking at it. Insofar as there is a
disincentive to distribute retained earnings, its because long-term capital
gains are taxed as capital gains, but dividends are taxed both as corporate
income and (currently, usually) as long-term capital gains to the recipient.

Simply allowing expensing of distributions would equalize the tax treatment
and eliminate the bias in favor of retained earnings, no change in the basic
basis of the rest of the tax system is necessary to that purpose.

Sure, eliminating the taxation of income (including corporate income and
capital gains) entirely would _also_ eliminate that bias, but its massive
overkill if that's your only concern.

~~~
bjterry
Allowing expensing of distributions would actually not equalize the tax
treatment. If you could expense distributions it would be more favorable to do
dividends than to retain earnings, because retained earnings (in the context
of companies building up huge war chests rather than reinvesting retained
earnings in the business) would still be subject to double-taxation (corporate
taxes, then deferred taxes on capital gains), while dividends would be subject
only to the tax on capital income, which is less than the combination of the
other two taxes. I think.

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Gys
To me basically the question is: should the money be spend by private persons
and corporations, or by governments. There should be a balance, but there is a
long term tendency towards governments. Because in the end they make the
rules. And its difficult to control ones powers...

Personally I am not sure the latter spends it better, in terms of good for the
future of society. I am very happy with Google search, Gmail, my iPhone, iPad,
etc. Looking forward to ever buy a Tesla hopefully ;-)

There are always side effects: a handful of people getting extremely rich or
presidents who spend billions on big projects.

Governments should concentrate on lowering taxes (in Europe the taxes go just
one way in the long run...) and keeping a very close eye the playing field:
misuse of rules. Privacy and net neutrality come to mind. Software patents...
As well as banks taking to high risks which are highly rewarded if it works
out or payed for by society if not (which is a governmental decision !).

In my humble opinion our government leaders are just as human as the leaders
of companies. Does anyone of them thinks of society ? Probably. Do either one
of them think about their own future ? Definitely.

~~~
ojbyrne
I don't think you can really separate "private persons and corporations" and
"governments," because the same people often switch back and forth. Goldman
Sachs is the obvious example:

[https://en.wikipedia.org/wiki/Goldman_Sachs#Personnel_.22rev...](https://en.wikipedia.org/wiki/Goldman_Sachs#Personnel_.22revolving-
door.22_with_US_government)

------
lifeisstillgood
tl;dr

If we think your cross-border transactions are moving money mostly to avoid
tax, we still tax it.

If we think that small divisions in tax-light countries happen to make all the
profit by doing all the purchasing, we will allocate that across the business

And currently just having a warehouse in a country did not make you tax
resident. Amazon is nothing but warehouses and that's a trend that will
continue. So we will tax you if you have a "significant digital presence"

All seem sensible clear policies. Taken with things like HMRC's new
whitelisting rules on tax schemes ("until we approve the scheme assume we will
tax it") governments around the world might soon start to balance the equation
of multi national companies and single nation citizens. A good thing all round
and probably the most important activity of the next few years that will never
be on the front pages

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sseveran
Won't work. If the choice is pay tax or spend money it will get spent.
Earnings may go down but the players will adapt to minimize their tax burden.

~~~
rjtavares
Better to spend money than hoard it...

~~~
charlesdm
Time to load up on debt! Good thing interest is tax deductible..

This is more of a game than anything. There will always be ways to reduce the
tax burden, and I find that changes are often made without really properly
thinking them through.

Closing loopholes is great, but rethinking critical parts of the law can also
create a whole set of loopholes if not done properly. Which, considering we're
human, is always the case.

~~~
justincormack
Many people have suggested removing the tax loophole that is interest on debt.
It might have to be coordinated but I would not be surprised if it happens.

------
lefstathiou
Other than risk of facing sanctions (lowe-case s), what is the incentive of
say an Ireland to comply when their tax code is such an important reason why
businesses go there? All else being equal, won't this hurt the development of
many emerging markets (not just tax havens but even Asian countries where
businesses have chosen not to re-patriot income - incentiving them to invest
locally)

~~~
Someone1234
The concept is that even if Ireland continued to have a low tax rate, the
country where the business is making their money could tax them when they try
and send the money there.

As the article puts it: If you're ONLY money moving to avoid tax, then it can
be taxed.

So if a company made tons in the US but then tried to ship it to Ireland, they
would just get taxed by the US government at the normal rates instead of
Ireland.

~~~
ojbyrne
But they don't just "ship" the money. They set up subsidiaries to provide
services to the parent company. And then the services in low-tax jurisdictions
just happen to have high margins. So now is government going to examine
internal processes to ensure that margins are "fair?" Seems incredibly
unworkable.

~~~
ppereira
They already do examine margins. Its called "transfer pricing". Information
sharing is a key part of the proposals.

------
fpp
While internationally supported and implemented tax avoidance rules are
generally the right way, I would like to see all these new rules balances with
real transparency and accountability for how this (additional) tax income of
countries / governments is spend.

What we have as transparency rules today is at best a good show - take the UK
for example (considered as one of the best with regards to open data): DFID -
the UK's development aid department publishes every £500 spent but with many
100s of millions they spend p.a. the only thing we know is that it disappeared
in some opaque gov. shops in Geneva that have zero accountability, spend money
on themselves as if there is no tomorrow and - when someone has a closer look
- have "lost" billions or fostered corruption and organised crime globally.

And the OECD - like most international organisations - is not exactly a light
when it comes to efficient use of (tax) funding.

First governments have to demonstrate and assure that they use the funds
entrusted in an efficient way that is best for their citizens and not only for
special interest groups. There must be rules to hold those in Government
accountable and not only £5000 fines if someone "lost" or wasted £1Billion+
funds, and afterwards (s)he is moved to another senior post or receives a
large consultancy contract from where they funds have disappeared.

In the moment this looks more like trying to threaten or milk successful
companies or to make them compromise e.g. on the participation in dubious spy
programs on citizens.

At the same time don't forget who is "running" the biggest tax heavens on this
planet - its the UK and the US plus a series of "independent" island states
where dozens of trillions of dollars have found a home (including for some of
the largest multinational players mentioned here).

------
innguest
> Amazon and Google say they pay all the taxes they should. Analysts say
> competitive pressures force companies to seek to minimise all costs,
> including tax.

Amazon and Google do not have competition. They seek to minimize all costs
because that's how they can free the most resources to invest in the product
they're offering to consumers. Also, there's no competition when a company
gets big and starts lobbying.

This is really bad news for everyone; we all lose when bankers steal money
from those that provide us goods and services.

~~~
bitJericho
Amazon and Google are in fact direct competitors in a number of areas. There's
also all kinds of competitors. Ebay, Barnes & Noble, MS, Yahoo, etc.

It's about time companies start paying their fair share of taxes. Not only
that, it's about time to start raising their tax rates since they don't care
about paying employees a living wage.

~~~
ars
> It's about time companies start paying their fair share of taxes.

Why should companies even pay tax in the first place? The owners should pay
tax on profits, but why should the corporation itself pay tax?

> Not only that, it's about time to start raising their tax rates since they
> don't care about paying employees a living wage.

How can you possibly not realize that if you increase their tax burden they
will lower salaries? Do you think there is a magic pot of money that
corporations can draw from to pay the tax?

~~~
bitJericho
> Do you think there is a magic pot of money that corporations can draw from
> to pay the tax?

Yes it's called the CEO's 30,000x higher salary.

> Why should companies even pay tax in the first place? The owners should pay
> tax on profits, but why should the corporation itself pay tax?

Because a corporation's losses cannot harm the owner's personal wealth. A
corporation therefore should pay taxes in order to cover that particular
expense to society.

~~~
ars
> Yes it's called the CEO's 30,000x higher salary.

That wouldn't work. The CEO would just go to another company, and it's REALLY
hard to find good CEO - there's a reason they are paid so much.

Also, with the kinds of companies affected by this the CEO doesn't get paid at
all. The owner only earns any profits, but draws no separate salary.

> Because a corporation's losses cannot harm the owner's personal wealth.

That's a surprisingly good answer.

