What I see here is tax evasion. But done in a roundabout legal loopholish kind of way.
1. Establish profitable company in your home country.
2. Establish 2nd company in a tax haven country.
3. Give 2nd company some kind of ownership, and then pay rental fees, licensing fees, or simply set up a high interest loan that the 2nd company loaned the first.
4. Once you set up a way to make it look like you owe the 2nd company tons of money, now your 1st company no longer is "profitable" and actually in debt losing money, which means it doesn't need to pay taxes on the massive profit it's making.
While I believe it's legal it hinges on bad ethical practice. But many large companies do this, such as cruise ships and I think Apple.
> Once you set up a way to make it look like you owe the 2nd company tons of money, now your 1st company no longer is "profitable" and actually in debt losing money, which means it doesn't need to pay taxes on the massive profit it's making.
Short of a revenue (as opposed to income) corporate tax or VAT, it’s a very tricky problem to address. Maybe an excise tax on foreign remittances to match the highest corporate bracket.
Or you just scrap corporate tax entirely because it’s a terrible idea anyway.
Incidentally, this is the real reason why "Western" states are so hung-up on copyright enforcement: nevermind the movie bullshit, IP is a door throughout which profits can be arbitrarily shuffled around by the rich and the powerful. It creates a parallel reality where imaginary goods can be transferred from jurisdiction to jurisdiction, creating infinite possibilities for transfer pricing. And if anyone objects? Ahh, they clearly want to starve artists and creatives!
It's genius, and we all go along with it because how can you hate art and imagination? It's such a fundamental side of human nature. By turning its output into pseudo-goods, we think we're moving up in the civilization scale, whereas we're just enabling a parasitical accumulation of capital.
In general, every country you do business in will charge taxes based on the profit you make within that country. So what you do is:
* Set up a company in the country where you'd like to pay taxes, and give it all of your intellectual property.
* Set up subsidiaries in the countries where you don't want to pay taxes. Have them pay licensing fees to the first company for the IP, making sure to set the licensing fee high enough that the subsidiaries don't make much profit.
* Now most of your profit lives in the first country, no matter how much business you do elsewhere.
Imagine that there are two opposing views of a subject and then a big middle ground of people who don't care.
If the middle ground uses a term to describe a thing, then the wings have to use it as well. Or there has to be a real push by someone spending a lot of money on advertising to recast the concept. If someone goes around at the individual level making a thing of talking about "imaginary property" they are just going to look like an isolated crank. It isn't helpful.
On the other hand, when the attention of the middleground people is on exactly the aspect of the concept that one wishes to highligt, then that seems like the right time to highligt.
Tax-evasion done by money-transfers based on fictional value attributions of something. Seems exactly like "imaginary property" to me.
You can try. But the likely outcome is you'll spend a lot of time defending picking emotive word choices and the conversation is going to get distracted from substantive arguments.
I agree with both of you. I think the concept has to be recast, and that's going to be a very hard thing to do. I think a lot of money and effort was spent to cast these things as "Intellectual Property" in the first place.
However, it was on HN that I first saw the term "Imaginary Property", and I've seen that more and more lately. So there's hope. If usage of the term grows exponentially, it might happen.
Genuine question: does this require IP though? What prevents the subsidiary from paying the parent for "consultancy" or any other amorphous but non-IP service instead?
Most activities can be quantified, at worst by looking at sector averages. There is already plenty of tax law around those, about what you can and cannot realistically expect tax authorities to believe. The IP field, though, has massive value swings, that make it fundamentally uncontrollable. How much is the word "Starbucks" worth? How much is "Nespresso" or "Linizio"...? These can move hundreds of millions in one go, whereas you would struggle to achieve it with murky consultancy contracts over several years.
Groups where the ultimate parent is responsible for roughly over 1Bn in revenue are required to submit Country By Country Reports covering all cross border transactions their details and their transfer pricing methodology, and, in many cases, the underlying documentation of those transactions (contracts, loan agreements etc.). These are digitally submitted via your local jurisdictions Tax authority and shared with all member countries. Companies as part of that group are required to lodge more detailed information at a local level on just their cross border transactions with others in the group. This allows for some level of check that information being reported is globally consistent between tax authorities, who are then able to identify and place controls on unwanted behaviours.
Except they don't. They create corporations to do it for them.
As long as creating a legal fiction is a mere matter of having someone else do paperwork, you either need to extract tax from legal fictions, or kiss a big chunk of taxable activity goodbye.
I don't think that's accurate if we're talking about large publicly listed companies, the only way for shareholders to spend the money on themselves is to take it out via dividends or sell the stock for a capital gain.
To pay back the loan they need to sell the stock which is a capital gains event.
The two main tax avoidance strategies would be people running and retiring overseas just before selling, or never selling and waiting for the cost basis to be reset upon their death.
The best way to "tax" the rich is to make them spend all their money. The more the rich consume, the more the less rich benefit. It's turtles all the way down after that.
So please order that custom yacht now, all you HN unicorns.
It only redistributes work toward what rich people want.
Investing into something actually useful would be much better.
Scenario A: yacht is bought - economy is redirected toward luxurious yacht building, people get paid to work on building a yacht
Scenario B: investment into housing - economy is redirected toward house building, people get paid to build houses
scenario A can be a good one only when this people would be unemployed and seeking a work otherwise. Or if you think that building luxurious yachts is more important than alternatives.
What if the point of taxes is not simply to redirect and redistribute funding, but also to reduce economic activity and, by extension, emissions and inflation?
> The best way to "tax" the rich is to make them spend all their money.
What a catastrophic idea. Do you want economy tuned to the tastes of the vain, wasteful, and capricious? In such economy there is no car, real estate, mobile phone, or clothes for you.
The UK shouldn’t really raise its voice here, easily half the tax havens are UK dependencies: Cayman Isles, Virgin Isles, Jersey, Guernsey, Isle of Man, Gibraltar. It is inconceivable to me that the UK lacks influence to stem these activities, so the only conclusion is that it willingly accepts status quo.
There is a reason that London was the financial headquarters of the EU while it lasted. They are going to try to do what they can to attract EU capital now that the last of these rules no longer apply to them, and will be the de-facto tax haven for the rest of the world except for the five-eyes.
Well, the UK is well suited to finance in many ways, most of the legit. The way courts work for example. Maybe a bit like France and Italy have a natural talent for couture, say.
But the shady stuff is sure there, and shady. UK high end property market seems to be a Monopoly-esque money laundering machine, with the extra inconvenience of having physical real estate attached to it.
IANAL but I understand UK courts have a reputation for being quick, pragmatic, fair and unbureaucratic. Finance often turns on 'legal innovation', or introducing entirely new financial constructs, and where on the Continent a more prescriptive legal system is in place, UK law is more interpretation-based.
Possibly not a concern with many EU countries, but with some for sure: the legal system is also stable, doesn't change on the whims of the politicians, and appears to be genuinely un-politicised.
Since Finance heavily relies on parties promising huge contingent payments to each other, having a trustworthy and reliable arbiter is key. If I enter into an agreement where I pay upfront, and I'm guaranteed insurance-type payments for 20 years into the future, the legal apparatus is the backstop to my claims.
This is debatable... The City of London is not really a tax haven as it has the same tax rate as the rest of the UK.
As the document whispers, what the City of London is, is a massive financial hub, that accommodates the offices and sales arms of many tax planning companies which sell professional services in London that would design structures to tunnel profits to various Crown Dependencies.
But you would find such services in any supercity. London is simply sitting at the crossroads of multiple hubs so it facilitates a lot of what's despised — but in itself, there's no haven in town!
> In 2016–17, foreign firms paid 80% of Irish corporate tax, employed 25% of the Irish labour force (paid 50% of Irish salary tax), and created 57% of Irish OECD non-farm value-add. As of 2017, 25 of the top 50 Irish firms were U.S.–controlled businesses, representing 70% of the revenue of the top 50 Irish firms. (Wikipedia)
Are you sure about that?
If the EU enforces what they preach and Ireland loses its tax haven state they could lose a huge chunk of their GDP.
Once a company becomes big enough it turns into 'yet another big one' that inherits the branding and the original activities but simply starts doing whatever else is doing to min-max everything beyond human ethics.
It's like having a very small company with only a few people. There won't be any HR because that kind of overhead isn't something you can afford or make use of. So you work 'for the boss' and if you need something your boss is also the person who makes the decisions. But when the company gets bigger, you now get HR between you and the boss, and suddenly you are insulated. You work for the company, and are beholden to HR. Every step after that is just more insulation, more min-maxing and just making things worse for the sake of scale. Usually.
HR does not get between you and the boss, but middle-management (hence the name) does. HR gets between the company and you if there is a chance of you damaging the company, other than that it is mostly (regulatory) window dressing and to save some cost on recruiting and onboarding.
Movies too. The studio charges the movie, so the studio is positive while the movie is in debt. Actors get a lumpsum and a percentage on the movie benefits.
In this case, it’s not shell companies, the studios actually have in-house expertise (=shooting most of the movie) while the movie mostly drives the scenario and the actors, so it’s harder to define what is illegal.
McDonalds also has a franchise system, although it’s easier to control whether the pricing offered to the franchisees is constant or proportional to benefits.
The existence of valid licensing fees does not mean all licensing fees are valid. Surgeons are allowed to legally cut people, that doesn't mean we can't figure out when someone was illegally stabbed.
If a profitable company is making a loan it does not need to a subsidiary it controls, that's a fictive loan used to disguise a transfer.
When licensing costs are paid to a shell company with 3 employees in a country that is neither the place where the HQ are or where the company originates from, that's fictive.
Any time legislatures have a hard time defining the line between legal and illegal behavior, courts tend to take a “we’ll know it when we see it” approach. Justice might be served but rule of law is diminished.
Not really. “Fictive” just means “not real,” and courts have processes for judging whether things are real or not. The fact that courts still have to judge the actual facts of the matter doesn’t mean the legislature isn’t doing its job or that rule of law is diminished. It’s no different than courts judging the truth value of claims in a murder case or a fraud case.
a major difference between continental law and common law is the intent of the law though.
If the court can prove that they did not handle with the intent of the law, it can still be decided that this is fraud. In a common law system this is not possible.
Common law is based on precedent and common sense application of the law, so it is generally common law systems which are described as being open to interpretation.
Common sense has nothing to do with common law after a couple generations morph any type of sense a law could have made into something nigh unrecognizable. Go digging through case law in different jurisdictions and marvel at the contradictory interpretations that arise. This is why strategic changes in jurisdiction are a valuable part of litigative strategy.
"oh no, our publicly very profitable company actually doesn't make any money because of all the.. license fees we pay, that we are clearly in a position to bargain for better, yet mysteriously do not! oh its such a coincidence that everyone in the C-Suite still makes money off the the shell company."
You can obfuscate fraud. But don't try that post-modern horseshit "what is being, man" on us.
It is technically tax avoidance. Tax evasion = not paying taxes you legally owe, is a crime. Tax avoidance = using legal means to reduce the amount of tax you owe, not a crime (by definition).
This is why I support taxes such as those that France levies on digital revenue originating within their country. I also think it makes sense to wholly eliminate corporation taxes (which are not only avoidable, but are a form of double taxation) and replace them with these revenue taxes.
Australia has specific laws to stop the abuse of tax avoidance [1]. While at a high level they seem reasonable they haven't resulted in us getting the desired amount of income from multinationals [2]. The article I linked relates to big tech though, and maybe that's a separate argument when very little of the innovation happens in Australia, mostly just sales.
Step 4 glosses over a ton of details but is sufficiently correct in Apple's case, which pioneered the Double Irish. That was supposed to stop in 2020, but unless you keep up with the world of corporate finance and global tax law, things keep shifting.
Apple's easy to pick on, they're one of the richest companies in the world and should pay more taxes. But for companies that are less successful, it's entirely possible that the second company is actually losing money. Without an appropriately sized army to track through the 200th company (tracking transactions between two companies is simplified to make the tax evasion easy to understand. Real world tax evasion is dramatically more complicated.)
What I never understood is, (how) does the money get transferred to the home country eventually? Doesn't it need to do that to have some utility? Otherwise, what's the point of just accumulating money offshore that you can't eventually use where you actually are?
There's a lot you can do, such as borrow against it as collateral, transfer it to other offshore companies in return for services (the entire deal happening in the tax haven - therefore not taxed), or even have it hold property which you can then use.
But if you use it to pay someone else offshore, presumably you get something in return at the home country, right? And you didn't pay for it there, right? So isn't the fair market value (or something along those lines) of whatever you eventually receive in the home country therefore taxable income? I don't understand how the value loop can legally close without taxation one way or another.
First of all, you can spend money on things outside your home country (second/nth house, buying a new yacht, etc.) and depending on how those are structured you can avoid that being taxable income. If someone takes a direct distribution or benefit in their country of residence and domicile then yes, those are definitely taxable events and careful tax avoiders pay their tax on these transactions.
Second your intuition is correct, often people do break the law at this point, it's just very hard to detect without files like this which is why the previous Panama/Paradise leaks have led to so many prosecutions and tax recovery actions. They made clear what otherwise was secret.
A common tactic is using the funds to buy property in which you then live as a tenant. In most countries (certainly in the UK) tenancy contracts are purely bilateral and non-public. There is no way for the government to know whether you are:
1) living in a property owned by a third party ownership company that you genuinely have no links to - btw many rich people do this for at least some of their homes so it's not like its an inherently suspicious activity. You can rent whole houses in central London for 10s of thousands a week.
2) living in a property owned by a company of which you are secretly the beneficial owner and paying market rent (to yourself). This may be allowed under some very carefully structured circumstances but usually not.
3) Like 2 but not actually paying rent. Definitely not allowed.
Technically they could find the difference between 2 and 3 if they audited your outgoings but they would first have to have a reason to even start doing that. It's not like you can take a tax deduction for rent, so this doesn't even show up on your taxes, they would literally have to pull your bank records to look for the expected outgoing rent. Telling the difference between (1) and (2) is impossible without the secret ownership information.
Another favourite is to use offshore accounts to buy things like jewellery, clothes, furniture, almost anything that isn't registrable property (i.e. anything other than real estate or vehicles). That is certainly illegal since you're taking a benefit which should be counted as income and taxed but good luck proving that.
Offshore entities can own properties in most open economies. They don't typically get taxed where they own the property or good, but where a profit is realized or an action takes place.
For example, in TFA it's mentioned that the Blairs bought an offshore company that owned a building in London; they really bought the building, but doing it this way allowed them to avoid property taxes in the UK that relate to ownership transfers ("stamp duty"). They could then hire out offices, and if they do that through the offshore company that "taxable income" would similarly disappear. Her Majesty's Revenues & Customs might eventually object to the arrangement, but if the offshore owners are not known, what are they going to do, bulldoze a historical central London property? Obviously not.
> what are they going to do, bulldoze a historical central London property?
Seize the property and auction it off to the highest bidder. The process would be quite similar to a foreclosure. The problem the UK has is more that the stamp duty has countless loopholes. If he doesn't actually owe tax, then legally that's the end of the discussion.
I have little faith that all the loopholes in a stamp tax can be closed. It would be much easier to enforce a property tax system. Events are abstract and ephemeral, but real property is tangible and immovable.
Survey the area to assess a property tax each year. Mail the assessment to the property's address, and include a unique account number for payment. You can audit that all land in the tax jurisdiction has been assessed, and that all assessments have been paid. The only thing you really need to be careful about is what criteria you use for the assessment. Market value is relatively safe for that.
That's effectively what Council Tax was originally meant to be, but after a while nobody could be bothered with the survey activity. They even closed the door to piecemeal re-classification, after enough people started challenging the band their property sat in, by passing legislation that basically states the band is fixed as it is until Parliament says otherwise (i.e. likely forever).
Council tax was never meant to be anything like property tax and was structured specifically to act in a different way.
For example: councils don't actually set their council tax rates by band. They set one rate which is the Band D rate. The rates of the other bands are then set based on fixed %s from that rate and the highest English rate (H) is only 200% of the Band D rate.
The value of the lowest valued band H (based on the 1991 price levels) property relative to the highest band D is 3.6x. So right away we see that as a % of property value the typical household (D is the most common) in any given place pays more than the highest valued local properties. Of course it is also the case that band H is open-ended.
There is then the fact that these are set and collected exclusively locally. That means that some of the lowest council tax rates in the country are in some of the richest places. Westminster and Wandsworth have Band D council tax in the £800s, Blaenau Gwent is over £2000!
> Council tax was never meant to be anything like property tax
Well, it was meant to look like a property tax, while at the same time ensuring it would disproportionately affect the lower classes, for sure. It was a Conservative measure, after all (which Tony Blair was obviously "intensely relaxed about", since it directed money to local authorities Labour controlled, hence it was never repealed). As wikipedia reports: "the Valuation Tribunal Service [...] states that: "The tax is a mix of a property tax and a personal tax".
> They set one rate which is the Band D rate.
Yeah, and they can't even be arsed to figure out if a Band D property in 1991 is still a Band D today - the roof might have fallen off since then, but hey, who's got time to do periodic surveys? Local councils have better things to do, obviously.
Probably stock buybacks. Company 2 then spends the profit on buying company 1's stock, which they basically burn. Stock prices go up and owners recoup value through capital gains.
It boggles my mind that two companies can own each other cyclically like this, but regardless:
I still don't get the "poof" part. So we're saying C2 is paying C1 for its stock, and I imagine that revenue doesn't count as income for tax purposes since C2 now "owns" part of C1 in return. As I see it, that means C1 is effectively getting a loan from C2, putting part of itself as collateral. It can spend the loan to grow, which is nice, sure. Let's say it does that. Now you're saying C1 performs a stock buyback? Wouldn't that mean it has to pay more for the stocks (since they rose in value)? It'd have to bring that money from somewhere... but where? I mean all it can do at this point is pay back the money it got from C2, but then it's even, right? There's nothing left over after that, it's just repaying a loan as I see/understand it.
From growth. Remember, half the point of these havens is to shelter money from being taxable. Nothing else matters. You move it over there for favorable treatment. Company 2 received back money from Company 1 that they invested in, so it's off Company 1's books virtually, but not in reality.
This is the hell created by multi-jurisdictional legal fictions. Short of a multi-national crackdown, being able to nail down the vagueries a bunch of well compensated international accounting firms and lawyers can get up to is unlikely at best.
I mean even if the company grew 10x, it'd have to pay 10x to buy back its shares, so it wouldn't be profiting, right?
If I'm understanding this correctly, there are 2 things I'm taking away from this:
1. Cyclic ownerships should be illegal.
2. The investors (i.e. the public, for a public company) are getting scammed here. But it's not because of tax avoidance, but because company valuations (and therefore share prices) are just utterly meaningless, and people are... too oblivious to this? I mean, a "growth" in valuation would (to me) be coupled to increase in the company's net assets. So if company 1 sells a lot of its product and its valuation rises... that means it's gaining assets somewhere. Either that increase in assets is due to sales revenue at home (in which case it'd be getting taxed normally) or it's the stake it has in company 2, and presumably company 2's valuation is growing. But company 2's valuation is just coupled to company 1's, so there's no logical reason for it to rise independently. If it does, and the company is getting rich that way, that just means to me that people are behaving irrationally and paying more for the same thing, and that's what's making companies richer (rather than tax avoidance)? Alternatively if you look at it as company 2 having revenue and thus company 1's stake increasing in value, wouldn't there be an eventual tax on that money before any person can realize it at home, and thus shouldn't that correct the stock price downward? Or am I completely misunderstanding something here?
Edit: I think I'm seeing one way this works: the stock price does get corrected downward, but not enough to cancel out the growth, since the offshore company did gain material assets. But then who (as in which person) is getting rich without paying taxes at home, exactly? Either C1's shareholders are selling long-term capital gains taxes (in which case the complaint is about long-term capital gains taxes) or they're doing it short-term (in which case they're still paying income-equivalent taxes). Who's avoiding taxes here?
The step here that is illegal is the moment company 1 takes out a high interest loan from company 2.
Company 1's directors have to do what is in the best interests of the company. If they choose to sign up to a high interest loan which will take all their profits, that isn't decision-making in the best interests of company 1. That's the point they can be put in prison.
I just don't quite understand how nobody is prosecuting them...
They need to make decisions in the best interest of Company 1 and Company 2 separately.
An action done on behalf of Company 1 which slightly hurts company 1 but provides large gains to company 2 would be illegal (unless they can argue that it was part of a larger strategy to benefit company 1).
It was, though not to the full size that was ultimately intended. There’s still a small community of people who live and work there, along with a trickle of visiting students/architects. Definitely worth a day trip if you’re ever in the Phoenix area with some free time.
Oh wonderful. So that means John Deere can drop all the lawsuits against farmers who try to repair their own tractors since farmers didn't break any law. Right?
JD doesn't necessarily need to open their source code, it just has to be legal for others to disassemble and analyse their software and publish the results --- just like you can do with practically every physical object you own.
heh, did anyone else have a flashback to Mary Ann Davidson, the CSO at Oracle, railing against customers who independently audit the security of products they purchase? Fun times.
I just read the article (shamefacedly seeking confirmation bias - I wanted to say "Oracle bad") - but I ended up agreeing with her main points:
1) most of the "third party security researchers" customers were hiring were blindly running tooling and the FP rate was near 100%
2) They had found and were working on 87% of genuine issues
3) (and I don't 100% agree here) - the license agreement forbids decompiling the source code because IP. OK fair point (grudgingly admitted) but I take issue with "a contract freely entered into" - you have to accept the tos/eula if you want to use the product. Not entirely freely entered into...
All in all, I thought it was a balanced and well written post - much better than the usual corporate effluent (
"We are thrilled to announce that we delight our customers in achieving their dreams of democratising toothbrushing")
Huh, I guess we are truly screwed if that blog post seemed in any way reasonable to you. It makes me think of that time in the late 90s when there was a serious push to make "hacking tools" like disassemblers illegal... dunno if the present crowd would have the sense to combat that like the oldtimers did.
"...that limitation includes the fact that you aren’t allowed to de-compile, dis-assemble, de-obfuscate..."
I genuinely don't care if a company wants to trapdoor their support contract with something like that. But it would make more sense for them to properly structure things so that they'd be able to look forward to nuisance tickets, instead of being driven to trying to convince the infosec world that they should just trust you - and feel bad for not doing so in the first place. In any case, the thrust of the argument she is making isn't about support contracts - it is framed much more broadly, which is why this post made so much noise at the time.
What I don't get is that the intel based macbook pros allow you to get 32G of RAM and 4TB hard drive. While the M1s only allow a max of 16G of RAM and 2TB hard drive. I'm not taking a hit on these other, in my opinion, much much more important specs to gain an extra battery life.
The real test will be the M1X or whatever they put in the 16" (hopefully) this year. Rumors say up to 64GB RAM among other things. I'd settle for 32 again (I'm on 2018 15", i9, 32GB, and whatever the best graphics card was) and I'll buy the 16" M1* immediately when it goes on sale as long as I can run 3-4 monitors (ideally 4 but I'll settle for 3).
This is still a first-gen product. It's like saying that you don't get why the first iPhone had 32GB+ of storage or 3G at launch.... it will be refined and improved over time.
The thing that isn't addressed. Their terms now say that people 13 and under cannot use their product. Yet this tool is taught in schools. They want to collect this data but do not want to follow COPPA laws.
I built one of these once. I even figure out a way to remotely trigger the garage door to close. I programmed it so that if I left it open for too long it'll message me telling me, and if I still stays open too long after that it'll be passive aggressive and say something like "I hate having to do all the work for you, but I closed your garage door because you forgot to."
Wait a minute... What about copyright? Like I would love to have a blog where I can just copy and paste my favorite recipes, and add a few notes myself. But I don't do that because it seems like plagiarism.
Or another option is to use this site, and then use some kind of 1-5 star rating. And then just see my favorites without all the other bs that food sites show you.
IANAL, but as I understand it the ingredient list is not copyright able, though the description may contain sufficient creative content to qualify. There’s even an FAQ covering it. https://www.copyright.gov/help/faq/faq-protect.html
> However, where a recipe or formula is accompanied by substantial literary expression in the form of an explanation or directions, or when there is a collection of recipes as in a cookbook, there may be a basis for copyright protection.
Emphasis mine. A website full of recipes certainly seems to be a collection in the sense protecting a cookbook.
Seriously. I did a similar massive recipe scraping project a few years ago but never would have redistributed it because it’s available for me to use, but not available for me to redistribute.
For a site that gets so opinionated about GPLv3 vs LGPL vs the rest, we really seem to have no qualms about licenses when it comes to actually using other people’s things.
The authors can file a DMCA. If they don't, there's no issue. If they do, the law will sort it out.
Though it sounds like a flippant response, I've spent a lot of time trying to decide how to feel about this. (I released 194k plaintext books as the books3 dataset.)
Copyrights apply to the literal text of a recipe, but not to a recipe itself. Recipes are not copyrightable last time I checked, just the literal text.
1. Establish profitable company in your home country.
2. Establish 2nd company in a tax haven country.
3. Give 2nd company some kind of ownership, and then pay rental fees, licensing fees, or simply set up a high interest loan that the 2nd company loaned the first.
4. Once you set up a way to make it look like you owe the 2nd company tons of money, now your 1st company no longer is "profitable" and actually in debt losing money, which means it doesn't need to pay taxes on the massive profit it's making.
While I believe it's legal it hinges on bad ethical practice. But many large companies do this, such as cruise ships and I think Apple.