From discussions in the past, I was under the impression there was general sense that if Ireland should have legitimately taxed them to this degree. That ultimately the taxes owed should probably be paid out to the countries where the sale occurs. As one country reaping the rewards of the tax for the entire European operation would be bizarre, when that country just has a medium sized support/sales operation (which was what Ireland was originally collecting tax on).
Does this also have the knock on affect that these companies can now write off this tax so their owed US taxes are much less (assuming they ever repatriate these earning - which they have often avoided to avoid paying US tax)?
Anyways, writing the above shows me how much I don't understand about these cases.
> That ultimately the taxes owed should probably be paid out to the countries where the sale occurs.
This is hard to implement in practice.
Imagine selling in a country with 50% tax, and having a country with 10% somehwere, anywhere in the world.
For easier math, let's say you buy dildos from a chinese manufacture for 1eur (including shipping), and sell them for 11eur to end customers. You've just earned 10eur, and you're taxed 5eur, giving you 5eur of profit.
What you then do is open a company in a low-tax country, the company is "completely independent" and the owner (your cousin) works with both the manufacturer and you. You buy the dildos from your cousin for 10eur, he buys them from china for 1eur has them shipped directly to you, and you sell them for 11eur.
So, your cousin earned 9eur, and will pay 10% tax on that (90c, 8.10eur of profit) and you earned 1eur, and will pay 50% tax on that (50c, 50c of profit for you).
So instead of paying 5eur in tax, you only paid 1.40eur, and pocketed 8.6eur. Yes, there are some additional costs (another company + paperwork, some percentage for your cousin) but you still earned more.
The same can be done with patents and licences, branding deals, etc. Company in rich country made 100M of profits... just have the company in a cheap-tax country charge them 99M for licencing, 1M gets taxed in the expensive-tax country, and 99M in the cheap one.
Multinational corporations have subsidiaries not cousins.
A great number of tricks go away if you treat subsidiaries as a single company. Countries are reluctant to pierce the corporate veil, but it’s all arbitrary rules.
Ultimately profits flow to a single entity. Taxing 1 levels down and stopping was clearly not the intent of my suggestion. If it’s under the control of Alphabet/ its profits go to Alphabet treat it as a single entity Alphabet.
The idea that subsidiaries, trusts, etc have any meaning whatsoever when collecting taxes is simply a loophole which can be closed at any time.
That is not a fictional example, in case any might still be wondering.
I worked many years for an american/canadian/global company in europe.
The software WE developed would be owned by a separate company entity.
Whenever we sold "OUR" software systems to our real local customers, "we" would 'borrow/rent' OUR software from that separate entity, at a hefty silly price.
Incidentally, that silly price was so high, that "we" (our company entity) would consistently produce a loss each year (even though our parent entity was raking it in, through that separate entity and the silly-price money we were transferring to them).
Those losses of course are tax deductible, so our company would consistently pay zero taxes or worse (I don't know if they were also able to trigger things like the state having to reimburse them..)
It is/was, as far as I know, totally legal and totally disgusting :-/.
The irony as I see it, was that the software was developed by us locally and used by local clients, but somehow ended up being "owned" by carribean islands.
That's basically how Hollywood accounting works, with some of the highest grossing films and franchises in history not paying a penny in tax due to showing a 'loss' on paper.
Harry Potter and the Order of the Phoenix (2007) ended up with a $167 million loss on paper after grossing nearly $1 billion. According to New Line's accounts, the LOTR trilogy made "horrendous losses" and no profit at all. Same as Forrest Gump, Men in Black, and Return of the Jedi.
The Music industry is far worse in its financial machinations.
With some minor exceptions, the companies involved in this are all American.
Ikea does the same with everything they sell in their stores, the stores have to licence design rights from the Netherlands, where royalties are only taxed a few percent. All the stores imposable amount are reduced to zero.
> ultimately the taxes owed should probably be paid out to the countries where the sale occurs.
As I wrote in another thread, that's not how business works in the EU. If Volkswagen, incorporated in Germany, sells a car in Poland, they're not required to pay a corresponding sliver of their net profits to the Polish exchequer. It all stays in Germany.
Exactly. Was a great boon for 30 years for Germany as their domestic exports were the only game in town for cheap and whitegoods consumer hardware within the EU - e.g. Miele, Siemens, Bosch, Braun, Grundig, Neff, Whirlpool, Grundig...
The second it advantages another EU country at their expense, however...
All the money Apple gets come from customers, no? All of it. Do they print their own dollars or something? Are they subsidized by governments?
Do the dollars that make up the profits, and the dollars that make up the taxes on profits, come from somewhere else than the dollars that make up the VAT?
I gather from your disdainful tone that you think you've just schooled me on something really fundamental, but the point you're trying to make is unclear to me. If you're asserting that VAT and the taxes paid on corporate profits are in reality one and the same, then no, that's wholly incorrect.
Yes, this is correct, although it may be more obvious to visitors than to residents.
The evidence that this is correct follows: visitors, tourists if you prefer, can collect reimbursement for VAT payments, the first link I hit was Norway but this is very common if not universal: https://www.toll.no/en/tourist-in-norway/reimbursement-of-va...
If VAT were a tax on the corporation, it would make no sense at all to reimburse it to specific consumers who are not obliged to pay it. That only makes sense when the tax is on the consumer, and merely collected by the corporation. Which is how VAT works.
Sales taxes are collected by the seller for reasons of convenience. They are intended to act as taxes on the consumer. For political reasons this is as not obvious as possible.
If they weren’t taxes intended to fall only on the consumer then:
* businesses wouldn’t be able to claim back sales taxes on their purchases.
* consumers wouldn’t be personally liable for taxes on goods they import.
If you allow me some jest I would like to point out that at the checkout of my local stores I never saw officers collecting VAT, I usually just give all the due money to the cashier
Other countries aren't getting it -- afaik that was a possibility regarding fall back mechanisms should their primary argument collapse before this ruling. The EU has won their primary case and thus Ireland must be forced to collect an spend it.
This is will force a political crisis as the government is complaining it has no money to build houses. So all the those comments saying other EU countries just has to sue Ireland to get some of that won't happen.
If Germany gave state aid to Deusche Bank and DB operates in many EU countries it wouldn't make any sense for Spain to get a cut of that if they were forced to hand it back, even if the revenue was generated in other countries by DB this doesn't concern the state aid given.
The Republic of Ireland is predicted to have a €65.2bn (£56.3bn) budget surplus by 2027. The government is projecting a headline surplus of €8.6bn (£7.4bn) for this year alone.
https://www.bbc.com/news/articles/c88zg586782o
If you were Irish you'd know exactly the issue - a mix between the local planning and rural needs schemes which prevent one-off building in established rural communities, and the farce that is An Bord Pleanála - our Planning Authority.
Given our absolute position as a Republic and a Democracy, we have incredible powers for individuals to block major developments. The one in the major Dublin suburb of Dundrum, adjacent the largest shopping Centre in Europe, is just the tip of the iceberg.
I'm not Irish and I'm a lazy reader at this time so I won't search who's right, but the comment you are answering to was way more convincing than yours.
They're correct on both. The Irish government is running a budget surplus due to massive increases in the corporation tax intake over the last several years. The issue with delivery of housing and projects in this country isn't due to a lack of money, but a lack of capacity. The economy is already running at full capacity and there aren't enough workers available. Throwing more cash at things wouldn't have a material increase in output for several years until supply could ramp up.
I'm Irish and the later is more correct. There isn't going to be a major political crisis over this. Irish corporate taxation is to the Irish electorate what the flag is to Americans. It's quasi religious.
The government isn't really blaming lack of money on the housing crisis more they are claiming it takes time.
If you want to tax sells in a given country charge VAT.
Corporate income tax is just a fundamentally bad tax. It's hard to enforce, even with good will it's hard to calculate (is paying $X for a license a legit expense or not?), unjust (buying more expensive things to provide the same service leads to paying less tax) it sets incentives to mix corporate and private use of resources, it incentivizes building holding companies to use losses of one entity to offset tax of another, it gives big players an advantage and it gives dishonest players an advantage.
I think it should be 0 and we should tax use of resources and consumption instead. Then let countries compete to create business friendly environment.
It doesn't provide enough revenue to be worth all the hassle with enforcement and accounting.
Does this also have the knock on affect that these companies can now write off this tax so their owed US taxes are much less (assuming they ever repatriate these earning - which they have often avoided to avoid paying US tax)?
Anyways, writing the above shows me how much I don't understand about these cases.