EU Unveils Plan To Force Facebook, Google and Amazon To Pay Their Fair Share of Tax (independent.co.uk)

An anonymous reader quotes a report from The Independent: The European Commission is bringing forward plans to make major multinationals such as Google, Amazon and Facebook disclose exactly where and how much tax they pay across the continent. The plan was expected to include rules requiring businesses earning more than 600 million euros a year (nearly $700 USD) to open up their tax affairs to public scrutiny, revealing their profits and accounts in every country in which they operate within the EU. Since the Panama Papers, a new clause has reportedly been added to require the companies to say how much money they make in so-called "tax havens." A final, more general statement would reveal profits in the rest of the world, treated as a single item. The plans will be presented by Britain's EU Commissioner, Lord Hill, who told the BBC: "This is a carefully thought through but ambitious proposal for more transparency on tax. While our proposal on [country-by-country reporting] is not of course focused principally on the response to the Panama Papers, there is an important connection between our continuing work on tax transparency and tax havens that we are building into the proposal."

Comments

Setting the bar a bit low

[SeaFox]

The plan was expected to include rules requiring businesses earning more than 600 million euros a year (nearly $700 USD) to open up their tax affairs to public scrutiny, revealing their profits and accounts in every country in which they operate within the EU

Wow, that's quite an exchange rate.

Re:Setting the bar a bit low

[marcello_dl]

600M EUR = 700 USD
Mario Draghi and his f*in quantitative easing.

Re:Setting the bar a bit low

[silentcoder]

Well, actually enforcing international law against shell companies being anonymously owned would make huge strides - and coincidentally basically kill terrorist funding networks.
In case you were wondering, Panama is only the SECOND worst about letting people form shell companies without having to provide identifying documentation so the ownership is known... the worst offender is the USA.

There are very few American names in the Panama papers - because Americans don't need Panama to dodge taxes or hide income from atrocities... they can do that more easily in Delaware or Nevada.

Re:Setting the bar a bit low

[Harlequin80]

If you are trying to hide money in the delaware and you are a US citizen you are nuts. The IRS has access to the data of those bank accounts. They will data match and you will be found out.

Re: Setting the bar a bit low

[silentcoder]

And thats why the bank account belongs to a shell company. If there is no information on who owns the company the IRS has no way of finding out whose money it really is. In delaware you can create a shell company online in 5 minutes for a nominal fee with zero documentation. I bet half the companies registered in DW are owned by Homer J. Simpson of Springfiels Il.

Re:Setting the bar a bit low

[AmiMoJo]

I'm starting to realize just how much I missed picking out mistakes in the summary and mocking them in the comments under the old Dice regime. This is definitely a return to form, reminding me of the good old days.

Re:Setting the bar a bit low

[khelms]

And then there's that whole "gravity" scam.

Re:Setting the bar a bit low

[cmiller173]

That is a weighty subject indeed.

Re:Setting the bar a bit low

[nanoflower]

That's just a conspiracy designed to hold the common man down.

Won't solve anything

[DNS-and-BIND]

There is this fallacious, persistent belief that if somehow the EU could get hold of more money, all their problems would be solved. This is not the case. When a government, at any level from local to supra-national, gets more money, what happens? They blow it immediately on stupid crap, or use it to fortify their own power. Then, the money is gone and it will never come back. However now that they are used to the higher income level, the quest for more money begins anew.

There is a wonderful short story, called The Rocking Horse Winner, about just this situation. I urge all of you to read it, it's only 5-10 minutes and is well worth the time. More money doesn't fix anything, it just generates demand for even more money.

Re:Won't solve anything

[Anonymous Coward]

Irrelevant. Do you really feel that multinationals (who are the main drivers of oligopolization in every market they participate in; and whose reach and power worldwide has increased enormously since the Thatcher/Reagan revolution) should be allowed to keep their competitive advantage over smaller companies, just because they can afford to hire the "best" lawyers and bookkeepers? Given that SMEs have to pay, and citizens (whose income comes from something other than cap gains, which is by and large not meaningfully taxed) I see no reason why big companies should be able to avoid it. The playing field is uneven enough as it is.

Re:Won't solve anything

[cas2000]

> More money doesn't fix anything, it just generates demand for
> even more money.

Why can't greedy capitalists ever learn this valuable lesson?

Re:Won't solve anything

[bloodhawk]

I am not sure this is about the EU simply getting more money. The general population has had a gutful of large corporations avoiding tax that they themselves can't avoid paying, this in turn is allowing minor parties that speak out against this to bleed support from major political parties, they know if they don't do something soon it isn't the money they have to worry about, it is there jobs.

Re:Won't solve anything

[AmiMoJo]

This isn't just a money grab, it's about curtailing extreme abuse of the system. These companies benefit from the services paid for by taxation (infrastructure, education, healthcare, legal system etc.) but contribute almost nothing back. Certainly nothing like what the law intended.

Essentially it's a bugfix to stop people abusing a flaw in the system, like a developer would ship for an MMO if players discovered a way to harvest vast amounts of gold in a way that was never intended.

Re:Won't solve anything

[silentcoder]

One local libertarian author cited Estonia as the reason we should ONLY care about those the Panama papers implicated in huge atrocities and actively help people dodge taxes. Estonia he says, has built their post-cold-war economy on being a tax-haven which has attracted lots of "investment" as foreign companies headquartered there to pay the low tax, and given the government lots of money to inject into the local economy which then thrived (a very unlibertarian idea that last part but libertarians have never been known for their consistency they'll break every rule they claim to believe in when the beneficiaries are already rich and libertarianism should be more properly known as neo-aristocratism).

Here's the thing he did not, however, consider. At the last G8 meeting, the African Union made a representation in which they said that Africa would gladly forgo all foreign aid - if the G8 agreed to pass harmonious laws to prevent their companies from avoiding taxes when doing business in Africa. It was a smart thing to say too - the taxes lost from taxable business in Africa every year through avoidance is almost 40 times what the continent receives in aid. If every African country cut it's corporate tax rate in half (and most are already among the lowest in the world - here in South Africa the corporate tax rate is less than 3rd of the individual income tax rate) and gave up all foreign aid - but those taxes were actually paid, Africa would be debt free in a year - and every African country would at LEAST tripple it's GDP even if it was so corrupt that 90% of the money was misspent (the actual levels are nowhere near THAT bad) - the remaining 10% invested would all but eradicate poverty on the continent.

So that changes the picture: Estonia has not had a "sound and clever economic policy" - they've enriched themselves not by producing anything, not by selling any resources of value - but by stealing the taxes due to the governments charged with caring for the poorest people on the planet. Every dollar Estonia make in foreign tax, is an African child going to sleep hungry tonight.

There is no reason this should be encouraged, supported or legal.

Re: Won't solve anything

[Half-pint HAL]

Corporations earning money and paying other countries for the services and infrastructure that THOSE countries provide at lower prices - that is, like, SO unfair! You may say that "taxes are theft" as a general attitude is extreme, but this particular tax initiative is most definitely theft and nothing more.

May I direct your attention to Starbucks? Starbucks have traditionally paid practically nothing in taxes in any country in the EU. They achieved this by putting all the profit onto their beans -- all Starbucks Whatevercountryorother LLC/Ltd/GmBH subsidiaries have to buy official Starbucks coffee, which is a 100% closed market. Starbucks coffee for Europe is sold via Switzerland, but the coffee never even enters the country. Starbucks' operation in Switzerland is just an office that subcontracts most of the work out. The actual operations of the company are not built on Swiss services or infrastructure.

Or how about Amazon? For most of Europe, we buy our goods from Amazon's Luxembourg operation, and they subcontract "fulfilment" to a local Amazon subsidiary who then ship it out. The goods are never in the physical possession of the Luxembourg company, and never ever visit Luxembourg. I could order a product that was designed and made entirely in Scotland from Amazon, have it delivered to me here in Scotland from an Amazon UK site in Scotland; the item would never have left Scotland at all, and yet I've allegedly bought it from a Luxembourg-based company. Again, the services and infrastructure that the business relies on are not merely based in Luxembourg -- the majority of it is not. And yet the UK tax evaporates.

Part of the point of laws like this is to level the playing field -- small specialist webshops are constantly being crushed by the likes of Amazon. Not only because of Amazon's natural economies of scale, but because of the manufactured economy of profit exporting.

Re:Won't solve anything

[JaredOfEuropa]

It's not (only) about getting more money for the EU or member states' governments. It's also about making them pay their "fair share" so others will have to pay less.

Now in almost any context I abhor that phrase "fair share", usually there is nothing fair about it. But in this case we're also talking about fair competition. Evading taxes is an expensive game that requires expert knowledge and a fair amount of money to set everything up, but it is also something that benefits enormously from economies of scale: it may cost $5.000 to hide $10.000 in profits, but only $50.000 to hide $1 billion. That puts tax evasion out of reach of small and medium enterprises, who will have an even harder time competing with the multinational giants if they are forced to pay the taxes thet the big boys can evade.

Re:Won't solve anything

[Solandri]

The thing about arguing it that way is that there are two possible solutions, one of which is a lot easier to implement and enforce.

A) Force multinational corporations to comply with the same tax laws as small businesses.
or
B) Stop taxing corporations.

"But B is outlandish! Blasphemous even!" Let me ask you this: Do you believe in taxation without representation? Do you believe corporations deserve representation in government? For most people the answer is no, no. What's the logical conclusion regarding taxing corporations then?

The usual argument people bring up to counter this is that the people who own and/or work at the corporation already have representation - they're allowed to vote, so it's OK to tax their comopany. That argument doesn't fly because those people are already taxed (as individuals) the same as people who don't own or work for a corporation. What's your justification for taxing them more just because they own or work for a corporation?

"But the government would lose billions in tax revenue!" The economy doesn't work like that. All taxation is is diverting a certain percentage of the country's GDP to the government coffers. For the most part, where that money gets diverted from doesn't really matter.* If you eliminated all income taxes and shifted the entire tax burden to corporate taxes overnight, what would happen? Everyone would suddenly have (say) 25% more money, but would their purchasing power increase by 25%? Nope. Companies would be forced to raise their prices to pay for the new taxes, and the price of goods and services they sell would increase - exactly enough to wipe out the 25% extra money people gained. Per capita purchasing power increases can only originate from increased productivity. Taxation is just moving money from one purse to a different purse - it does not affect productivity

Neither do companies for that matter. Companies are just a shell - it's the people who work for that company who generate its productivity. People are the only source of productivity, so ultimately any tax burden is paid for by people regardless of what type of tax you use to collect it - income taxes, sales taxes, corporate taxes, import taxes, customs taxes, all of it is ultimately paid for by people. Think of the economy as a giant donut-shaped swimming pool (in reality it's a web but it's conceptually easier this way), and economic activity as the speed at which the water circles around. Individual people move that water around by paddling it (adding productivity to the economy). A company is just a group of people paddling together. Someone who is self-employed is paddling on his own. Taxes are just a diversion in this donut which directs about 35% of the water into government control, for the government to decide where the water should outflow. But it's always people who do the paddling regardless of whether they work as individuals, work for a corporation, or work for the government.

Eliminate corporate taxes and there's no incentive for these companies to shift income out of these countries. The money stays where it's needed,** and if the company is generating a lot of income in that country, it will keep money in that country to finance its operations. That money gets spent in that country, meaning more income and sales for that country to tax. **The exception would be profits distributed to owners/shareholders. But in a simplified tax structure like this, you could simply assess those people income tax based on (corporate dividend from that stock) * (percent of company income generated in country x) * (income tax rate in country x). Heck, you could even argue that a corporate tax is a simpler way to do just that. The drawback is that a multinational corporation exists in multiple countries simultaneously so a corporate tax creates an incentive to shift income out of countries with higher corporate taxes, whereas an individual can only exist in one country at a time. And

we need a "rogue tax-haven nations" list

[cas2000]

If we can have lists of "rogue nations" and "terrorist organisations" that it is illegal to deal with, then there's no reason why we can't also have lists of "rogue tax-haven nations" (like British Virgin Islands) and "tax-evasion organisations" (like Mossack Fonseca) that it is also illegal to deal with.

It should be a serious crime with huge penalties (both monetary and gaol time) to negotiate with or transact business with any government, company or organisation in one of the listed countries, or to own, operate or conduct business with any listed entity in the organisations list.

That would solve the problem at its source.

And before anyone says that Mossack Fonseca is a legal company that provides other services than just setup of shell companies and tax evasion, the same is true of Hamas. They are a huge humanitarian organisation in the Middle East, providing financial and medical aid and other services to those who need it. Unfortunately, they also have a nutcase terrorist militant wing - this gets them listed as a terrorist organisation and no amount of humanitarian work by the majority non-terrorist parts of Hamas will ever get them off that list.

Re:All tax is immoral

[KozmoStevnNaut]

Punish the wealth creators, and they'll stop creating wealth.

Considering all the wealth they create ends up in their own pockets, I'd say it's a fair deal.

Re:All tax is immoral

[bloodhawk]

The whole problem is they are not creating wealth, at least not in the countries they are siphoning money away from, they are doing the opposite. This isn't about punishing them, it is about creating a level playing field where just because you are a multinational that can move HQ into a tax haven that you can't gain a competitive advantage on local companies that have to pay their taxes.

Re:Ironic

[TheRaven64]

There isn't likely to be any complaint. The British government is currently a little bit shaky over the Panama leaks. It turns out that the Prime Minister blocked previous EU plans to strengthen disclosure rules for off-shore trusts, and is the beneficiary of an off-shore trust. The Chancellor wasn't popular even before the current revelations, but it turns out that both he and the PM have benefitted from the lower tax rate for high income holders and a large chunk of his income comes from dividends in a company that hasn't paid any UK tax for years. They're playing up the fact that it was a British commissioner who is pushing this because they want to make it look as if the British Government is in favour of this kind of thing. Now, of course, they may try to block it in a year's time when people have all forgotten about the current scandals...

Re:Actually this is the problem

[silentcoder]

It comes from a supreme court case in 1910 when a corporation decided to pay it's workers a decent living wage, and cut margins a bit to afford that. The shareholders sued claiming the CEO had no right to pay workers a penny more than the least he could get away with - as that reduced their profits. They won.

However, it's pretty important to know that this was an American case, it has no bearing on any other country nor is it supported by the laws of any other country. German law, for example, does not describe companies in a way that could possibly support such a legal finding - companies there are described as communities existing for the benefit of all involved - shareholders, employees and customers alike and would lose a case where they screwed any of those (which is why in Germany every corporate board HAS to be made up of 50% non-shareholding employees, usually appointed by the union).

So the logic that drives that is uniquely and exclusively American (and to a lesser extent exists in Britain) but the rest of the world is not that insane. This is why laws like these tends to look like they target American companies (look at how facebook got mentioned here) - it's not really the case, they are laws the likes of which European companies have always worked with and complied with happily because *not* complying would require doing unthinkable. The utterly opposite incentives created by US laws leads to US companies feeling targetted since their behavior mostly consists of those "unspeakable things".

Re:Ironic

[muffen]

This was up for debate in EU a while back, and it was the british who blocked it. However, with the panamapapers being leaked, and Cameron's own involvment, it might not be so easy to block it this time.

The timing isn't an accident, and the british commissioner leading it isnt an accident either, its all designed to maximize the chances of it going through.

I think this is a good start, you pay taxes where you earn the money...

Re:All tax is immoral

[jandersen]

Punish the wealth creators, and they'll stop creating wealth.

Nonsens. Who do you think are the real wealth creators? The fat cats that sit at the top, skimming the cream off the labour of others without much effort? Or the people who put in a real day's work, whether they are called engineers, hi-tech entrepreneurs, farmers or manual labourers? All of these groups of wealth creators will keep working, because they have to, whether they pay taxes or not; if they don't, they can't feed their families. If your only contribution to society consist in siphoning un-earned money into your own wallet, then you are nothing more than a parasite, and the rest of us would be better off without you.

Re:All tax is immoral

[silentcoder]

The term "wealth creator" is basically a giant red flag that means "This person is an utter tool or a troll or both".

Missing the point

[EmperorOfCanada]

I keep hearing about the various governments being out this number of billions or that number of billions. But where I see the big problem is competition. How can local companies compete with these non-tax paying companies when they are forced to pay taxes.

Capitalism is quite simply the reinvestment in the means of production. With tech companies this can be a complicated relationship with both reinvesting in the actual product, and having the cash available to go around buying out similar companies. Another layer in that involves both issuing new shares to buy companies, and issuing shares to attract investors.

As an example, if a local UK company wants to compete with Google in the ad space in the UK, they will end up paying full taxes on any profits; while google won't. Thus google will be able to return a higher profit to their investors, have more cash to buy out competitors, and will be able to issue more valuable shares as part of those buyouts. The UK company will simply have much of its value continuously eroded by taxes that are annually removed from its balance.

Obviously using google as a comparison to some little ad company is a bit unbalanced, but the same applies to any homegrown company that legally exists only in the European country. Cutting edge drones, robotics, 3D printing, or pretty much anything along those lines will not be able to match the growth curve of a company paying a tiny fraction in taxes.

Those sort of companies that could otherwise become international players are what drives a country's economy. To allow certain countries to always have the upper hand is just going to be a long term bad plan.

So I wouldn't be so much worrying about the handful of missing billions but the long term missing trillions.

So quite simply, make sure that these international companies are under the exact same tax burden as a local company when it involves any business within Europe.

So if a local company were to make an apple priced smart phone and would end up paying $80 in taxes. Make sure that Apple selling the same phone is paying $80 in taxes regardless of what paper shenanigans they try.

Re:All tax is immoral

[Tom]

The ratio of wealth creators among the 1% is probably also on the order of 1%. Most of the super-rich don't create wealth, except for themselves. In my country, recent statistics say that 80% of the wealth of the rich (millionaires and above) is inherited.

Lots of the famous super-rich started that way. Gates parents were wealthy, and the Trump empire was built by two generations (not including Donald).

The real wealth creators are in the middle class. Not the one-in-a-million startups that make billion dollar IPOs, but the one-in-five startups that create a viable, middle-sized company and employ a dozen or a hundred people.

That is where wealth is created. And incidentally, it is also where taxes are the most heavy. Because all the tax breaks that are pushed through with your argument are always for the top.

Re:All tax is immoral

[Half-pint HAL]

Punish the wealth creators, and they'll stop creating wealth. -- roman_mir

Oh yes, I can just picture it now. "What?!? I'm only going to get 3 gazillion megabucks? But I wanted 5 gazillion megabucks. Sod it all. I'm declaring insolvency!"

Re:Actually this is the problem

[emorning]

It comes from a supreme court case in 1910 when a corporation decided to pay it's workers a decent living wage, and cut margins a bit to afford that.

There is no legal duty to maximize corporate profits and 'shareholder value'.

And what supreme court case are you talking about? Dodge v. Ford Motor Co?
That was a Michigan Supreme Court case, not a US Supreme Court case. And even that case really has nothing to do with shareholder value.