SMALL FIRMS IN TAX OPTIMISATION GAME

Businesses tailor strategies to avoid payments

TAX optimisation is no longer a matter just for the multinationals. A number of market players are now tailoring strategies originally drawn up for the corporate whales to the minnows, or small businesses and independent entrepreneurs.

Whether the businesses are active in imports and exports, or in services, recent scandals involving document leaks, such as the so-called “Paradise Papers” earlier this month, show that a wider variety of companies are trying to lower their tax bills.

“When people talk about tax evasion, they think about multinationals. But the problem affects smaller companies, too,” said Oxfam France spokeswoman Manon Aubry, noting that owners of several small and mediumsized firms have also been caught up in scandals recently.

While tax evasion is illegal, there are a number of strategies that experts have devised for firms to structure their business operations to avoid tax.

Called tax planning, tax avoidance, or tax optimisation, these strategies stay within the letter of the law, if not the spirit. Nevertheless, they are spreading.

Given the opacity of the practice, it can be difficult to measure exactly how wide-spread it has become.

Jean-Eudes du Mesnil du Buisson, head of the French confederation of small and medium-sized businesses, CPME, said there was “no doubt some small and medium-sized businesses involved, but it is far from being a common practice.”

By contrast, Paul Duvaux, a Paris-based tax lawyer, said he has seen “frequent use” of these tax schemes by owners of small businesses. “Multinationals don’t have anything on small businesses,” he said. “These are legal practices. They only have to use the tools available to them.”

Manon Aubry of Oxfam France said that, in reality, the use of such schemes was somewhere between commonplace and niche.

“For multinationals, what is at stake financially is much greater. But the cost of access to these schemes is sufficiently low to make them interesting to small and medium-sized businesses, as well,” she said.

Aubry pointed to a number of firms offering tax optimisation services that advertise on the Internet, including helping businesses create subsidiaries in Luxembourg, or a European headquarters in Ireland, or creating offshore companies.

One firm, Bethel Finance, says on the French version of its website that “all of these techniques are used by big groups and they are perfectly legal. Our goal is to offer them to small and mediumsized businesses.”

When people talk about tax evasion, they think about multinationals.

But the problem affects smaller companies, too,

MANON AUBRY Oxfam France spokeswoman