Na­tions feel share should be larger

Tax

Austin American-Statesman - - BUSINESS - B

prof­its out of the coun­tries they’ve done busi­ness in, the on­line com­pa­nies have man­aged to keep down both sales taxes and cor­po­rate in­come taxes on their overseas in­come.

Google’s Bri­tish chief, Matt Brit­tin, said last week that the com­pany “plays by the rules set by politi­cians.”

“The only peo­ple who really have choices are politi­cians who set the tax rates,” he told the U.K.’s Chan­nel 4 News.

The fact that the meth­ods are le­gal hasn’t stopped re­sent­ment brew­ing among gov­ern­ments, other brick-and­mor­tar busi­nesses, and house­holds feel­ing ever higher tax bur­dens.

The Bri­tish Par­lia­ment’s pub­lic ac­counts com­mit­tee said Ama­zon, by ac­count­ing for the prof­its made in the U.K. else­where in the EU, paid $2.9 mil­lion in Bri­tish tax in 2011, on rev­enue of $333 mil­lion.

In Italy, the government said tax po­lice de­ter­mined Google had un­de­clared earn­ings of $311 mil­lion from 20022006 and had not paid value added tax of $125 mil­lion in the pe­riod.

Philippe Marini, the French se­na­tor who leads the coun­try’s fi­nance com­mis­sion, es­ti­mated France is miss­ing out on $1.7 bil­lion in taxes from Google, Ap­ple, Face­book and Ama­zon. And, Marini said, that amount would pale in com­par­i­son with what they likely owe Ger­many and Bri­tain where sales fig­ures are higher.

“A bak­ery across the street is eas­ier to con­trol,” Marini said. “And house­holds can’t re­lo­cate to Ire­land just like that.”

The com­pa­nies say they com­ply with the law and are co­op­er­a­tive in coun­tries where they op­er­ate, but do not elab­o­rate. Even peo­ple crit­i­cal of their tac­tics say ul­ti­mately the job of an ac­coun­tant is to keep a client’s tax bill as low as pos­si­ble.

The com­pa­nies also stress that they do pay some taxes — con­tri­bu­tions to their em­ploy­ees’ so­cial se­cu­rity, for ex­am­ple.

France, how­ever, is go­ing af­ter the tech com­pa­nies: On June 30, tax au­thor­i­ties raided Google’s Paris of­fices, ac­cord­ing to court doc­u­ments posted on­line af­ter Google con­tested the seizure of its files. The tech gi­ant has de­nied re­ceiv­ing a $2.2 bil­lion bill from the French government and says it pays all legally re­quired taxes.

Taxes fall un­der French pri­vacy law, so spe­cific amounts are not made pub­lic. But the raid on Google’s Paris of­fices is a sign the French government be­lieves the tech com­pany has more than just in­ci­den­tal sup­port staff in the French cap­i­tal. France’s bud­get min­is­ter, Jerome Cahuzac, said “a cer­tain search en­gine needs to reg­u­lar­ize its sit­u­a­tion in France.”

Face­book, Ama­zon and Ap­ple have come un­der sim­i­lar French scru­tiny, ac­cord­ing to pub­lished re­ports and pub­lic fil­ings. Marini said French law is lag­ging be­hind, but hopes to catch up.

Both Ama­zon and Google are con­test­ing the French ac­tions in court.

Bri­tain and Ger­many have joined France in tar­get­ing the tech giants and, of­fi­cials say, are co­or­di­nat­ing against what one of­fi­cial calls “state­less in­come.”

The G-20 meet­ing in Mex­ico this month showed a mea­sure of in­ter­na­tional sup­port for tight­en­ing the rules. The U.K. Trea­sury chief Ge­orge Os­borne and Ger­man fi­nance min­is­ter Wolf­gang Schaeu­ble called for a com­mon front “to strengthen in­ter­na­tional stan­dards for cor­po­rate tax regimes.”

“Gov­ern­ments have to keep up in the race,” said Marini, the French se­na­tor. “Com­pa­nies have a much faster pace than ei­ther na­tional or Euro­pean law.”

Help­ing the gov­ern­ments keep tabs on the tech multi­na­tion­als is the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and Devel­op­ment. Orig­i­nally set up in 1948 with the aim of stim­u­lat­ing world trade, the OECD now is tak­ing the lead role in fight­ing tax eva­sion, said Pas­cal Saint-Amans, di­rec­tor of the or­ga­ni­za­tion’s Cen­ter for Tax Pol­icy since Fe­bru­ary.

The OECD has es­tab­lished a locked data­base de­tail­ing some of the world’s most so­phis­ti­cated tax schemes to al­low government tax au­thor­i­ties to pri­vately share rev­enue-shift­ing schemes they en­counter.

The main prob­lem, for Saint-Amans, is that tax havens within Europe such as Ire­land and Lux­em­bourg ease the process that al­lows multi­na­tion­als to send prof­its even far­ther off­shore to places like Ber­muda. That makes it harder for the coun­tries with the most staff and sales to track. Google, Ap­ple, Mi­crosoft and Face­book have in­ter­na­tional head­quar­ters in Ire­land; Ama­zon’s in­ter­na­tional of­fices are in Lux­em­bourg. But the big­gest Euro­pean mar­kets for all those com­pa­nies are Ger­many, France and Great Bri­tain.

“At some point again you’re back to the ba­sics, which is where is the real ac­tiv­ity? And that’s some­thing that we may have lost sight of,” said Saint-Amans. “The low­tax regimes are more the con­se­quence than the prob­lem.”

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