Inquiry into how Apple, Google and Microsoft rob Australians by not paying Aus taxes

[Lynx-lynx]

Yeah, I meant that title to read like that ..... those companies (and others) have been hauled before a Senate inquiry into corporate tax avoidance.

The inquiry by the Senate Economics References Committee is scheduled to hear evidence from Google, Apple and Microsoft and mining corporations BHP Billiton, Rio Tinto and Fortescue Metals Group. (Yep, the last three are enormously large Aus companies - I'm not only picking on the overseas companies!)

As the Apple bloke said in answer to a question he was asked by a Cttee member - when you buy an Apple product in JB Hifi (in Aus) then the transaction is between the consumer and JB Hifi. But then JB Hifi pays Apple Singapore with the proceeds of that consumer's payment. Therefore they avoid Australian taxes. Hissssssssss ....

An estimated $60 billion dollars worth of taxes go offshore.

How do these companies excuse such behaviour:We're not opposed to paying tax. What we're opposed to is being uncompetitive. Says Google's Maile Carnegie. (Hisssssss )


Aus Broadcasting Corp Article: http://www.abc.net.au/news/2015-04-0...nquiry/6379024

Transcript - voice and written - http://www.abc.net.au/news/2015-04-0...idance/6379062

[Pulpmeister]

The response by the overseas guys was typical:

(a) it's legal
(b) everyone's doing it

Minor details like: the schemes are shamelessly artificial tax scams; and their corporate ethics are shoddy; was not addressed by them. And, if my local newspaper report is right, nobody asked the hard question: is it ethical?

If they are so ready to cheat their host countries, we can safely assume they're cheating their customers, not to mention suppliers and employees, equally ruthlessly.

It's near universal in big corporations, as well as wealthy individuals, who employ a small army of tax lawyers and accountants to find crevices in the law to squeeze their scams through, and another army of lobbyists to persuade governments to overlook them.

[HarryT]

If there is a "loophole" in the law, then the law needs to be changed, but I really don't think that you can blame anyone for minimising their tax bill by entirely legal methods. I strongly suspect that you don't voluntarily pay more tax than you're required to, do you? I pay an accountant to ensure that I pay the minimum amount of tax that the law requires. Every company does.

Company directors have a legal obligation to act in the best interests of their shareholders, and that is generally interpreted as meaning that they have to act to maximize profits. Directors who voluntarily paid more tax than they were obliged to, and by doing so reduced profits and hence shareholder dividends, could be personally liable to prosecution as a result.

[eschwartz]

Originally Posted by Pulpmeister

The response by the overseas guys was typical:

(a) it's legal
(b) everyone's doing it

Minor details like: the schemes are shamelessly artificial tax scams; and their corporate ethics are shoddy; was not addressed by them. And, if my local newspaper report is right, nobody asked the hard question: is it ethical?

If they are so ready to cheat their host countries, we can safely assume they're cheating their customers, not to mention suppliers and employees, equally ruthlessly.

It's near universal in big corporations, as well as wealthy individuals, who employ a small army of tax lawyers and accountants to find crevices in the law to squeeze their scams through, and another army of lobbyists to persuade governments to overlook them.

If it is legal, how can it be cheating or a scam?

Or, as HarryT said.

And yes, I am positive every single one of those companies, and all the others as well, are "cheating", or rather, negotiating, with their suppliers and employees, in order to get the best deal they can.

What of it?

[murg]

Originally Posted by HarryT

If there is a "loophole" in the law, then the law needs to be changed, but I really don't think that you can blame anyone for minimising their tax bill by entirely legal methods. I strongly suspect that you don't voluntarily pay more tax than you're required to, do you? I pay an accountant to ensure that I pay the minimum amount of tax that the law requires. Every company does.

Company directors have a legal obligation to act in the best interests of their shareholders, and that is generally interpreted as meaning that they have to act to maximize profits. Directors who voluntarily paid more tax than they were obliged to, and by doing so reduced profits and hence shareholder dividends, could be personally liable to prosecution as a result.

Harry, you aren't creating international structures of companies to move the money around. Nor are you loaning money to yourself is multiple jurisdictions.

While the tricks being used are legal, in Australia we have an overriding tax law that says that any tax avoidance scheme that has as it's purpose the avoidance of tax is illegal.

[murg]

Originally Posted by eschwartz

And yes, I am positive every single one of those companies, and all the others as well, are "cheating", or rather, negotiating, with their suppliers and employees, in order to get the best deal they can.

They aren't negotiating with their suppliers and employees, they are structuring the internal corporate payments to move the money to less taxed jurisdictions.

[HarryT]

Originally Posted by murg

While the tricks being used are legal, in Australia we have an overriding tax law that says that any tax avoidance scheme that has as it's purpose the avoidance of tax is illegal.

If the companies are acting illegally, then of course they should be prosecuted, but what is the difference between "tax avoidance" and "minimising your tax bill by legal methods"? Can you explain for the benefit of us non-Australians?

Here in the UK, "tax evasion" is the crime of not paying the taxes that the law requires you to, but "tax avoidance" is employing legal methods to minimise your taxes, which is precisely what companies pay accountants to do.

[eschwartz]

Originally Posted by murg

Harry, you aren't creating international structures of companies to move the money around. Nor are you loaning money to yourself is multiple jurisdictions.

While the tricks being used are legal, in Australia we have an overriding tax law that says that any tax avoidance scheme that has as it's purpose the avoidance of tax is illegal.

When the law says that that is legal, I fail to see what the problem is.

And Australia has a number of peculiar habits -- peculiar to the inhabitants of other countries, at least.

I personally think it is a bit much to have a law that says the government can nail you for arbitrary reasons, simply because they *feel* you are trying to get out of paying your fair share of taxes.
Laws exist for a reason -- so people know what can and cannot be done. To institute laws that depend on arbitrary definitions of moral (to be determined after the fact) is simply bent.

[eschwartz]

Originally Posted by murg

They aren't negotiating with their suppliers and employees, they are structuring the internal corporate payments to move the money to less taxed jurisdictions.

I was answering Pulpmeister's concern:

If they are so ready to cheat their host countries, we can safely assume they're cheating their customers, not to mention suppliers and employees, equally ruthlessly.

[Lynx-lynx]

[HarryT]If there is a "loophole" in the law, then the law needs to be changed, but I really don't think that you can blame anyone for minimising their tax bill by entirely legal methods. I strongly suspect that you don't voluntarily pay more tax than you're required to, do you? I pay an accountant to ensure that I pay the minimum amount of tax that the law requires. Every company does.

Company directors have a legal obligation to act in the best interests of their shareholders, and that is generally interpreted as meaning that they have to act to maximize profits. Directors who voluntarily paid more tax than they were obliged to, and by doing so reduced profits and hence shareholder dividends, could be personally liable to prosecution as a result. [/HarryT]

Harry our Gov't considers multi national tax avoidance to be a serious issue for Australia and to that end the Senate has instituted an inquiry. The Aus Gov't does not see the matter of tax avoidance as the mere minimisation of taxation dues, nor a matter that ordinary everyday accountants would be capable of dreaming up and successfully establishing and managing.


Harry and eschwartz, the G20 meeting in Brisbane last year discussed the issue of cross border tax evasion, here's an excerpt from an Article in The Conversation: http://theconversation.com/multinati...rackdown-23421

Spoiler:

The G20 finance ministers have once again agreed to cooperate to counter aggressive cross-border tax avoidance by multinationals.

Many US firms are using tax avoidance schemes for their non-US earnings while they shamelessly claim they are paying appropriate taxes in the source countries in which they operate.

The OECD responded to earlier requests for action from the G20 by initiating the “Base Erosion and Profit Shifting” (BEPS) project, and since then has published an action plan to address the issue. The aim of the OECD is to develop measures to counter aggressive tax avoidance in both member and non-member countries, and to limit the risk of double taxation.

When US multinationals assert that their entire non-US income is derived through the double Irish scheme (see explanation below), and is subjected to a very low rate of tax, the artificial and contrived nature of the arrangements is obvious. The OECD is making progress, but there does appear to be some unintended consequences for the OECD and national governments as they develop measures to counter tax avoidance.

Despite the extra scrutiny facing US multinationals since 2012, when Starbucks agreed to “voluntarily” pay company tax in the UK, tax avoidance activities appear not to have slowed.

Harry, here is an excerpt as to what the Aust Taxation Office (ATO) considers tax avoidance schemes are: https://www.ato.gov.au/General/Tax-p...dance-schemes/

Spoiler:

Each year a significant number of arrangements that are aggressive towards the tax system are promoted to taxpayers. These arrangements reduce total tax revenue in one of three ways: by reducing a participant's taxable income or increasing their deductions against their income (or both), or by avoiding tax entirely.

There are many different types of tax avoidance schemes, ranging from mass-marketed arrangements that you might see advertised to the public to boutique arrangements - specialist financial arrangements offered directly to experienced investors. Some are marketed to individuals, and may exploit people's social or environmental conscience and generosity. Others target self-managed super funds. (follow link for rest of discussion)

Double Irish Dutch sandwich anyone?

[HarryT]

Originally Posted by Lynx-lynx

Harry our Gov't considers multi national tax avoidance to be a serious issue for Australia and to that end the Senate has instituted an inquiry. The Aus Gov't does not see the matter of tax avoidance as the mere minimisation of taxation dues, nor a matter that ordinary everyday accountants would be capable of dreaming up and successfully establishing and managing.

You agree, though, that there is a difference between tax evasion (a crime) and tax avoidance (employing legal methods to reduce your tax bill)? I honestly don't see how the Australian government can take any action against companies who are not breaking the law.

The government may not like the fact that multinationals have extremely clever accountants who are employed to devise these methods of minimising tax, but unless the law is changed to make it illegal, there's probably not a lot they can do about it, is there?

[Lynx-lynx]

Originally Posted by HarryT

You agree, though, that there is a difference between tax evasion (a crime) and tax avoidance (employing legal methods to reduce your tax bill)? I honestly don't see how the Australian government can take any action against companies who are not breaking the law.

The government may not like the fact that multinationals have extremely clever accountants who are employed to devise these methods of minimising tax, but unless the law is changed to make it illegal, there's probably not a lot they can do about it, is there?

The ATO considers tax avoidance schemes to be tax evasion as per the Article I linked in the previous post: https://www.ato.gov.au/General/Tax-p...dance-schemes/

And the G20 also considered cross border tax evasion to be a major concern.

[HarryT]

Originally Posted by Lynx-lynx

The ATO considers tax avoidance schemes to be tax evasion as per the Article I linked in the previous post: https://www.ato.gov.au/General/Tax-p...dance-schemes/

That being the case, why do they not simply instigate legal proceedings for tax evasion against the companies involved and let the court decide whether or not they've broken the law? Why is an enquiry needed?

[Billi]

Originally Posted by HarryT

The government may not like the fact that multinationals have extremely clever accountants who are employed to devise these methods of minimising tax

What makes you ever so sure of this?

, but unless the law is changed to make it illegal, there's probably not a lot they can do about it, is there?

Yes, there is. First, they are the ones to change the laws (if they would have only the smallest interest in doing so).
In Europe, part of the tax-avoiding schemes of these kind of companies have been worked out by the company of the President of the European Commission ...

[HarryT]

Originally Posted by Billi

Yes, there is. First, they are the ones to change the laws (if they would have only the smallest interest in doing so).
In Europe, part of the tax-avoiding schemes of these kind of companies have been worked out by the company of the President of the European Commission ...

That is exactly why I said "If there's a legal loophole, the laws need to be changed".