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posted by n1 on Wednesday September 17 2014, @12:13AM   Printer-friendly [Skip to comment(s)]
from the plan-for-world-peace-to-follow dept.

Reuters reports that plans for a major rewriting of international tax rules have been unveiled by the Organisation for Economic Co-operation and Development (OECD) that could eliminate structures that have allowed companies like Google and Amazon to shave billions of dollars off their tax bills. For more than 50 years, the OECD’s work on international taxation has been focused on ensuring companies are not taxed twice on the same profits hampering trade and limit global growth. But companies have been using such treaties to ensure profits are not taxed anywhere. A Reuters investigation last year found that three quarters of the 50 biggest U.S. technology companies channelled revenues from European sales into low tax jurisdictions like Ireland and Switzerland, rather than reporting them nationally. For example, search giant Google takes advantage of tax treaties to channel more than $8 billion in untaxed profits out of Europe and Asia each year and into a subsidiary that is tax resident in Bermuda, which has no income tax. “We are putting an end to double non-taxation,” says OECD head of tax Pascal Saint-Amans.

For the recommendations to actually become binding countries will have to encode them in their domestic laws or amend their bilateral tax treaties. The OECD says that it plans to hold an international conference on amending the network of existing tax treaties. Sol Picciotto, an emeritus professor at Lancaster University in Britain, says the recommendations are at least five to 10 years from becoming law, and that the jury is still out on whether they will accomplish their stated goals. “These are just tweaks,” says Picciotto. “They’re trying to repair an old motorcar, but what they need is a new engine.”

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  • (Score: -1, Offtopic) by Anonymous Coward on Wednesday September 17 2014, @12:56AM

    by Anonymous Coward on Wednesday September 17 2014, @12:56AM (#94326)

    How about all income tax be completely abandoned for a simple sales tax. One that no one is excluded from rich, poor, or otherwise.

    • (Score: 0) by Anonymous Coward on Wednesday September 17 2014, @04:31AM

      by Anonymous Coward on Wednesday September 17 2014, @04:31AM (#94392)

      With a sales tax you are effectively taxing the poor at a higher rate than the rich, which doesn't work out mathematically in a welfare state.

      • (Score: 2) by urza9814 on Thursday September 18 2014, @07:56PM

        by urza9814 (3954) on Thursday September 18 2014, @07:56PM (#95175) Journal

        With a sales tax you are effectively taxing the poor at a higher rate than the rich, which doesn't work out mathematically in a welfare state.

        Not necessarily. Generally (at least in the areas of the US where I've lived) essentials (food, shelter, sometimes clothing) aren't taxed. And that would be the majority of a poor person's spending. The more luxuries a person buys, the more sales tax they pay.

    • (Score: 4, Informative) by Zyx Abacab on Wednesday September 17 2014, @04:46AM

      by Zyx Abacab (3701) on Wednesday September 17 2014, @04:46AM (#94395)

      I'm not sure if you're being a troll but, hell, I'll bite.

      A simple (or flat-rate) tax is a terrible idea because such a tax is unfairly biased against the poor. If you made $125000 in a year, but I only made $14000, would it really be fair if we both paid the exact same amount in taxes?

      Think of it this way: we're both at the store, and we both happen to be buying the exact same things. Say the total cost is $75, and the tax rate is 12 percent. When the bill comes up, we'd have to pay an equal amount in taxes: $9. But that equality is not fair. For someone who makes a six-figure salary, that tax is easily paid; but for someone who's near the poverty line, it might be very significant. Clearly, one of us has much more money to spend than the other. That $9 might mean a meal or a day's heating. This is the classic argument against any kind of sales tax: such a tax is levied on every person, regardless of his or her capacity to pay it.

      A simple flat-rate tax scheme becomes even more unfair over time. Irrespective of how much either of us makes, we have to continually provide ourselves with some things, like food and shelter. Suppose that $75 purchase from earlier was for groceries, and that such a bill is typical for both of us while going to the grocery store. Over the course of the year, supposing we both go shopping twice a week, we're looking at $7800 in groceries alone before taxes. At a 12% tax rate, that's $936 in taxes over the year. From my gross income of $14000, I've paid 6.69% toward taxes. From your gross income of $125000, you've paid 0.749% toward taxes. We've bought the exact same amount of groceries but I, despite making much less money, have comparatively contributed more than you! Everyone needs to buy groceries and, unlike someone who makes six figures, I don't have another $100000 to spend on food. This is why most states create tax exemptions for some goods, but that only helps the problem - not solve it.

      A counterargument is that the wealthier person might also spend much more; whereas I'm just buying groceries, he or she is buying groceries, fancy new cars and lots of other neat stuff. In such a case, the taxes might even out to 12% of $14000 and 12% of $125000. While that may be true, the heart of the problem is that wealth is actually useful for much more than just purchases. Most people are not wealthy and, for them, money is more-or-less equivalent to goods: aside from the odd service, like a plumber or repairman, the average person buys things with his or her money. If income taxation was done away with, what would happen to property income? Dividends? Capital gains?

      Like sales, we exchange money to get these things. But, unlike sales, we don't get some object in return: instead, we (hopefully) get more money. The average person deals little with investments or shareholding, instead putting most of their money into buying stuff. So the wealthy person is unfairly advantaged over the average person: because only the wealthy have many more spend-to-get-more-income options, the average person ends up having a greater net tax burden than the wealthy person. For him or her, the impact of the sales tax is lost amongst a wealth of options, but the poor guy feels it very strongly indeed.

      • (Score: 2) by opinionated_science on Wednesday September 17 2014, @01:18PM

        by opinionated_science (4031) on Wednesday September 17 2014, @01:18PM (#94529)

        It depends on the "flat tax" type. There is http://www.fairtax.org/ [fairtax.org] which explains very well how moving taxation onto sales would solve 2 problems immediately.

        1) reduce irs size to focus on companies

        2) illegal immigrants pay just like everyone else.

        There are inevitably details that matter, but the general principle removes a great deal of the "deduction lottery" which is manipulated by the wealthiest.

      • (Score: 0) by Anonymous Coward on Wednesday September 17 2014, @02:43PM

        by Anonymous Coward on Wednesday September 17 2014, @02:43PM (#94563)

        Ill bite :)

        When the bill comes up, we'd have to pay an equal amount in taxes: $9. But that equality is not fair.
        So your idea of 'fair' is I pay more because I can afford it? You have equality backwards to fair.

        If I pay % wise vs my income as someone else that is equality not fair. It means I work harder and earn more but do not get more purchasing power from that work. I have no incentive to do better. You consider that fair. I consider it theft. It means I do more work for less return. It would mean the highest paying job in the world is working a counter at McDonalds. As I can buy a nice care and live in the suburbs because I pay the same amounts as someone who works 70 hours a week and makes 120k a year.

        Yes being poor sucks ass. Been there have the t-shirt. Being poor means you have to make decisions like 'do I eat or do I buy the tools I need for a job'. Being 'rich' means I have the opportunity to do both.

        Look at all equality and economic schemes thru the broken window fallacy. You will see many of them destroy wealth and discourage production. Discouraging production means less jobs. Less jobs means lower wages.

        This book describes it very well. Unfortunately he does not adequately describe the laffer curve (as it was popularized after he wrote the book). Which was a tool meant to ease inflation. But was instead sold as a tool of social injustice. It achieves that by taking money away from 'the rich' and giving it to the government. We know how well they spend their money.
        http://steshaw.org/economics-in-one-lesson/ [steshaw.org]

        Most social injustice programs work *very* well on the micro level. On the macro level they usually fail and make things worse. There are very few cases where it worked on the macro level. That is because the business owners were so ripping everyone off, that anything was better. They usually managed to do this thru the force of government laws and creating regional monopolies and destroying other peoples wealth.

        you've paid 0.749% toward taxes.
        You are confusing wealth with money. They are not the same thing. Money conveys wealth. Which is why it is easy to confuse them. Wealth allows you to do more things. If you remove wealth you put people who are 'rich' into the same position and making the same decisions as the 'poor'. They will act accordingly. They then need to make either-or decisions instead of 'and' decision. One way creates more work one way stagnates what we do. Work = jobs.

        To use your own example of groceries and combine it with what I mean. I buy groceries. However, I ALSO make payments on a nice car. I ALSO buy toys for my kids. I ALSO make payments on a bigger house and pay proportionately more taxes.

        To put it into perspective. Take the last presidential hopeful in 2011 paid 14%! Holy smokes thats like nearly 20% less than what I paid. HOWEVER, it was 1.94 million dollars. That is more than my entire family has *EVER* paid. He did it in one year. Yet my family get proportionately get more out of the taxes he paid.

        Money that is not moving is not doing anything, it is wealth. Do not confuse wealth with money. You save up for a rainy day and you can take a nice vacation. You accumulate wealth to do something nice. Lets say you saved up 1 million dollars. You would be considered very wealthy. Should you be taxed at a higher rate just because you never spent your money?

        Like most internet theories people trot out what they think is 'fair' however they rarely look at the longer term. I always use these two examples to show it off. Communism works great at first until someone realizes by being lazy they get just as much out of it. At that point it turns totalitarian as you have to force everyone to work to get anything done. Capitalism works until someone figures out you can pay people to force others to do things you want to get you more money. Both are short term gains at the cost of long term gains.

      • (Score: 0) by Anonymous Coward on Wednesday September 17 2014, @06:31PM

        by Anonymous Coward on Wednesday September 17 2014, @06:31PM (#94643)

        I am for doing good to the poor, but I differ in opinion about the means. I think the best way of doing good to the poor is not making them easy in poverty, but leading or driving them out of it.

        Benjamin Franklin

    • (Score: 2) by Tork on Wednesday September 17 2014, @05:32AM

      by Tork (3914) on Wednesday September 17 2014, @05:32AM (#94401)
      Why tax just one direction the money goes when you can tax both?
      --
      Slashdolt Logic: "24 year old jokes about sharks and lasers are +5, Funny." 💩
      • (Score: 1) by anubi on Wednesday September 17 2014, @11:02AM

        by anubi (2828) on Wednesday September 17 2014, @11:02AM (#94470) Journal

        They do.

        Coming, holding, and going.

        Income Tax. Property Tax, Sales Tax.

        When you add em' all up, its a lot of tax.

        Funny thing though, it seems every time another tax gets put on the ballot, people will vote it in if they call it a "bond"!

        Just where does one think the money to pay back the bond buyers comes from?

        --
        "Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
    • (Score: 3, Interesting) by hoochiecoochieman on Wednesday September 17 2014, @10:39AM

      by hoochiecoochieman (4158) on Wednesday September 17 2014, @10:39AM (#94465)

      Sales tax is highly evaded, because there's no incentive for neither the buyer not the seller to declare the transaction. If it's not declared, the buyer pays less and the seller gets undeclared revenue, which will allow him to declare less profits, with fiscal advantages.

      For a tax to be enforceable, there must be an incentive for at least one of the parts to declare the transaction. If by going clean both parties lose, you're encouraging fraud. It can only work in a highly surveilled environment, where the risk of being caught outweighs the benefits of fraud.

      At least here in Portugal, some kinds of companies evade sales tax big time, namely hairdressers, bars, discos, restaurants, car repair shops, household appliance repair shops, etc.

      The biggest tax evaders around here, however, are banks. But it's all legal. They take advantage of loopholes in the legislation to route around corporate taxes. Meanwhile, they got huge bailouts from the same State they refuse to pay taxes to. That's why it's so hard to enforce taxes around here, people feel (and rightfully so) that the taxation is hugely unfair. And they want to get their piece of the pie, too.

      Being a salaried worker and an honest person, I pay all my taxes to the very last cent. I know, I know, I'm an idiot. But what can I do, I was born this way. If there was a Heaven, I'd be destined to it.

  • (Score: 3, Interesting) by frojack on Wednesday September 17 2014, @01:33AM

    by frojack (1554) Subscriber Badge on Wednesday September 17 2014, @01:33AM (#94334) Journal

    Its about time that the pendulum swings the other way.

    About as much clarity as the article offers is this nugget:

    The nations endorsed the creation of a detailed template under which companies would be required to report their revenue, profit and taxes paid in each jurisdiction in which they operate, giving national tax authorities a detailed picture of their operations.

    So where the revenue comes from will be key.

    But even that seems nebulous. Where does google operate? Anywhere they can be reached with a browser? Is the guy idly clicking on a Cadillac ad in some village in Bolivia "Business in Bolivia" or "Business in Michigan"? Where does the bill payer sit? Where does the server sit?

    Seems to me Bolivia gets frozen out of any revenue in either case.

    On the other hand why move money around the world if you are going to get taxed in the country where the money originated anyway? That does not bode well for the backwater countries of the world. Will this spread the wealth or concentrate it?

    --
    No, you are mistaken. I've always had this sig.
    • (Score: 0) by Anonymous Coward on Wednesday September 17 2014, @01:42AM

      by Anonymous Coward on Wednesday September 17 2014, @01:42AM (#94336)

      The "backwater countries" will win in this by being better able to tax mining and resource companies. They don't care about Google the way that you do.

    • (Score: 2) by urza9814 on Thursday September 18 2014, @07:34PM

      by urza9814 (3954) on Thursday September 18 2014, @07:34PM (#95164) Journal

      But even that seems nebulous. Where does google operate? Anywhere they can be reached with a browser? Is the guy idly clicking on a Cadillac ad in some village in Bolivia "Business in Bolivia" or "Business in Michigan"? Where does the bill payer sit? Where does the server sit?

      Does Cadillac pay for that ad in Bolivianos, or in US Dollars?

      It's not nearly as complicated as you make it seem. All that matters is the payment. If Cadillac US pays Google US to serve some ad to some guy in Bolivia, it doesn't matter that the ad is served in Bolivia, the payment is made in the US.

      Although the laws haven't been written yet, I'd imagine it will come down to where the payment is received. So if someone in England orders from Amazon US, it'll be taxed as US income since Amazon US would be the entity processing the transaction. Doesn't matter where the buyer is. Just like the payment is going to be processed in USD, not in Pounds or Bolivianos.

      • (Score: 2) by frojack on Friday September 19 2014, @08:26PM

        by frojack (1554) Subscriber Badge on Friday September 19 2014, @08:26PM (#95644) Journal

        How sure are you of this?

        Wouldn't two global companies choose to pay each other in a country with the most favorable tax structure?
        GM Holdings LLC has offices in lots of south american countries, as [vault.com]does Google. [google.com]

        The income of serving an ad in south america could be viewed as having been EARNED in south america, and the payments could he exchanged in south america, and the ads might even be served from Google's Data center in Chile [google.com].

        So once again, I'm mystified how you can be so sure this was a transaction between Detroit and Mountain View.

        --
        No, you are mistaken. I've always had this sig.
  • (Score: 2) by TheLink on Wednesday September 17 2014, @08:29AM

    by TheLink (332) on Wednesday September 17 2014, @08:29AM (#94442) Journal

    If companies publicly declare $$$ as theirs (in annual reports), treat it as theirs (control it), or even borrow using it as collateral; then they should be taxed as if it's theirs and not belonging to some other entity.

    How do you think it'll work out for me if I told the Tax dept that I didn't need to pay taxes on some $$$ because it wasn't mine but belonged to some relative in Ireland; then I turned around, borrowed money from banks using that $$$ as collateral, and used the borrowed money to buy myself a house and a car? Or told the relative to buy stuff for me to use AND the relative kept following my instructions regarding that money?

    To me it seems dishonest to say it's is not yours for tax purposes but yours for other purposes.

    • (Score: 1) by anubi on Wednesday September 17 2014, @11:38AM

      by anubi (2828) on Wednesday September 17 2014, @11:38AM (#94483) Journal

      I feel the same way every time I pay property tax for the right to tell most people to "get off my lawn" , however other people somehow have wrangled the right to tell me what I can and cannot do without also paying the government for that right. Why is my house considered property and taxable, but someone else's imaginary property defended by my government as if it were real, yet not taxed? If it were taxed, it would encourage productive assets to be maintained, and also encourage abandoned stuff to be ... well ... abandoned.

      When we keep all sorts of stuff only so someone else can't use it, we know that as "hoarding", and is usually frowned upon.... unless its imaginary property.

      It seems we are playing in a field where it costs very little to go around and claim rights to doing stuff, only to make money by keeping anyone else from doing it. Then we bitch about it because another sovereign country starts production and we can't do a thing about it - all our politicians could do is keep anyone from making it here - in the land of "free enterprise"...

      I am a strong believer that I can feed a man for a day by giving him a fish, however teaching one to fish will feed him for the rest of his life... I do not need my government not only taxing me, but using those tax dollars to make "NO FISHING" signs. Such activity to me is just an indication we have way too many overfed politicians who have no connection whatsoever to the real world.

      I am sick of watching our nation slide deeper and deeper into the financial hole while we finance our legal masturbation with debt instruments.

      --
      "Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
      • (Score: 2) by TheLink on Thursday September 18 2014, @06:38PM

        by TheLink (332) on Thursday September 18 2014, @06:38PM (#95120) Journal
        Yeah I don't think it's property either.

        Not like they'll ever get taxed for the millions of copies that they claim belong to them and are merely licensed to the buyers :).

        Your nation won't slide faster than average by virtue of the petrodollar. Everyone else (including Japan, China) with positive amounts of US dollars gets poorer (taxed) every time the USA creates US dollars (whether by loaning from left hand to right hand or future to present etc especially at below market rates). And when finance people worldwide get nervous or even panic they like to move to US dollars and call it a "flight to safety" or similar...
  • (Score: 2) by khallow on Wednesday September 17 2014, @10:06PM

    by khallow (3766) Subscriber Badge on Wednesday September 17 2014, @10:06PM (#94699) Journal

    We would be deeply concerned if telecoms or fossil fuel businesses attempted to create such monopolies, so why cheer when governments do the same? The "race to the bottom" of taxation competition is one way to constrain governments.