Why didn't Facebook pay taxes
Europe and tax evasion Why multinationals pay little tax
"Two tax assessments from Ireland artificially reduced Apple's tax burden for more than two decades. This is a violation of EU rules on state aid. Apple will now have to repay benefits of up to 13 billion euros, plus interest."
In the summer of 2016, EU Competition Commissioner Margrethe Vestager will appear before the media in Brussels. Ireland had given Apple tax breaks. In some years the company didn't even have to pay one percent tax.
"Fair taxation is a global issue. It must apply to everyone."
Commissioner Vestager is in top form. For a good half an hour it offers deep insights into an empire of tax avoidance, describes the intricate company structure. She calculates that Apple's effective tax rate in 2012 was only 0.05 percent. And fell to 0.005 percent in 2014.
"Which means that even less taxes were paid. 50 euros for a million euros in profit."
Firms that do not share the costs of society
Today, after a series of global revelations - the Luxemburg Leaks, the Panama and the Paradise Papers - the world knows about the problem of tax evasion by multinational corporations. The public at least suspects the enormous sums flowing into places that corporations and the super-rich promise that they can keep their wealth to themselves and increase it largely undisturbed. It is estimated that the EU alone loses 50 to 70 billion euros annually through "aggressive tax avoidance".
"The fact that people are now waking up and realizing that they are paying taxes while the richest and the big corporations do not, puts enormous pressure on decision-makers. It is obvious that the tax system is not working. We need a new one."
The world has also known about the problem of tax evasion by multinational corporations since the Panama Papers (dpa / picture-alliance / Karl-Josef Hildenbrand)
Tove Ryding of the European Network for Debt and Development in Brussels has been researching companies that do not want to share in the costs of society for years. And states whose business model is to attract such corporations with tax discounts and lax supervision. Information, she says, is extremely difficult to get hold of.
For years there has been a fight in Brussels about which information companies have to disclose to whom. One instrument is the so-called "Country by country reporting" - that is, country-specific reports.
"That sounds a bit technical, but it is very simple. The point is that the corporations publish data on how many employees they have, how much profit they make and what assets they own. All of this is not known to the public," says Nadja Salson, tax expert from EPSU, the European Federation of Public Service Unions. More transparency is urgently needed in this shadowy world. The EU Commission wanted to make some of this country data public. According to the Commission behind closed doors, one was less successful there.
Global competition for locations for low corporate taxes
"This is only the very first step. And even this proposal is blocked in the Council. For example, by the German, Austrian, but also the Swedish government."
The second front, says Salson, is the question of fairness.
"The most important source of taxes today is taxes on labor. Then comes VAT - what consumers pay. In third place are corporate taxes. Across Europe we are seeing a decline in taxes on corporate profits and high incomes. While VAT is rising We think these are unfair taxes because everyone pays the same rate here, regardless of their income. "
One reason for the secrecy: For years there has been global competition for locations for ever lower corporate taxes. The race to undercut is in full swing. Ireland offers a cheap 12.5 percent - with many attractive extras. Hungary as much as nine percent.
Corporations are like migratory birds
"Probably the most noticeable global tax policy development in recent decades was the decline in corporate taxes. Between 1985 and 2018 their average global rate fell by more than half. From 49 to 24 percent," according to a study published in summer 2018 by Scientists from the University of Copenhagen and the University of California Berkeley.
The study shows that around $ 600 billion in profits from multinational corporations are parked in tax havens. The US, UK and Germany are losing the most. From Germany alone, around 55 billion dollars flowed out in 2015. Most western industrialized countries are affected, including Brazil, China and Russia. Even developing countries pay for it. In total, less development aid flows to Africa than disappears through tax evasion and financial tricks.
"Tax justice is actually a key to a just society."
The main winners: Ireland, Luxembourg and Singapore, but also, for example, Caribbean countries, Hong Kong, the Netherlands - and still Switzerland. The term "winner" is relative. The oases collect very little taxes on huge amounts of postponed corporate profits. What these states get is only a tiny fraction of what corporations save elsewhere. The eternal dilemma: the corporations are like migratory birds. While the states try to control international economic structures nationally.
When a country changes the rules, companies move to the next tax haven with more favorable conditions (picture alliance / dpa / Jörg Carstensen)
"In Ireland for example - without employees, without a director, at a letterbox address. And if Ireland changes the rules, but Luxembourg doesn't, write on a new piece of paper that the company is now in Luxembourg. As soon as Luxembourg changes the rules, they pull maybe to Singapore. "
Says the economist Véronica Grondona, who works in Brussels as an expert for the left-wing faction in the EU Parliament.
"Tax authorities only have very small binoculars"
Today we know more about such oasis structures, and also about the role of escape helpers. The big law firms, for example, or the "Big Four", the four dominant consulting firms Deloitte, KPMG, EY - formerly Ernst & Young - and PwC - Pricewaterhouse Coopers. Véronica Grondona previously worked for PwC, advising corporations. German companies in her home country Argentina, for example, whose managers explained to her: "We are converting everything so that the profits disappear here."
"At the moment, each country can at most see what corporations are doing in their country. And perhaps the company will inform the authorities that they are doing transactions with a subsidiary in Switzerland. But certainly not that transactions with a subsidiary are being carried out from Switzerland in Singapore, where perhaps the lion's share of profit shifting takes place. That means: The tax authorities of the countries only have very small binoculars and can only see what is happening in their environment. "
In states that see themselves as winners of these shifts, low taxes, lax regulation or even banking secrecy are considered a kind of raison d'état and are defended with fearful defiance. This has already been observed in the locker paradise of Switzerland, also in Luxembourg or on the British Channel Islands. It is no different in Ireland. When Margarete Vestager announced her Apple decision in 2016, Irish journalists objected that everyone had obeyed the rules. The Commissioner reacted coolly:
"If my effective tax rate were 0.05 percent - and dropped to 0.005 percent, I would probably have the idea to take a second look at my tax return."
"Our national development is not yet beyond puberty. We are still stuck in a somewhat paranoid mentality: Remember the bad times! Don't say anything that could annoy the multinationals! Otherwise everything will go wrong. And at Christmas we will be back." in the poor house! "
Says Sorley McCaughey, chief campaigner for the Irish organization Christian Aid, who made tax evasion a topic early on. It's about addictions, say the critics. Ireland's role as a tax haven, says Richard Boyd Barrett, Member of the Irish Parliament, is a sacred cow, even for large sections of the opposition.
"I have requested that we invite Google, Facebook, Apple and all the big companies that are at the center of this storm as witnesses. There was an uproar in the committee."
There was mood in parliament. The chairman switched off all cameras and microphones. Even the discussion about it should not be made public.
EU Commission targets "aggressive tax planning"
In the EU Parliament, at least the microphones and cameras continue to run. In spring 2018, the majority of MEPs supported plans to introduce a "common consolidated corporate tax base". It aims to make it more difficult for companies to shift profits to Member States with lower tax rates.
Many Conservative MPs, such as the French Alain Lamassoure, also praise the European Commission for targeting the "aggressive tax planning" of member states such as Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands.
"Google and Facebook have millions of customers in my country and don't pay any taxes."
In 2012 there was a first EU action plan against tax fraud. In 2015 the Commission launched a "transparency package".
"The politicians are now claiming they are doing a lot of activity. In fact, we still have the very flawed tax system that is causing all the problems."
Non-governmental organizations are also putting increasing pressure on more tax justice, denouncing the methods of companies such as Facebook, Amazon, Google, Uber - or McDonald’s.
The trade union umbrella organization EPSU, for example, published a study with American colleagues under the title "Unhappy Meal", in which details of a tax model of McDonalds were analyzed, with subsidiaries in Luxembourg, Switzerland and the USA. The authors estimate that between 2009 and 2013, this construct cost the European states around one billion euros in tax revenue.
Non-governmental organizations put pressure for more tax justice - also in the case of McDonald's (picture alliance / dpa-Zentralbild / Sascha Steinach)
The commission investigated. Last week Margrethe Vestager announced the result: McDonalds did not benefit from illegal tax breaks and Luxembourg did not violate state aid rules. Although all revenues from franchise partners in Europe, including Russia and Ukraine, had been tax exempt. Because they were supposedly taxed in the US, which never happened.
"The double non-taxation in this case is based on an incompatibility between Luxembourg and US tax law and not on special treatment by Luxembourg."
EU needs unanimity on tax issues
A so-called "mismatch": a loophole in the law. Unfair, but completely legal. In other cases, however, the Commission ordered that Luxembourg has to demand large amounts due to "selective tax treatment" - for example from Amazon, Fiat Chrysler and the French Engie group. The Starbucks case in the Netherlands also ended with back payments due to "unfair competitive advantages".
When asked, however, one hears loud sighs in the EU Commission. With 28 finance ministers, it is said, not much is happening. Especially since unanimity is required on tax issues. The resistance comes not only from the usual suspects, but also, for example, from Hungary, Finland, Sweden, Austria and Germany.
"Unfortunately, every country in the EU has some loopholes that benefit big business," says trade union expert Nadja Salson.
"All governments have lost the power to regulate corporate taxes. That is the crux of the problem."
The economist sits on a committee that is supposed to design a more efficient tax administration for the Commission. Together with experts who are closely linked to the "tax avoidance industry", as she puts it. The "big four" are everywhere, acting as tax evasion experts for companies and as helpers for politics.
In the Financial Times, Karthik Ramanna, professor at Oxford University, scoffed: "The commission should know better than to invite the foxes to advise them on the security measures for the hen house."
The economist Grondona also thinks beautiful words, few deeds.
"I'm not saying the Commission isn't working. But any new initiative ends up leaving enough loopholes and the system not really changing."
The disclosure of group figures by country, for example, is a central demand of the Social Democrats. The German SPD finance minister Olaf Scholz rowed back with all his might in the EU parliament in July.
"That is why I advocate a very cautious approach, which in the end produces an efficient instrument, but which is also accepted by the companies and the various countries that we need so that it takes place internationally. And I expressly commit myself to such a cautious one Path."
Which amounts to a veto right of the company. Shortly thereafter, a paper from his ministry came to light that warned against a "demonization" of the large digital companies.
"This is an important step in the fight against international tax evasion."
Concerns about national income and jobs are holding back many countries
Scholz's predecessor, Wolfgang Schäuble, was already seen as a brake. Behind this there is always concern for national income and jobs. Tove Ryding thinks this is a mistake.
"We can see who creates jobs in Europe: Small and medium-sized companies. But it is precisely these companies that have a hard time competing with the large corporations that do not pay taxes. That harms the economy, it does not create jobs. And it undermines societies in all over the world, because they need tax money to finance schools, healthcare, security, roads and other infrastructure. "
Officially, everyone pulls together. Even Ireland is fighting against tax avoidance.
Popular port of port for corporate profits: the Grand Canal in Dublin (Deutschlandradio / Tom Schimmeck)
"Ireland has played and continues to play an important role in the OECD's project on the taxation of multinational corporations," said Mark Redmond, CEO of the American Chamber of Commerce in Dublin.
"For 50 years, the OECD made international tax rules for multinational corporations," countered Tove Ryding. Exactly the rules that created this chaos. And the corporations are even right when they say: We don't break any rules. The problem is: the rules are simply not suitable for collecting taxes from them. "
"There is consensus here. Any academic research concludes that Ireland is a tax haven. And that the Irish government is crutching on the OECD to say: There is no problem. There is nothing," says amused Emma Clancy, Irish expert in the European Parliament. In Dublin, she says, companies make politics.
Trump cuts corporate tax significantly
"You are literally formulating government policy. You are entering the budget and saying, 'We think this and that should be done.' And the government does that and puts it in the law. "
Corporate taxes continue to fall. Donald Trump recently cut it from 35 to 21 percent in the United States. He helps the Apple company to get the bulk of its assets parked abroad - a good $ 250 billion - back to the US. In August, the US president tweeted:
"Looking forward to dinner tonight with Tim Cook from Apple. He's investing a ton of dollars in the US."
In return, Apple has announced a few investments.
"Apple saying it will create 20,000 new jobs and build a new corporate campus in an American city still unnamed."
And the company has long since found a replacement for the "Double Irish" - Apple's much vilified tax model, which relocated three subsidiaries to a stateless - and tax-free - no man's land.
"We have found a mechanism in several of Ireland's double taxation treaties to continue the Double Irish," says Emma Clancy. Andy Storey, Lecturer in Political Economy at University College Dublin, explains the new method.
"Now it's getting a bit complicated: Apple's daughters in Jersey - the island itself is a tax haven - have lent Apple Ireland the money to buy these licenses, copyrights and patents. The licenses, in turn, can be written off for tax purposes. that Apple Ireland pays Apple Jersey to repay its debt is tax deductible. When it comes to tax avoidance, every time one door closes somewhere, another opens elsewhere. "
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