Did Microsoft Shift Its Profits to Low-Tax Countries? (nytimes.com) 96
Microsoft is apparently shifting its profits to countries with low taxes — and out of countries where they have many more employees and significant sales. Back in 2005 Former Microsoft CEO Steve Ballmer even said that a low corporate tax rate "is part of the overall advantage of doing business in Ireland," remembers long-time Slashdot reader theodp. (Ballmer added "It would be disingenuous to say otherwise.")
But in 2026 the EU now requires a country-by-country compliance report, and the New York Times notes that Microsoft "was most likely the first major U.S. technology company to make a so-called country by country report of its finances to comply..." Like other big companies, Microsoft uses transactions between subsidiaries to shift profits around to reduce its tax bill. The report revealed a consistent pattern: high returns in low-tax jurisdictions and slim margins in higher-tax ones. The report showed the sometimes absurd results. Microsoft said it had generated almost 40 percent of its pretax income in tax-friendly Ireland, where it employed about 3 percent of its global work force. In higher-tax Germany, the largest economy in Europe, Microsoft earned barely half of 1 percent of its global profits, it said.
Excluding Ireland, the company said, it generated less than 2 percent of its worldwide pretax earnings in Europe... [In Luxembourg Microsoft said it had $283 million in pretax income with only 34 employees.]
[America's] Internal Revenue Service is challenging profit-shifting transactions used by Microsoft, and is seeking back taxes of nearly $29 billion4. The company has said it disagrees with the I.R.S. and said in a securities filing that it "will vigorously contest" the proposed tax bills.
This week a Microsoft blog post offered their own "context," arguing that tax is "one important measure of contribution, but it is not the only one.
"Our investments, partnerships, infrastructure, and long-term presence in countries around the world also reflect a commitment to helping strengthen the economies and communities where we operate, today and for the future."
But in 2026 the EU now requires a country-by-country compliance report, and the New York Times notes that Microsoft "was most likely the first major U.S. technology company to make a so-called country by country report of its finances to comply..." Like other big companies, Microsoft uses transactions between subsidiaries to shift profits around to reduce its tax bill. The report revealed a consistent pattern: high returns in low-tax jurisdictions and slim margins in higher-tax ones. The report showed the sometimes absurd results. Microsoft said it had generated almost 40 percent of its pretax income in tax-friendly Ireland, where it employed about 3 percent of its global work force. In higher-tax Germany, the largest economy in Europe, Microsoft earned barely half of 1 percent of its global profits, it said.
Excluding Ireland, the company said, it generated less than 2 percent of its worldwide pretax earnings in Europe... [In Luxembourg Microsoft said it had $283 million in pretax income with only 34 employees.]
[America's] Internal Revenue Service is challenging profit-shifting transactions used by Microsoft, and is seeking back taxes of nearly $29 billion4. The company has said it disagrees with the I.R.S. and said in a securities filing that it "will vigorously contest" the proposed tax bills.
This week a Microsoft blog post offered their own "context," arguing that tax is "one important measure of contribution, but it is not the only one.
"Our investments, partnerships, infrastructure, and long-term presence in countries around the world also reflect a commitment to helping strengthen the economies and communities where we operate, today and for the future."
Tax the billionaires fairly too? (Score:2)
Re:Tax the billionaires fairly too? (Score:4, Informative)
True. Location, location, location!" is the new "Developers, developers, developers!": Jeff Bezos's Move From WA To FL Has Saved Him Close To $1B in Taxes This Year [slashdot.org]
3% global sales tax where revenue is received (Score:2)
The USA should just require all companies selling more than $1,000,000 in the USA to report their revenue / sales per country worldwide.
A 1% to x% tax on global top-line revenue paid to the USA government would prevent this income shifting between tax jurisdictions, jurisdiction shopping, done only to reduce taxes paid.
That is a top-line revenue tax without deductions, amortization, writing off losses, writing off depreciation, writing off goodwill, deducting salaries and other expenses.
It would free up all
Don't tax profits which can be faked (Score:2)
Get rid of the loopholes, deductions and other paper shuffling operations.
None of those existed before the USA tax code was introduced more than 125 years after the USA was founded.
They move to low tax cities too (Score:2)
Billionaires flock to low tax states to avoid taxes too.
Companies move to low tax cities too. Look at the various companies moving 12 miles, leaving Seattle and relocating in Bellevue
Does a bear do something in the woods? (Score:5, Interesting)
Gosh, I hate to feel like I'm put in the position of trying to defend a corporate cancer, even if the fine people of Microsoft have tried a little to mend a few of their evil ways, but I cannot pass by the low hanging fruit. Of COURSE they did it. You know they did it, and some more besides. (With apologies to Flip...) But they had to do it or they would have been crushed or acquired or worse by some bigger and meaner, dare I say more evil, corporate cancer that did a better job of retaining its earnings by using tax dodges.
I think there may be a root of the problem: When any dimension becomes too dominant, then the system tends to collapse along that dimension. Profit uber alles destroys everything in its path.
Solutions? A progressive tax on monopoly profits? Naw, that trick will never work. (With apologies to Rocky...)
Re: (Score:2)
Too bad there's not a moderation category of "+1 both Insightful and Funny". But yeah, someone please mod parent up.
Dimensional collapse is a good thing? (Score:3)
Now you've gone an put a fork in it. I feel like I have an excuse to try to clarify the dimensional thing a bit.
Mathematicians among us may fear the curse of dimensionality, but that's the way the world works. LOTS of dimensions. But we humans are not good at dealing with more than a few a a time, so we always try to prioritize one or a few of them. It's not that the other dimensions don't matter, but we ignore them and that often causes problems. Probably extinction if the Fermi Paradox isn't some kind of
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According to a friend who understands the math, category theory is quite useful for dimensions. There is an interesting article that argues for a Standard Unit for value: https://www.iqiipi.com/the-eig... [iqiipi.com] I don't know who this (anonymous) author is, but all of the essays on this website are VERY insightful. (I particularly like the one on Agile and the one on 'bugs'. The one on Ada has a few minor errors, but generally gets it very right.)
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a Standard Unit for value: https://www.iqiipi.com/the-eig... [iqiipi.com]
Thank you so much for this link, it is fascinating!
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Interesting link.
Unfortunately half of his talk about "agile" is completely wrong :D
The software I mostly was working on pretty clearly has dimensions and units attached to its numbers. Java meanwhile has standards for that. Did not exist in my time.
Did not find the Ada article yet, but looking forward for it.
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Microsoft created cookie jar reserves back in the 1980's and 1990's, long before the Double Irish. I wonder how much Microsoft has left in those reserves.
Its already progressive ... (Score:1)
Solutions? A progressive tax on monopoly profits? Naw, that trick will never work.
We already have a progressive tax system in the USA. The top 1% pay about 38% of all federal income taxes, while earning around 22% of all income. The bottom 50% pay about 3% of all federal income tax, while earning about 12% of all income. States with income taxes show similar trends.
Higher rates for wealthier brackets. We do that. (Score:2)
> The top 1% pay about 38% of all federal income taxes, while earning around 22% of all income.
That doesn't mean what you think it does.
It does when you include both statements, rather than snip the inconvenient fact that the lower 50% pays 3% of all federal income taxes. A progressive system taxes different income brackets differently, higher rates for wealthier brackets. We do that.
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> We already have a progressive tax system in the USA.
I'm not sure I get this, but why does the marginal tax system stop progressing at an income of $640,600, doesn't that mean lower income earners are getting a progressively worse deal compared to those the further up they are above the 640,600 threshold?
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No idea bout the numbers.
But being above the upper threshold does not mean earners do not pay taxes on that.
It only means the percentage does no longer increase.
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> We already have a progressive tax system in the USA.
I'm not sure I get this, but why does the marginal tax system stop progressing at an income of $640,600, doesn't that mean lower income earners are getting a progressively worse deal compared to those the further up they are above the 640,600 threshold?
640K and above have a higher tax rate than those below 640K, how is paying at a lower rate progressively worse?
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> 640K and above have a higher tax rate than those below 640K, how is paying at a lower rate progressively worse?
I don't have a clear argument.
But lets say the rate is 10% for 10 000, 20% for 20 000 and so on till 50% to 50 000.
Lets say I make 50 000. If it makes sense to tax me more the more my revenue goes for 10 000 to 50 000, why does that logic not continue to apply to those making above 50 000?
That seems related to ideas like that the cost of living reasonably doesn't go up with revenue and cutting
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lets say the rate is 10% for 10 000, 20% for 20 000 and so on till 50% to 50 000.
Lets say I make 50 000. If it makes sense to tax me more the more my revenue goes for 10 000 to 50 000, why does that logic not continue to apply to those making above 50 000?
At the low end the reduced tax rates are an accommodation for those "too close" to the poverty line. I think this rationale, this justification, is something easily sold to the voters of both the political left and right. I believe the poverty line is currently $16K, which seems weirdly low at face value. But that number is not really chosen to reflect a living wage directly, it's more a point where the most drastic public assistance becomes available. Other less drastic public assistance occurs at multiple
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> At the low end the reduced tax rates are an accommodation for those "too close" to the poverty line.
Interesting, I've never seen progressive taxation portrayed downwards rather than upwards.
> So if we starting creating additional higher tax brackets above $50K we are no longer fulfilling the role of assisting those "too close" to the poverty line. We are no longer dealing with the bottom 30% of households.
Not sure your point, the bottom 30% top revenue is about 50 000 but there are additional tax br
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> At the low end the reduced tax rates are an accommodation for those "too close" to the poverty line.
Interesting, I've never seen progressive taxation portrayed downwards rather than upwards.
I'm describing the underlying motivation, which is focused on those of more modest "ability to pay" as wiki phrases it:
"Progressive taxes are imposed in an attempt to reduce the tax incidence on people with a lower ability to pay"
https://en.wikipedia.org/wiki/... [wikipedia.org]
In truth, being motivated by wealthy, rather than the modest, is the uncommon perspective, and a political tell.
> So if we starting creating additional higher tax brackets above $50K we are no longer fulfilling the role of assisting those "too close" to the poverty line. We are no longer dealing with the bottom 30% of households.
Not sure your point, the bottom 30% top revenue is about 50 000 but there are additional tax brackets up to about 500 000.
Your hypothetical ended at 50K. The point is to setup for the question: "We would need a new rationale, a new justification, for th
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We're misunderstanding each other too much. So rather than respond to your points, I read some other stuff.
Some other suggestions instead of only looking at income tax rates:
"Most tax policy experts argue that if the goal is to fight income disparity, it is far more effective to close modern loopholes and adjust capital gains tax rules than it is to pass a massive headline income tax rate that looks tough on paper but forces money out of the country." -said some LLM
Those loop holes also seem to make income
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But a stronger economy that includes more of the working class pretty much requires a healthy balance of types of work. We offshored too much. For example in the USA manufacturing is around 8% of our economy, and for Germany it is 20%. Plus there is the whole thing about identifying critical products and making sure we have domestic sources. So that the supply chain does not affect critical things, as it did during covid for example.
But back to my original qualm. Taxing disposable revenue is more of a real loss on lower income workers than on high revenu earners and the relative loss gets worse the higher income you compare it too.
As I said, we already addres
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> You have yet to provide a rationale for greater taxation on the wealthier brackets.
I didn't make that claim.
I questioned why the income tax system wasn't more progressive considering the perspective of those in the lower economic classes.
But if you are asking, I guess an answer to the rational would be the same as it but adjusted to the current economic reality.
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> You have yet to provide a rationale for greater taxation on the wealthier brackets.
I didn't make that claim.
I read that into the exchange:
“> At the low end the reduced tax rates are an accommodation for those "too close" to the poverty line.
Interesting, I've never seen progressive taxation portrayed downwards rather than upwards.”
I was wondering what a “non-envious” or “not a resource to be mined” rationale would be given the upwards focus.
I questioned why the income tax system wasn't more progressive considering the perspective of those in the lower economic classes. But if you are asking, I guess an answer to the rational would be the same as it but adjusted to the current economic reality.
But isn’t the perspective of the lower economic classes that downward looking perspective I described? An accommodation for t
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> Our economy is checkreined today by a war-born tax system at a time when it is far more in need of the spur than the bit.
Are you saying income tax should come down even faster than it has been in the past 50 years?
If so, how could that reverse the increasing movement of assets upwards?
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> I am saying moving towards the environment Kennedy rightfully criticizes would not be a good move. And I’m not sure why we would want to other than envy or to persist in our of control spending. I’m not seeing the more rational reason for 640K and 1M needing different brackets.
I'm not saying increasing tax brackets is a good way to tackle the increasing disparity of compensation, productivity increases profiting less and less lower economic classes, and assets moving upwards.
But if lowering
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I'm not saying increasing tax brackets is a good way to tackle the increasing disparity of compensation, productivity increases profiting less and less lower economic classes, and assets moving upwards.
I don't think the tax rates are responsible for these. To the extent that tax policy is a problem it would seem that loopholes and legal dodges are contributors. For example a CEO hypothetically receiving a $1 salary and $1,000,000 in stock compensation. I am not saying a mix of cash and stock is a bad idea, the idea of incentivizing the long term over next quarter's financial report to Wall Street has its merits. I think it is a question of balance. In true American fashion, we seem to go from one extreme
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I retract my earlier reply. I didn't realize how intellectually dishonest you are. If I do manage to remember your identity, you need not anticipate any future comments from me.
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I didn't realize how intellectually dishonest you are.
Maybe my reply didn't mean what you think it does. Hint: You've said the same thing I did, that higher income brackets pay a higher tax rate. That is a progressive system.
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Z^-2
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Elon should be paying at least 150bn per year in tax if he's worth 1tn. Where's the money?
Where's the money from the income? 1T is a fictitious number, it's just a theoretical guesstimate based largely on stock price. He owns a lot of Tesla and SpaceX, he needs to in order to control those companies.
Many upper middle class Americans are paper millionaires, their fictitious wealth estimate being over 1M based on home and retirement accounts.
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so rich people can get richer as long as it's not "income". What a convenient loophole and why idiots like you like to say "but rich people pay income tax on their income herp derp." And all the non income wealth... hey look over there at that distraction, sure is distracting isn't it.
Nope. "Wealth" is often a fictional number. The value of an asset is not known until it is sold or traded, and at that point there is income. So it's taxed at that point. With respect to the initial purchase, the known base value, initial value, was probably purchased with previously taxed income. Wealth taxes are sometimes double taxation, sometimes taxation on fictional wealth.
And the fact sales taxes and fees etc are regressive. And there's no loophole for poor people to avoid those.
Nope. Necessities are often free from sales taxes. That is a progressive behavior.
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We tax people on new income, not current wealth. If John Doe is worth 1bn but doesn't earn any new money, there is no additional tax burden. If he receives dividends or interest, that new income is taxed. If much of his wealth is because he owns 5000 acres of prime forest land, it doesn't make any sense to tax him year after year based on the estimated value of the land if he were to sell it.
Note a wealth tax is also a tax set at a fictional value. Value is not known until an asset is sold. And if taxed as wealth, and taxed when sold as income, that's double taxation. An annual wealth tax is multiple taxation of the same theoretical dollar every year.
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I wish I had seen your comment earlier because I think you redirected the discussion in a nonconstructive way. Deliberately? If so, then there is no real reason to discuss any of the issues with you. However it is possible you simply leapt to the conclusion you wanted without any actual malice.
If you couldn't understand what I wrote (and I frequently acknowledge that I write poorly), then you could have asked for clarification. The main problem seems to be you overlooked or failed to understand "on monopoly
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I wish I had seen your comment earlier because I think you redirected the discussion in a nonconstructive way. Deliberately?
I snipped the earlier part because I was not arguing against it. "Engineering profits" is a real thing. All that I argued against is that a progressive tax system is the solution.
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Z^-1
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The ONLY problem is that not everyone else has done so yet. Government shouldn't be allowed to tax income and profit.
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The ONLY problem is that not everyone else has done so yet. Government shouldn't be allowed to tax income and profit.
In the USA we don't. Wages, social security payments, healthcare payments, education reimbursements, etc are dedectible for the employer.
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NAK
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But they had to do it or they would have been crushed or acquired or worse by some bigger and meaner, dare I say more evil, corporate cancer that did a better job of retaining its earnings by using tax dodges.
Is this sarcasm? Which bigger and meaner corporation would have crushed or acquired Microsoft?
IBM could have acquired MS back in the day if they had any brains. Keeping DOS in-house. Instead they decided to play accounting games and have a key critical component under the control of a contractor.
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The EU solution is for them to pay corporation tax based on where their revenue actually comes from, hence the requirement to release a country-by-country compliance report. If 10% of their profit comes from France, they can pay corporation tax on 10% of their global profits to France, regardless of any bullshit subsidiary franchise fees and other crap they have in place.
If you were not aware a common trick they use is to make the national subsidiary pay crippling licencing fees to the parent Irish company
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I think this is actually a reasonable solution approach, but I am advocating for something beyond that. I think that excessive market dominance is a bad thing in itself, and that tax policies should try to encourage more freedom and innovation. My idea involves the same kind of detailed accounting to identify the sources of profits, and the profits that are linked to monopolistic practices would get bumped to higher tax rates. My fantasy is that this could create a situation where a natural path to higher r
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Microsoft is also a Delaware company, just like a few million other companies (thousands of which exist at the same address).
There's a reason why DE is the chosen state for many companies to incorporate.
(They were a WA company until 1986)
I disagree (Score:2)
"they would have been crushed or acquired or worse by some bigger and meaner, dare I say more evil, corporate cancer".
Nope, nobody more evil.
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Hmm... I don't know. There are so many dimensions involved in evil that I think it is really hard to pick #1 out of the many contenders. I think the strongest argument for Microsoft's supremacy might be the EULA parts about limiting and evading liability. But in terms of harms actually caused, I think there are several contenders that have definitely eclipsed Microsoft.
Shifting profits (Score:4, Insightful)
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But these days they've perfected the art of bribing the cheapest politicians to rig the rules in their favor for more profits. In conclusion, we can now solve the energy crisis by attaching magnets to Adam Smith's corpse and generating electricity as he spins in his grave.
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not only do they lobby - more like bribe; they often write the legislation
Everyone does. (Score:4, Interesting)
Most large American (and other countries with reasonable tax rates) corporations at least consider moving to Ireland or similar countries to lesson tax burden. This is hard to stop.
You could declaring that profit margins in the low tax nation is the same margin for all income earned in the US. That is if you declare a profit margin of 24% in Ireland than 24% of all money leaving the US is considered profit and taxable at American rates. This is something that would involve a lot of arguments and I could see accountants getting paid even more to negate this trick.
Another way to do it is to declare that any American owning such corporations must pay 2% (or a similar number) of the value they own as a yearly tax. Example: if Bill Gates owns 100 billion in Microsoft stock, then he must pay 2 billion in taxes yearly for owning it. This kind of thing is harder to argue with, particularly for public corporations as their value is determined by the market.
Frankly, the 2nd method is far superior in my mind. A lot of the abusive practices the wealthy use to evade taxes are caused by us taxing 'profits' rather than net worth. Profits are easy to hide, net worth less so.
Re: Everyone does. (Score:2)
If you do most of your business in Ireland, then you're a foreign company. Cut them off from most federal contracts, require them to be double taxed on imports. Remove their access to US work visas (H1B). Those are for American companies.
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If you do most of your business in Ireland, then you're a foreign company.
The GP is most likely speaking from the EU perspective. Where Irish registry makes the company (subsidiary) a native EU based company. Allowing it to be treated as a domestic company throughout the EU.
The fact is, with offshore manufacturing, you can engineer the tax rate by "realizing" the profits at any stage in the global supply chain. See other response.
Its also offshore manufacturing ... (Score:3)
Most large American (and other countries with reasonable tax rates) corporations at least consider moving to Ireland or similar countries to lesson tax burden.
It's more than that. Offshoring the supply chain also allows companies to "engineer" where "profits" are realized when parts, subassemblies, product assembly, distribution, etc are done overseas. "Profit realization" can occur at any point, reducing taxes even bore the completed consumer product gets to Ireland.
Betteridge's Law of Headlines Broken (Score:4, Insightful)
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There aren't enough super wealthy to provide sufficient revenue. We went through this exercise a while back. Take a corporation. Lockheed was the example IIRC. Take all of the executives compensation. Every penny, not just some tax rate. Spread it it across all of its employees like peanut butter. It will make a nice Christmas bonus. Nothing you'd manage to live on. Your kids might get nice iPhones under the tree (but not the top of the line models).
You HAVE to tax the middle class. Because that's where th
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America has been shifting taxes from corporations onto individuals, and regressively taxing individuals since the implementation of the Income Tax.
Watching people argue about taxing corporations always cracks me up. Businesses don't pay taxes, that's just an operating expense that is passed along to their customers. Which is you.
What Do The Numbers Tell You? (Score:2)
Country ===== Profit Before taxes.
Ireland ====== 47,083,027,808
Gemany ===== 661,226,924
Malta ====== -765,780,100
Ireland is purely bullshit.
Malta is extremely interesting and almost certainly bullshit. They're probably getting some sort of Maltese welfare.
The numbers for Panama are absurdly low. Is Panama no longer a tax haven?
Unfair on SMEs (Score:5, Insightful)
Running a business with $15M turnover, we are not big enough to take advantage of big business shenanigans.
It peeves me off no end, that I pay 30% tax on profits while big multinationals spirit their profits off tax shelters.
I don’t mind paying the tax, as you need tax to provide for a modern society. I’m peeved multinationals are allowed to engage in tax fraud.
Re:Unfair on SMEs (Score:5, Funny)
"I want either less corruption. Or more opportunity to engage in it."
Re: Unfair on SMEs (Score:4, Insightful)
If it is done fairly it isn't corruption. It's the self dealing and big enough to avoid consequences that is the problem
Time to send in oracle auditors (Score:2)
Countries are part of the problem as well (Score:3)
Should be illegal (Score:1)
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If your profit margins vary significantly between countries and the deviation from the expected appears to line up nicely with financial transfers from a high tax country to a low tax country:
A) The high tax country should make that illegal
B) The high tax country's collections enforcement should give your corporation a financial colonoscopy followed by a fine equal to twice what you 'saved'.
Re: Should be illegal (Score:2)
It is illegal to do it blatantly. But these companies try very hard to do it in a legal way.
Of course. Everyone would. (Score:2, Interesting)
Everyone would if they could. Why on Earth would you willingly pay more tax in country X if you could legally pay less tax elsewhere? It may be controversial but is perfectly legal, and corporations have no soul to have this sort of moral dilemmas.
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What if they did? (Score:2)
there are ways around this (Score:2)
If your profits are mostly in another country, then a reasonable law could treat your products and services as imports. Having tacking a tariff on MS office365 subscriptions would give actual American and European busineses a fair competitive playing field in their respective markets.
Does the Pope shit in the woods? (Score:1)
About as altruistic as a cat (Score:1)
What year is it?? (Score:2)