They can certainly manage to avoid compliance with at least the spirit of the law when it really matters to them. I guess avoiding paying tax is important enough to engage armies of lawyers and reorganise your corporate structure, while this isn't.
"You're technically owned by an Irish company you invented to avoid taxes? Cool. The c-suite plus your accountants are going to prison for the next five years and we're seizing the X billion you actually owe plus a punitive fine."
Seems like this is a bit on the difficult to enforce side. Incidentally, profit is what is taxed, so the easy way to avoid tax is to simply not be profitable. Individuals pay tax on all of our income from interest and employment so this difference always feels somewhat unfair. The very laws that allow companies to avoid paying income tax are usually created as incentives: do this (HQ in Ireland), and in trade, you get to pay less in tax. The C suite and lawyers are usually guilty of meticulously obeying the law, which really makes the whole thing feel even more unfair. Reality is that the system is working as coded, but there are bugs in the code.
Evading taxes is illegal. Tax avoidance is legal and it's a fiduciary duty of corporate officers. They would actually be violation their fiduciary duties if they paid more tax than was required.
I think it's the general sentiment that companies avoid things like paying taxes by skirting around the rules through means available to them due to their wealth and status. While a smaller company isn't going to have the resources at their disposal to gain such advantages.
I guess it's similar to how it people feel like celebrities and executives can always avoid going to jail for things that a regular person would almost definitely end up in jail for.
Or more succinctly, laws aren't perfect and corporations abuse those imperfections.
Often with complex tax schemes we don't know if they're legal or not because they haven't been tested in courts.
Some governments focus on low-hanging fruit or on flagrant tax evasion. They don't want a long running court case costing millions with an uncertain outcome.
So we never get to find out whether this scheme is legal avoidance or illegal evasion.
But, even if it's legal avoidance: I pay my tax. Why shouldn't this huge company who seeks to benefit from tax-payer funded institutions also pay their tax?
No, your comment quite clearly implies that the corporations should not utilize the tax laws to pay the minimum required amount of taxes. You use words like 'avoid' to imply that it's evasion, but it's 'avoiding' in the same way as someone who 'avoids' taxes by taking a deduction for a dependent.
Tax dodging is also against the spirit of the law, which is a direct result of companies lobbying for loopholes they can use. Said companies are the initiators, not the corrupt/dumb politicians (who are, of course, also to blame).
There's the grey area where companies are exploiting tax schemes in unusual ways and the tax authorities have not yet declared whether those complex schemes are legal or not.
Immensely wealthy multinational corporations have a lot of money to spend on lawyers and accountants, so while these companies are probably not evading tax the avoidance schemes they come up with are sometimes not legal requiring them to repay.
Don't forget that tax is part of law and so there is what's written and how that's interpreted by the courts. Until you've had case law there are areas of uncertainty.
Shrug. You can only fine what’s actually illegal, and tax avoidance currently isn’t. If corporate behaviours are deemed problematic then generally laws are updated to cover that.
Tax laws are what's written in acts and statutes, but also how the courts interpret those laws.
When a company plans their tax they can either use the laws as they're intended (tax planning), they can deceive the tax authorities in order to illegally reduce their tax burden (tax evasion) or they can use the laws in ways which aren't necessarily intended, but which aren't yet outright illegal because we haven't had a court ruling yet (tax avoidance).
It's really easy to say "just change the law", but there are problems with that.
Prosecuting complex tax cases is fantastically expensive, and so tax authorities tend to only go to court when i) the case is obvious and ii) everything else has failed. (This includes for the small guy too -- if I chose not to pay my tax there are escalating steps of intervention before I get prosecuted). This means we simply don't know if a particular tax avoidance scheme is illegal or not, and we're unlikely to find out unless the tax authorities move to a more punitive regime.
And we don't necessarily want to give more power to the state. We want to limit the power of the state to some extent, which is why a lot of pretty unpleasant behaviours are perfectly legal, and it's why we impose that "beyond all reasonable doubt" requirement on criminal conviction.
Corporate values aren't (at least they shouldn't be) nonsense. A company could say "we do this because it's legally mandated and we don't have a choice", but that's the worst reason for doing something. Companies that make use of education, transport infrastructure, policing, healthcare, (all the things that are paid for by taxation) should pay their fair amount of tax, rather than using the law in weird unexpected ways to reduce their tax burden by an unreasonable amount.
There is a cultural thing going on here. No-one in the UK is saying that companies should go out of their way to pay more tax than they need to. And reducing their tax burden a bit is probably seen as okay. But we do have the concept of "taking the piss", and a lot of these companies are taking the piss. They need to realise that public tolerance for this is low and reducing, and that if they don't change their behaviours they're going to see increased tax regulation.
There are clear interpretations and case law that state that faithful adherence to the letter of the tax law is fine. How is one to interpret the "spirit" of the law when the spirit inferred by one reader is at odds with the text of the law as acted upon by someone else? It's (relatively) easy to show compliance with the letter of the law. It's (essentially) impossible to show compliance with all possible spiritual interpretations thereof.
The Internal Revenue Service (of the US) writes:
Avoidance of taxes is not a criminal offense. Any attempt to reduce,
avoid, minimize, or alleviate taxes by legitimate means is permissible.
The distinction between evasion and avoidance is fine yet definite. One
who avoids tax does not conceal or misrepresent. He shapes events to
reduce or eliminate tax liability and upon the happening of the events,
makes a complete disclosure. Evasion, on the other hand, involves
deceit, subterfuge, camouflage, concealment, some attempt to color or
obscure events, or making things seem other than what they are.
Did this Dutch company purchase product/services from this Irish company?
Did these two companies merge and the surviving company was the non-US company?
Did this executive receive stock options on such-and-such date?
Those are all relatively easy questions of fact.
Should the surviving entity of the merger have been the US company? (According to whom? Or on what basis? To what end? Which benefits the investors the most? What did the shareholders vote to do with their company? Why should someone else judge that what they did was "legal but improper"?)
The real issue is simply that the US is relatively uncompetitive as a corporate domicile (on a rates and particularly on a "worldwide income basis") Attempts to patch the system without addressing this root issue are unlikely to succeed in a clean and sustainable fashion, IMO.
Tax evasion is and always will be, illegal. Tax avoidance is legal and undertaken by every single sane tax-payer who pays the minimum tax but computes that amount in accordance with the tax rules. The courts are available for redress if the tax authorities think the rules are being bent. Judgement is a legal matter and not one for debate by armchair moralists.
Those who don't like the way some tax laws operate in the realm of complex company operations should lobby the law-makers not those tax-payers working in compliance with the law.
If you ever think of a financial trick to avoid taxes and say "why couldn't companies do X", the answer without fail is "because it's illegal and you aren't aware of the specific law you're violating".
If this was legal all sorts of companies would do this all the time.
EDIT: People keep saying that it's fine if they're obeying the law. There's a chance that they might not be obeying the law. While they're not evading tax (not using clearly illegal means) they're not just tax planning. Indeed, the schemes used by these companies are pushing a language change. Tax avoidance used to mean normal tax planning.
The tactics of Google, Amazon, Vodafone, Starbucks, etc etc etc mean that "Tax avoidance" now means complex schemes which are probably legal, but that might not be. The schemes are complex, and require believing odd things to be true. For example, Starbucks makes no profit in the UK[1], something that people will find baffling if they've ever bought a £4 coffee.
Any one of the big four accountancy firms has more staff that the HMRC. There's big money to be made in avoiding tax. When firms are caught they negotiate deals to repay some, but not nearly all tax.[2]
But the final slap in the face is that underfunded, understaffed HMRC gets "help" from the big four accountancy firms. What's the catch? What could possibly go wrong with allowing the poacher to play at gamekeeper? They lend staff to HMRC to draft tax law; they then use their knowledge of those laws (that they helped to create) to exploit loopholes.[3]
People really don't mind if you plan your taxes to reduce the bill. But they do get angry when they see people "taking the piss", especially when the country is going through austerity measures and when the NHS is being crunched. All these companies make use of UK infrastructure (police; education; health; roads, etc etc) - they should pay their tax.
Small point: tax avoidance is legal and sensible. Would anyone or any company seek to maximize its tax bill bar bizarre circumstances? Rather, the reverse. If there's a devastating avoidance loophole it's the job of government to redraft the regulations or let the courts decide.
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