Meanwhile my (single-person) company is paying around 20% corporation tax, and then I'm getting taxed a further 20-40% on top of that when I pay myself.
Yep, the current corporate tax laws basically punish single-nation companies, while giving multinationals a free pass. International tax laws desperately need an overhaul.
Are you in the US? If you have a single person company you could have a simple single member LLC set up so profits would flow through to you without getting taxed at the company level.
Of course you'd also have to pay self-employment tax on top of the regular income tax though (can get around some of that by using an S Corp).
FY19/20 - $314.7bn profit (3/4 of Ireland's GDP) and paid no tax on it.
> The subsidiary, which collects licence fees for use of copyrighted Microsoft software around the world, recorded an annual profit of $314.7bn in the year to the end of June 2020, according to accounts filed at the Irish Companies Registration Office. Its profits jumped from just under $10bn the previous year and compare with Ireland’s 2020 GDP of €357bn ($437bn).
> Tax transparency campaigners described the “tax aggression displayed by Microsoft, and facilitated by Ireland” as “beyond belief”.
And seen in another thread: Microsoft is lobbying the US govt to spend 250 million to make more software engineers by introducing computer courses in schools so that there are more SE on the market in the future so that they can hire for cheaper.
Meanwhile, individuals are paying 20–50% income tax.
One company’s single year profit is three quarters of GDP of a nation of 5 million people!!! With that much economic power, it is no wonder these multinationals write the rules as they please
TBH, it looks like this was just money moved around from other low/no-tax subsidiaries.
Profit after tax increased ... due to the liquidation of two subsidiaries.
Like, it's still bad, but this money presumably represents many years of accumulated profits, as otherwise the number makes no sense (MS made a profit of $14bn in 2020).
Previously Microsoft shifted 39 billion in North and South American profits to Puerto Rico. (It used Singapore for Asian profits and Ireland for EU profits.) The IRS's case against the company is still active. This was the largest IRS audit in history by dollar amount.
Most economists around the world support eliminating the corporate tax and raising capital gains to compensate. In addition to vastly reducing the amount of accounting needed it would make structures like this pointless. Perhaps governments should get on this as a priority. It seems like early movers would attract a lot of investment.
It's extremely easy to speculate about this stuff academically. Economists tend to delight in theory-adjacent discussions. These have very little bearing on the real world.
TRW, in this case, is a cascading infinity of corporate law, tax law, accounting practices, jurisdictions, lobbyists, parliaments and special interests. None of these exist in economist's models, unless they're modeling public choice theory or somesuch.
Capital gains is just as gameable as corporate income, in practice... and more politically explosive.
IMO, if there is an actual interest in taxing wealth, just tax wealth. Assume 5%-8% return on wealth, and tax total wealth on this basis.
Exactly. Corporations as individuals respond to incentives. The cause of this situation is exactly the presence of high corporate taxes in many countries which multinationals can game.
Disagrees with the public finances above: the issue is that the document says "$ 000".
It's a typo, the numbers are just dollar amounts.
And the text of the report proves it, it explicitly says profit of the year was 13bn.
EDIT: the report is very confusing. It looks like there could be an argument to say it is genuinely 300bn -- the issue is there's *operating profit* of 13bn... but a secondary "profit" from the liquidation of subsidy companies.
So the issue is the article presents this as an operating profit, but it isnt.
Microsoft did not even make that much revenue in the 2020 fiscal year. Total global revenues were $143B and total global net income (aka profit) was $44. It was the a very good year for Microsoft. But £220B (apx $310B) in profits is laughable.
The reporters might have been looking at the "total assets" line of MSFT's financials, which was $301B at the end of FY2020. But you don't pay tax on total assets. Just speculation on my part.
Turnover was $13.606B and operating profit was $13.604B
From the financial report "Profit after tax increased .. to $314.73Bn reflecting gains made upon liquidation of two subsidiaries".
I'm guessing this is a company that exists to receive licensing fees from around the world and the profit just about equals revenue apart from cost of the accountants.
Many corporate tax evasion systems operate by setting up subsidiaries in countries where profit is taxed and licensing their own IP from a "company" in a country where you can cut nice tax deals. Because there's no good way to rate the value of IP, you can basically charge any amount to your other "companies" so that they don't make a dime of profit.
It figures that the "company" licensing all of this IP has very little in the way of operating costs. Maybe they need to pay the rent of the local mailbox that they've registered themselves to, or maybe they even need to rent an office in an office complex somewhere, but the entire operating exists purely to redirect the flow of money.
This approach is evil, nothing less. Companies benefit from government infrastructure all around the world and pay nothing back. The bookies that set up these schemes will tell you that they're perfectly ethical because they're totally legal, but their moral compass has stopped functioning years ago. It's not just Big Tech either, most companies operating worldwide use tactics like these.
I think that 220bn is the profit of that particular Irish subsidiary. They got their revenue from all other Microsoft's subsidiaries around the world and only need very little expense ("directors", etc). Hence, profit.
There shouldn’t be „corporate taxes“. They tend to be difficult to collect, troublesome to declare and actually can not contribute much to national budgets.
Think about it:
Employees of multinational companies pay billions of income tax.
Customers buying products and services from multinational pay billions in VAT.
Shareholders of multinationals receiving dividends pay billions of capital gains tax.
So what exactly is left for a corporate tax to collect?
Why can't governments learn that taxing corporations is pointless? The same revenue is can be raised more simply through sales tax and personal income tax on salaries and distributions.
It sounds sinister in a headline, but from a general theory perspective, why shouldn't we just dump corporate tax altogether and simply raise personal capital gains taxes to match income taxes?
Corporate tax is ultimately a double-tax. All of those profits will eventually be paid to investors (dividends, buybacks, acquisition) or employees (bonuses, profit sharing, stock options), where it will be taxed.
If both types of income were taxed the same...it wouldn't matter who got the money, or how.
Companies creating bizarre international corporate structures and governments spending time competing to untangle them is a giant waste of human bandwidth.
We should just dump this charade altogether and focus on more important things.
Is it really that bad that Microsoft pursues all the legal means for minimizing their corporate tax? Microsoft employees pay the same rates as we do. Also, most people in this thread are Microsoft shareholders, unless they have some unusual choices for their retirement. 5% of SP500 is Microsoft stock, and SP500 tracking funds are a common pick.
This is really, really, really a problem. I know a lot of us make decent money and we write large "checks" to the government because we're in high tax brackets, but seriously. The middle class has gotten smaller. If you live in a city a house costs a million dollars. Many people don't have adequate healthcare. Yet we are allowing the richest people in the world to have astronomical profits and pay no tax to help cover the costs of society, while we squeeze the "working rich" (high earners that don't get most of their income from dividends/capital gains) and working class .
Now, maybe if you are making 300+ you don't feel squeezed. But in all fairness, not that many people make $300k.
- a government borrows heavily and spends on useless things that won't generate future revenue (unlike roads, education which would)
- government raises taxes because they can no longer borrow to spend on things
- companies decide to keep their international profits in international accounts because that money to their country seems foolish at that point.
- somehow that's affecting the "poor" people in the said very rich country?
What do you recommend as a solution? Do you honestly think if MS and a few other companies paid more in tax things will magically get better? Do you trust the government to send that money properly? The problem runs much much deeper. This is only scratching the surface.
Congress is corrupt (via lobbyists). Congress would make this illegal if congress men/women didn't sell out American Citizens.
88% of the cost of the US Fed gov is paid for by taxes by workers (income taxes). Less than 12% comes from all corp/business taxes combined with capital gains (taxing the rich 1%). Business shifting tax burden to workers is a massive scale problem.
$3.5 Trillion = US Tax Revenues (2019) and 88% came from workers.
> 88% of the cost of the US Fed gov is paid for by taxes by workers (income taxes). Less than 12% comes from all corp/business taxes combined with capital gains (taxing the rich 1%).
Reminds me of "rich man's war and poor man's fight". The rich are always moralizing about how everyone should pay their fair share, but it is the poor man who ends up paying. Why do we think that a system controlled by the rich man will ever really allow it to overtax the rich. Better to stop raising taxes that only the poor will pay.
Isn't the US levying corporate tax on worlwide income anyway (since the last tax reform).
So it's "only" a matter of deciding whether those taxes should be paid in US vs. other countries (and if the intellectual property was developped mostly in the US, it seems fair for the US to get most of it).
If you're opening a location in another country, and that location takes X in revenue, the tax should be paid in that country.
Why on earth do you think its fair for US based organizations to spread across the globe, reap the huge profits from that but funnel all the cash back into the US?
I would say that it would more fair if tax was paid in the end users home country. This way these worldwide mega cooperation's would help every country where they sell their products instead of all the money goes to the US.
In 10 years from now it could easily be China that owns many of these mega cooperation's. Would you find it fair if the tax money from china "MS", china "apple", china x all would go to China and the USA would get zero.
Microsoft Ireland isn't a US company and therefore not subject to US laws. Presumably they're free to charge Microsoft USA whatever they want for their services and licensing their IP.
What is the solution to this? I've wracked my brain and can't come up with anything.
Companies will just continue to flee to whatever country is now offering 0%. Christmas Island has a new 0% corporate tax policy? Let's go buy a mailbox there and move our "headquarters".
The old-school thinking is that low corporate tax policies encourage business, creating jobs in the process and boosting that country's economy. In the real world it's a shell company with zero employees that pays that country zero in taxes.
This push for a global minimum tax is interesting, and obviously scares the hell out of a lot of conservatives and others who want nothing to do with "global" anything. Also, how would that even work? Countries would simply not agree to play along, no?
The only thing I can think is that this entire thing has to be flipped into some sort of "VAT"/usage situation.
So if a US company is using Microsoft Azure and pays them $1 million annually to do this, Microsoft has to pay US taxes on that $1 million. Track where the customer is based and pay tax based on that countries tax policy.
I'm clearly no tax person, so my ideas mean nothing. But I've put a lot of thought into this "race to the bottom" and it's difficult to come up with a solution.
[+] [-] kowlo|4 years ago|reply
[+] [-] m12k|4 years ago|reply
[+] [-] TomGullen|4 years ago|reply
[+] [-] tootahe45|4 years ago|reply
[+] [-] deafcalculus|4 years ago|reply
[+] [-] teekert|4 years ago|reply
[+] [-] weird-eye-issue|4 years ago|reply
Of course you'd also have to pay self-employment tax on top of the regular income tax though (can get around some of that by using an S Corp).
[+] [-] new_here|4 years ago|reply
FY18/19 - under $10bn profit
FY19/20 - $314.7bn profit (3/4 of Ireland's GDP) and paid no tax on it.
> The subsidiary, which collects licence fees for use of copyrighted Microsoft software around the world, recorded an annual profit of $314.7bn in the year to the end of June 2020, according to accounts filed at the Irish Companies Registration Office. Its profits jumped from just under $10bn the previous year and compare with Ireland’s 2020 GDP of €357bn ($437bn).
> Tax transparency campaigners described the “tax aggression displayed by Microsoft, and facilitated by Ireland” as “beyond belief”.
[+] [-] ornornor|4 years ago|reply
Meanwhile, individuals are paying 20–50% income tax.
What a wonderful world.
[+] [-] akudha|4 years ago|reply
[+] [-] disgruntledphd2|4 years ago|reply
See: https://www.documentcloud.org/documents/20794038-microsoft-r... for the actual directors report.
[+] [-] refurb|4 years ago|reply
And what this is saying is that Ireland’s GDP will double in 2020?
[+] [-] msiyer|4 years ago|reply
[+] [-] 1vuio0pswjnm7|4 years ago|reply
https://www.propublica.org/article/the-irs-decided-to-get-to...
The ProPublica reporting apparently inspired the Judge to get things moving again.
https://thehill.com/policy/technology/479417-microsoft-order...
Truly sickening.
[+] [-] TimPC|4 years ago|reply
[+] [-] dalbasal|4 years ago|reply
TRW, in this case, is a cascading infinity of corporate law, tax law, accounting practices, jurisdictions, lobbyists, parliaments and special interests. None of these exist in economist's models, unless they're modeling public choice theory or somesuch.
Capital gains is just as gameable as corporate income, in practice... and more politically explosive.
IMO, if there is an actual interest in taxing wealth, just tax wealth. Assume 5%-8% return on wealth, and tax total wealth on this basis.
[+] [-] mxcrossr|4 years ago|reply
[+] [-] G3rn0ti|4 years ago|reply
[+] [-] sbennettmcleish|4 years ago|reply
[+] [-] mjburgess|4 years ago|reply
https://ie.globaldatabase.com/company/microsoft-round-island...
It lists 9bn in profit.
The quoted document > https://assets.documentcloud.org/documents/20794038/microsof...
Disagrees with the public finances above: the issue is that the document says "$ 000".
It's a typo, the numbers are just dollar amounts.
And the text of the report proves it, it explicitly says profit of the year was 13bn.
EDIT: the report is very confusing. It looks like there could be an argument to say it is genuinely 300bn -- the issue is there's *operating profit* of 13bn... but a secondary "profit" from the liquidation of subsidy companies.
So the issue is the article presents this as an operating profit, but it isnt.
[+] [-] rmah|4 years ago|reply
The reporters might have been looking at the "total assets" line of MSFT's financials, which was $301B at the end of FY2020. But you don't pay tax on total assets. Just speculation on my part.
These reporters can't even check basic facts.
[+] [-] helsinkiandrew|4 years ago|reply
From the financial report "Profit after tax increased .. to $314.73Bn reflecting gains made upon liquidation of two subsidiaries".
I'm guessing this is a company that exists to receive licensing fees from around the world and the profit just about equals revenue apart from cost of the accountants.
[+] [-] jeroenhd|4 years ago|reply
It figures that the "company" licensing all of this IP has very little in the way of operating costs. Maybe they need to pay the rent of the local mailbox that they've registered themselves to, or maybe they even need to rent an office in an office complex somewhere, but the entire operating exists purely to redirect the flow of money.
This approach is evil, nothing less. Companies benefit from government infrastructure all around the world and pay nothing back. The bookies that set up these schemes will tell you that they're perfectly ethical because they're totally legal, but their moral compass has stopped functioning years ago. It's not just Big Tech either, most companies operating worldwide use tactics like these.
[+] [-] arczyx|4 years ago|reply
[+] [-] kowlo|4 years ago|reply
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] MikeUt|4 years ago|reply
[+] [-] G3rn0ti|4 years ago|reply
Think about it:
Employees of multinational companies pay billions of income tax.
Customers buying products and services from multinational pay billions in VAT.
Shareholders of multinationals receiving dividends pay billions of capital gains tax.
So what exactly is left for a corporate tax to collect?
[+] [-] fallingknife|4 years ago|reply
[+] [-] pembrook|4 years ago|reply
Corporate tax is ultimately a double-tax. All of those profits will eventually be paid to investors (dividends, buybacks, acquisition) or employees (bonuses, profit sharing, stock options), where it will be taxed.
If both types of income were taxed the same...it wouldn't matter who got the money, or how.
Companies creating bizarre international corporate structures and governments spending time competing to untangle them is a giant waste of human bandwidth.
We should just dump this charade altogether and focus on more important things.
[+] [-] rorykoehler|4 years ago|reply
[+] [-] pg5|4 years ago|reply
[+] [-] czottmann|4 years ago|reply
It's not like they have to scramble to get by, unlike many people in those countries whose tax systems they (ab)use.
[+] [-] apercu|4 years ago|reply
Now, maybe if you are making 300+ you don't feel squeezed. But in all fairness, not that many people make $300k.
[+] [-] mohanmcgeek|4 years ago|reply
[+] [-] gher-shyu3i|4 years ago|reply
[+] [-] seaourfreed|4 years ago|reply
88% of the cost of the US Fed gov is paid for by taxes by workers (income taxes). Less than 12% comes from all corp/business taxes combined with capital gains (taxing the rich 1%). Business shifting tax burden to workers is a massive scale problem.
$3.5 Trillion = US Tax Revenues (2019) and 88% came from workers.
US Federal Tax Revenues (2019): $3.5 Trillion
SOURCE: https://www.google.com/search?q=us+tax+revenues+2019&oq=us+t...
US Capital Gains (2018): $170 Billion (4.8%)
SOURCE: https://taxfoundation.org/federal-capital-gains-tax-collecti...
US Corporate Taxes: 3.9% of US Tax Revenues
https://taxfoundation.org/us-tax-revenue-2021/#:~:text=Corpo...
[+] [-] kilroy123|4 years ago|reply
Overtime, all our policies changed to squeeze the regular citizens to protect and enrich the top 1%. It's wealth redistribution to the top.
Instead Americans would rather flight each other instead of banning together to reverse course.
It doesn't have to be this way.
I love how this website shows this in data:
https://wtfhappenedin1971.com
[+] [-] cheph|4 years ago|reply
"the rich" pay income taxes as well: https://itep.org/who-pays-taxes-in-america-in-2020/
In fact, the top 1% paid 24.3% of all income tax. And the top 5% paid 40.6% of all income tax.
So it is most definitely taxing the rich.
The top 25% paid 66.4% of all income taxes, so to suggest that this is somehow a very regressive tax system seems to not hold water.
[+] [-] hemantv|4 years ago|reply
[+] [-] jFriedensreich|4 years ago|reply
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] brobdingnagians|4 years ago|reply
[+] [-] tonfa|4 years ago|reply
So it's "only" a matter of deciding whether those taxes should be paid in US vs. other countries (and if the intellectual property was developped mostly in the US, it seems fair for the US to get most of it).
[+] [-] breakfastduck|4 years ago|reply
If you're opening a location in another country, and that location takes X in revenue, the tax should be paid in that country.
Why on earth do you think its fair for US based organizations to spread across the globe, reap the huge profits from that but funnel all the cash back into the US?
[+] [-] ToFab123|4 years ago|reply
In 10 years from now it could easily be China that owns many of these mega cooperation's. Would you find it fair if the tax money from china "MS", china "apple", china x all would go to China and the USA would get zero.
[+] [-] nly|4 years ago|reply
[+] [-] CryptoPunk|4 years ago|reply
2. A comment on the Guardian's journalists' potential financial conflicts of interest:
https://news.ycombinator.com/item?id=27352245
[+] [-] EMM_386|4 years ago|reply
Companies will just continue to flee to whatever country is now offering 0%. Christmas Island has a new 0% corporate tax policy? Let's go buy a mailbox there and move our "headquarters".
The old-school thinking is that low corporate tax policies encourage business, creating jobs in the process and boosting that country's economy. In the real world it's a shell company with zero employees that pays that country zero in taxes.
This push for a global minimum tax is interesting, and obviously scares the hell out of a lot of conservatives and others who want nothing to do with "global" anything. Also, how would that even work? Countries would simply not agree to play along, no?
The only thing I can think is that this entire thing has to be flipped into some sort of "VAT"/usage situation.
So if a US company is using Microsoft Azure and pays them $1 million annually to do this, Microsoft has to pay US taxes on that $1 million. Track where the customer is based and pay tax based on that countries tax policy.
I'm clearly no tax person, so my ideas mean nothing. But I've put a lot of thought into this "race to the bottom" and it's difficult to come up with a solution.
[+] [-] gadders|4 years ago|reply