et déjà en 2005, Tax Justice Network dénonçait la chose !
un commentaire de Noël Hodson :
MICROSOFT & Many Others. Trading Profits and Capital Profits.
Thanks for the interesting and informative article on Microsoft’s tax avoidance. Two items spring to mind:
1) The Double Irish – which relies on national differences in Transfer Pricing to shift untaxed profits from real OECD markets (High Streets) to tax-havens. Note that the real-market-tax-collectors (say the US, UK or EU) are not obliged by law to accept the Royalty, Interest, Management Charges or Inflated transfer-pricing invoices from tax-havens as tax deductible in their regions. The real-market countries have accepted such invoices due to government policy, not tax-law. Microsoft has, I recall reading, used The Double Irish, as have Apple and others. OECD tax-collectors have the legal power to re-open back accounts, disallow the faux tax deductions, and assess the real-profits for tax, in their regions. These challenges and back-tax claims often happen to smaller tax-avoiding companies. Google is today arguing such 10 years back-tax cases in France, Italy and the UK. Emerging economies should take note that they also can re-open past years.
2) Another major fault line in faux-self-invoicing is the valuations placed on the IPR (intellectual property rights – Patent Box etc), software, brand names, patents, trademarks and other paper assets which are “sold” to tax-havens.
E.G. Lets say that Microsoft sells “Microsoft Office” Brand from Washington to Cayman – for $100M. With a successful brand, the development costs will have been recovered and tax allowances claimed in the US, before the transfer. The BASE COST for Capital Gains Tax CGT, is therefore very low – or NIL – and the $100M “sale” is taxed in the US at say 30% – $30M. What happens next is High Street real-sales in, say, the UK with real-profits of $3Bn. The bookkeepers in Washington calculate a Brand Royalty to be charged by Cayman, Ireland and other havens, to London of, say, $2.9Bn leaving $100M trading profit to be taxed in the UK (this HQ interference breaks the rules of where management is supposed to be located).
The Royalty is repeated year after year; which confers a capital valuation on the Brand name of 40 x $2.9Bn (2.5% income or yield) or $116Bn. The asset value has increased by $115,900,000,000. What the IRS should do is re-visit the original Brand “sale” from the US to Cayman at £100M and revalue the asset as it left the US, at $116Bn – and tax the Capital Gain in the US at 30% – $35Bn.
The IRS hasn’t claimed such Capital Gains Tax due to lenient US government policy. It is the same in the UK.
Any asset transferred from HQ in the US, to a tax-haven, which then charges real-trade OECD companies, should similarly be charged CGT on its yield value as it leaves the US; this equally applies to Loan Capital, of say, $10M, which earns 0.5% interest $50,000 from a US bank, now miraculously able to earn 7% interest $700,000 (14 times more) from a trading subsidiary in London (imparting a yield value of $140M) – another Capital Gain, evidenced by a loan note, that ought to be taxed as it leaves America and goes to Cayman.
We might imagine that the HQ US directors would be appalled that assets worth billions are being sold at very small prices to tiny companies in odd little islands with false directors, in strange jurisdictions; who and where, in law control the valuable assets. If not the directors, then the HQ shareholders will be shocked to lose such assets. They are not shocked and appalled because it is known to all officers to be sham. The on-shore lawyers ensure that ownership and control of the assets, allegedly offshore, always remains on-shore with the HQ company, where all important management decisions are made – whatever they may say to the IRS.
It is in such detail that these grand schemes unravel – and brave executives who have signed false Balance Sheets and Tax Returns, like Al Capone, risk prison.
All such deductible charges are only valid in UK, EU and US tax law if the off-shore company can demonstrate the reality of the charges made, from its own off-shore employees, assets and resources. Brass-plate companies cannot demonstrate such real economic activity, the controlling directors do not really live offshore, the invoices are sham – and the tax-collectors can disallow the deductions in the real-market companies. Self-invoicing is not “perfectly legal”.
Thus endeth the lesson,