AdvisorOne website (a new one on me) has reported that:
A combination of small-business failures and the move of large corporations toward countries considered tax havens has led to a drop of nearly two-thirds in the corporate taxes collected by Spain, increasing the difficulties already faced by a nation on the verge of a bailout.
Reuters reported Wednesday that although Prime Minister Mariano Rajoy has been reluctant to target businesses in his drive to cut Spain's deficit, its corporations have sought business elsewhere, including in many “tax haven” countries, boosting their own income but lowering the taxes they pay to their home country.
Mariano's austerity measures totaling some 65 billion euros ($84 billion) have focused primarily on public-sector wage cuts and increased taxes on individuals rather than on business targets. However, some of its most successful corporations have gone abroad seeking profits and lower tax bills. The end result is that Spain is seeing lower revenues despite the corporations' profitability.
How is it being done?:
"Big corporations are paying less and less in taxes. Their profits have not fallen at the same pace that their [Spanish] tax contribution has fallen," said Carlos Cruzado in the report. Cruzado is chairman of the Treasury Ministry trade union GESTHA.
The net result is:
According to the Spanish Tax Agency, the amount of corporate income it took in in 2011 was 11.4%, while individuals surrendered 12.6% of their income to the government.
The evidence seems pretty unambiguous:
The latest report issued by Spain's Observation Group for Social Corporate Responsibility found that, while prior to the financial crisis, 18 of Spain's 35 blue-chip companies had subsidiaries in territories considered tax havens, in 2010 that number had risen to 30.
The 1% aren't playing their part: that's for sure.
If countries are to get through austerity without social and democratic breakdown there's no doubt at all that tax haven abuse has not just to be curtailed, but ended. I and the Tax Justice Network have argued for a long time that tax havens are a coordinated assault on western democracy. I think the evidence that this is the case is growing steadily.
What's worrying is that even left of centre politicians still don't hear that, loud and clear.
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Tax havens are a coordinated assault on democracy.
Well put, Richard. That wealth may be owned by the few but is created by the many.
Interesting juxtaposition of stories. Millionaires don’t move from California because of tax (they like the lifestyle too much); corporations do move out to tax havens. Conclusion: the idea of treating corporations like people is neo-lib bullsh*t, because they aren’t?
I think the other way of looking at it James is that no-one physically ‘moves’ anywhere. Millionaires don’t move because that would mean them actually moving location, and, that won’t happen because being human people (which I imagine they sometimes find it hard to admit) it’s more than just tax that ties them down.
Corporations don’t actually physically move either. They just use/abuse loopholes or poorly-considered legislation to change the location of their legal arrangements, or to route funds (digitally, of course) to/through tax havens.
So to summarise, nobody actually moves, it’s just that individuals can’t move themselves ‘virtually’, where as companies can.
Having read this back – just to qualify – there are of course rare occasions when some corporations do actually physically move, but these are few and far between.
Another good reason to levy a tax on the owners of land – which doesn’t move – be they individuals or companies.
And this will go on and on, across the Eurozone countries as more of them try to get the 1% to contribute their fair share to tackling the crises, Richard.On the one hand I wouldn’t expect anything different. After all, it’s long been obvious to anyone who spent any time examining it, that ‘corporate resonsibility’ is, for many large organisations simply a marketing device, much as being green and sustainability is.
The really obsene thing, I think, that this development also starts to expose is something which has been evident – but not much discussed apart from here – for some while: that certain members states are actually acting directly against the interests of others (through their fiscal policies). The UK, Luxembourg and the Netherlands being three examples. In the UK’s case this has become all the more so since theTories came to power. They are, in effect, leeches sucking the remaining blood out of very sick countries.
By adopting fiscal policies that are in fact predatory they force further pain and misery onto the vast majority of the populations of Spain, Portugal, Greece and so on, and make it daily less likely that these countries will ever recover economically or socially. They are, in short, active participants in a process of democratic destruction and decay that is likely to lead to large scale civil unrest and, ultimately, the return of totalitarian regimes in southern Europe. Still, I sure that politicians of the right and the 1% across the rest of Europe aren’t that bothered as they’re generally fairly relaxed about doing business with dictators.
From the Reuters piece where this comes from:
That the companies have continued posting profits at all is largely thanks to earnings abroad, but as foreign profits are generally taxed where they are made, Spain’s coffers have seen less and less.
Isn’t this exactly what Tax Justice Network has been campaigning for? That profits are taxed in the country where they are made.
Oh dear, another one who doesn’t get it
Of course we do that
But there is no tax in tax havens
Which is why we ask for source and residence bases
Not one or other, but both
With double tax relief to eliminate risk of double tax
It’s really not hard to understand
Do you define UK as a tax haven, as I think you do elsewhere?
I can’t think of that many Spanish multinationals off-hand, but let’s take Zara/Inditex for an example. When Inditex pays tax for its UK income, is it “no tax” and should this income be also taxed in Spain?
Still, globally Inditex got 2522 M€ in EBIT and paid 613 M€ in income taxes in 2011.
To me it seems rather that Spanish companies pay little tax in Spain because Spanish economy is in a bad shape and there’s not much profit to be made.
Tax on a source basis should be paid in UK
And on residence basis in Spain
Odd how you ignore zero tax states, I see
What does that actually mean?
If a British subsidiary of a Spanish multinational makes 1 000 000 euro earnings before taxes in Britain, this is taxed in Britain at a certain percentage (I presume this is what you mean by source basis). This net profit is then taken by the Spanish mother company. Should it then be taxed again on residence basis in Spain, or what do you mean?
How much total tax should in your view be paid to each country?
If the uk charges 24% it is paid here
If Spain charges 30% then an extra 6% is paid there
The world worked well like this for decades
Quite, this sounds right.
Now, if the case is the other way round: there’s a UK mother company with a Spanish subsidiary. For example, let’s assume that Vodafone makes an operating profit of 2400 MEUR in Spain and after deducting some interests pays 30 % i.e. about 800 MEUR of tax there.
Then it doesn’t pay any UK tax on this, despite being a UK mother company. Is this still okay? As far as I can see, this is correct and there’s no tax avoidance here, right?
In that case there is no UK tax to pay
But where does the interest go?
Interest goes to debtors, but that is irrelevant as it is a legitimate cost and in this case also quite small.
No, interest is often intra- group and paid to a tax haven treasury function
Right now Spain is one of the last countries in the world that needs 30 out of its 35 top blue chip companies collaborating with tax haven platforms to deny their Hacienda (Tax Office) of desperately required revenue.
But how to challenge the tax havens?
Many of these “financial centres” are outpost of the City of London which is primarily influenced by top bankers and senior politicians who in turn have extensive clicks with prominent celebrities, diplomats, dignitaries including Royalty and influential gangsters.
It has been suggested that this secretive melange of old boy alliances can on occasions be glued together by blackmail and intimidation connected to lewd practices too sickening to detail — and ruinous if publicized /proven.
Maybe we are stuck with tax havens simply because they too dangerous to investigate.