A few years ago I wrote an April Fool's spoof suggesting that a tax haven had been established in space. Now I note on Martin Hearson's blog that both the OECD and UN are considering:
“Whether a satellite in geostationary orbit could constitute a permanent establishment.”
Amazon having a head office in Slough isn't apparently, a permanent establishment but a satellite could be? You couldn't make it up. But as I predicted, what a fantastic tax planning opportunity? I should think all the Big 4 have already got a space programme waiting to go.
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Perhaps we’ll see KPMG in place of CCCP and PWC in place of USA on the rocket fuselages of the commuter service run by Virgin. Don’t know what E&W and Deloitte are going to do.
There’s always the Peoples’ Republic of China – and maybe even North Korea? (joke – I hope) – or perhaps Japan, for E&W and Deloitte!
Interesting, I wonder if you will be able to claim that your central management and control is in space if you establish a company in the jurisdiction of space, with corporate directors all incorporated in space, all with their resident office at the satellite.
What is the tax rate for trading companies in space, are there any TIEAs established between the G20 in space?
It may have been a spoof, Richard, but your example serves to illustrate a very important and worrying trend that has become all to evident this last year. That is, that for many years and for the majority of people the themes and developments central to much of science fiction were treated as just that – fiction – whereas it’s becoming increasingly clear to many of us with a knowledge of and interest in SF that they are far closer to reality than most assume. Furthermore, on current trends several of the predicted ‘fictional’ developments are likely to become real a lot earlier than SF writers predicted.
For example, future societies based on forms or variants of feudalism are fairly commonplace in SF and its cousin, science fantasy. And there is little doubt that in the real world we are well down the road to the imposition of forms of neo-feudalism across much of the developed and developing world (though counter to SF I don’t honestly see a return to humans wearing feudal era clothing, as Dune or Game of Thrones, for example, but you never know).
Similarly, fake or psuedo political systems which have the veneer of forms of ‘democracy’ but are in reality dictatorships controlled by elites/corporations/criminals etc are another SF staple. And what do we see when we undertake any form of critical evaluation of democracies across the globe? Pretty much that.
And finally, of course, technology. In the Terminator series the human race ends up being dominated by – and then at war with – Skynet, a vast computer system that through the marvels of artifical inteligence has become ‘self aware’ and decided that humans are a threat to it’s existence and thus seeks to defend itself by annihilating the human race. Far fetched? Well, think of all that we’ve found out recently from Edward Snowden about the scale and reach of the computer systems of the NSA and GCHQ. Then add into that mix the fact (yes, fact) that work on IA and self aware systems has been ongoing for years and the potential for a Skynet becomes a lot more realistic.
Overall though, I take the view that the inevitable trajectory for where we are heading is a neo-feudal variant of Orwell’s 1984, with the environmental effects of climate change added to the mix rather than wars between large geo-political blocks. Sadly, the hegemony of neo-liberalism will ensure that the majority of citizens won’t be aware – or even perhaps care – about that until its well and truly upon us.
You’re worryingly likely to be accurate in your analysis
Ivan- I’m no SF fan but I remember thinking that the Terminator plots were remarkable prescient! Especially the bits where people cannot tell what is there own reality and what has been ‘implanted’. Who wrote the script-was it Philip K. Dick?
The “Terminator” technology is certainly here – robot planes, ships, tanks most definitely. And with the growth in govt outsourcing, expect to see much of this technology being used by mercenary companies, i.e. Blackwater. It’s a diabolical mix. These companies won’t have to pay humans anymore, hence maximum profit. So we’ll see robot armies on the loose worldwide and unaccountable to the polities that pay for them.
And if we add to this, the trans-humanist agenda of people like Ray Kurzweil, will we see a world dominated by some kind of ‘over-mind’ system (not unlike John Christopher’s Tripods scenario)?
Hmm, an interesting question, one aspect of which is that space is not a jurisdiction. It is not a place where companies can be incorporated. So I take it that any taxable entity would have to be a PE, rather than a separate company. Moreover, space does not have a system of contract law, and cannot enter into tax treaties with countries.
My recollection is that the standard view is that a server does not in itself create a PE. If that holds, we would need contracts being executed in space, in order to create a PE. And I think that the decision to execute each contract would have to be taken in space, but I am not sure of this point.
Assuming for the moment that the satellite will not have any people on board, and that the decision to make the contract must be taken in space, can a computer decide to execute a contract? The answer might well be yes. On Earth, if you order something from an Internet retailer, the computer with which you communicate is set up to commit its owner to a contract with you, once the computer has checked that your credit card number is acceptable and you have ticked the box to accept the terms and conditions.
But can an entity that is not in any jurisdiction make a contract, that will be recognized as such in the jurisdiction of the other party, and in jurisdictions generally? I fear that the answer may be yes. If the Martians showed up, and tried to make contracts with us, my hunch is that those contracts would be recognized in English (or whatever) law, even if there was no legal system at all on Mars.
So we may well have a problem here. One remedy would be a ruling, adopted by as many countries as possible, that no entity that was outside all terrestrial jurisdictions would be recognized as a PE, and that all of its transactions would be attributed to some terrestrial jurisdiction. (We would need rules to determine which one.) As people have remarked in the comments, wild predictions do come to pass, so we had better get a move on and get some robust rules in place. Even unitary taxation would need a rider that only turnover, people and assets on Earth would count in the formula for apportionment, because satellites are expensive assets.
Some corporates and their advisers might claim that there was nothing to worry about, because there could be no tax treaties with space, so profits attributed to satellites would get taxed in full when repatriated to Earth. But in a world in which users of the Double Irish can shift profits to Bermuda, and then sneak them back up to the United States without paying US tax, I would not put it past them to repatriate profits from space without a tax charge.
Could placing a company in international waters not be a simpler way of creating an international tax haven and avoiding the laws of nation states? In much the same way as pirate radio stations used to operate.
Taking Google and Amazon’s defence that tax is paid where the transaction is completed. Were the computing infrastructure to be placed on a ship or dissused oil platform in international waters then could they not claim that no taxes are due. Cross-channel ferries must wait until they are in international waters before they can sell tax free alchol and cigarettes. Does this set a possible precedent?
A ship with no flag? In international waters the ship is under the jurisdiction of the flag state.
Lets hope the policymakers don’t follow other sci-fi plot lines too closeley, after all Logan’s Run would get rid any kind of pensions crisis!
The problem with claiming that a satelite is not under the jurisdiction of a specific state is that no state will protect you.
That was the down side the shipping industry discovered when they had succeeded in freeing themselves from the stright jacket of the nation states: No one cared for years while their ships were capered outside the Horn of Africa. Only when nation states discovered that the multimillion industry of pirating also contributed to terrorism did they start to react.