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OECD nations gang up on internet retailers, tax dodgers

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And a good thing too

The MAAl law is too long in coming. Multinationals drain resources from a country. This proposal to force them to actually provide support for the countries they are feeding from is totally justified,

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Re: And a good thing too

"This proposal to force them to actually provide support for the countries they are feeding from is totally justified"

The problem that the politicians claim to be solving is one of their own making, having happily rubber stamped immensely long, poorly drafted, complex tax laws, and then idiotically signed tax and trading treaties that enable international corporations to engage in tax arbitrage. And since almost all countries prohibit profit shifting through transfer pricing, I've no doubt some of the rules already exist to prohibit dodgy licensing or reseller schemes - apparently the Ozthorities can't or won't enforce them, so its not really clear how more rules will solve anything.

Of course, adding another complicated tax law overlay won't solve the structural problems. This (as with the UK's similar ambitions) is the worst sort of gesture politics, since with the structural issues still in place, they're just squeezing the balloon at one end, and the tax dodging globocorps will come up with a new wheeze that puffs it up at the other end.

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Anonymous Coward

Re: And a good thing too

<iThe MAAl law is too long in coming. Multinationals drain resources from a country. This proposal to force them to actually provide support for the countries they are feeding from is totally justified,</i>

.. but the reality is that this simply means a new revenue stream for the consultancies and lawyers that cook up these avoidance strategies. Sometimes I think the whole purpose of these exercises is to keep those people in good money rather than to fix the issue in a way to makes taxation a bit more fair.

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Re: And a good thing too

If I ruled the country i'd just implement a law called the "taking the piss act" which says that on conviction via jury trial for "taking the piss" by avoiding/evading tax (a prosecution for which can be bought by any citizen, or groups of citizens) the company will be taxed a largish percentage of their turnover instead of a largish percentage of profit for the next five years.

If the multinations go out of business, tough. It simply means that other businesses will take up their market share, most of which will actually pay tax.

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Re: And a good thing too

"Of course, adding another complicated tax law overlay won't solve the structural problems."

When what's actually needed is to strip the structure down and start over why do the "fixes" remind me of bandaids upon bandaids upon bandaids?

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Anonymous Coward

This will not work

Minor problems:

Step 3: Do Australian customers deal mainly with Australian employees. Google & Co have demonstrated this one in Europe - all sales are closed in Ireland. In the Australian case they will close them in Singapore (as they do now). So this failed right there.

Step 4: Define Tax Haven. Again - go and prove this one.

Step 5: Again - "The purpose of this scheme is to reimburse global development and marketing costs".

The check should stop at the first half of step 3. Any company with global revenue above XBn should be taxed locally in all countries it operates unconditionally. "Case closed". A number between 1 and 5 Bn is about right for that. Any bitching and moaning about the "adverse effects" is baseless as the entry cost of taxation at standard rate in a country is the cost of employing one measly account clerk. As you are no longer avoiding tax, you do not need to contract KPMG for 50mil to do your tax bill in all but a handful of countries.

As a side effect, this will do wonders in terms of retaining the competitiveness of the market because it will be impossible to grow to "tax invincibility" size as most tech Megalodons do today. It will also dampen the use of globalization as a market lever.

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Re: This will not work

"The check should stop at the first half of step 3. Any company with global revenue above XBn should be taxed locally in all countries it operates unconditionally. "Case closed". A number between 1 and 5 Bn is about right for that. Any bitching and moaning about the "adverse effects" is baseless as the entry cost of taxation at standard rate in a country is the cost of employing one measly account clerk. As you are no longer avoiding tax, you do not need to contract KPMG for 50mil to do your tax bill in all but a handful of countries."

Ever heard of "Smurfing"? The company will just splinter off into multiple smaller ones, each apparently independent and keeping their revenues under the trigger value. Plus they can argue what constitutes "doing business" until the sun stops.

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Re: This will not work

Seems you beat me to making this point.

Ultimately, all this will achieve is ensure that nobody domiciled in Australia is employed in the process. What'll happen is that an Australian phone redirection service forwards a call to an office in Singapore, and the customer deals with somebody there.

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Coat

Re: This will not work

what'll happen is that an Australian phone redirection service forwards a call to an office in Singapore, and the customer deals with somebody there.

Have we found the real reason that Google is investing in Space-X? Lunar call centers, no tax to pay at all.

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Re: This will not work

Setting up a tax free country in Antarctica might be cheaper than the Moon. And with the kind of investment they are capable of funding, a comfortable city under all that ice is not an infeasible project.

Something like Rapture from Bioshock.

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Do Australians customers deal mainly with Australian employees

Seems a loophole to me. It would be enough to outsource all sales people to India to avoid this new tax.

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Re: Do Australians customers deal mainly with Australian employees

To avoid any sales. Corrected for you.

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Intangables 375 mill over 4 years ?

Colour me unimpressed, thats less than 1 weeks worth of NEW debt per annum

Billions hahahahaha - a way will be found

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Re: Intangables 375 mill over 4 years ?

Exactly. Meanwhile Hockey's mates in finance (super tax concessions) and real estate (negative gearing, CGT discount) get to keep their increasingly many billions per year of tax lurks. Makes all this seem like a sideshow, just to be seen to be doing something whilst not even touching the low hanging fruit.

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Not a burden?

"Hockey said most online sellers are already collecting consumption tax in their home markets, so asking them to do the same for export sales shouldn't be seen as a nasty compliance burden."

Online companies will have to comply with every detail of every tax in every country. And keep up to date with all changes. And this is not a burden? Maybe not for the likes of Amazon, but for anyone smaller it's a huge problem. And they already know about this - tiny kitchen table businesses now have to comply with all the different EU VAT regs, or go via a centralised shop which is nearly as bad.

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Re: Not a burden?

Surely there's an accounting software package which does the heavy lifting for smaller online sellers where you plug in your sales figures and it spits out a list of national tax departments who you need to send a cheque to. And since any business selling stuff online would need some accounting software to keep track of sales and deal with their own tax department, having to deal with additional countries should not represent a large increase in burden.

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Re: Not a burden?

The problem with this is what exactly are you selling? Let's narrow it down to "a film". Now depending on the media, or digital or not, it could be in a different class depending on the country. Now add in if it is "culturally important" - again the class changes (Note that culturally important in one country may not be in another). Continue listing all the parameters you need to work out the tax class for every country.

So to sell your 2€ DVD, you enter into your software the following:

Item: Film, Colour, with sound, format DVD, Produced in France, Culturally significant in Elbonia, .....

Do you see where this is going? Have a headache yet? It is a complete nightmare to do properly.

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Anonymous Coward

Re: Not a burden?

Or the software can look up the product code (it has one, doesn't it?) on the Net and get all the vitals from there.

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Re: Not a burden?

"Online companies will have to comply with every detail of every tax in every country. And keep up to date with all changes. And this is not a burden? Maybe not for the likes of Amazon, but for anyone smaller it's a huge problem."

I'm confused. People want to sell to customers in a country, but don't want to obey that country's laws? And they consider this a reasonable stance?

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Don't we do this already?

Am I missing something here?

I've been selling apps online for years and VAT and other sales taxes have been charged on those sales by the RegNow.com style companies since I think 2001ish. And just a few years ago the rules in the EU got changed so that the sales tax rate was the rate in the customer's country rather than the app store's country.

Isn't Australia just catching up with what we've had here for years now?

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