Tags: tech | europe | tax | america

Reuters Analysis: Most Big US Tech Groups Avoid European Tax Net

Tuesday, 23 July 2013 07:38 AM EDT

Most big U.S. technology companies cut their tax bills by not declaring a tax residence in their main European markets, preventing tax authorities in those countries from even assessing their income, a Reuters analysis of hundreds of corporate filings shows.

Last week the Organization for Economic Co-operation and Development (OECD) issued an action plan for tackling what it calls corporate tax avoidance.

This has become a major political issue as citizens tire of paying higher taxes while companies often pay effective tax rates that are a fraction of statutory levels.

Editor's Note: The IRS’ Worst Nightmare — How to Pay Zero Taxes

The OECD, which advises its mainly rich nation members on economic and tax policy, said it needed to assess how far companies in the digital economy use tactics like not creating a tax residence — or permanent establishment (PE) — in countries where they have major operations, to avoid paying tax where they do most of their business.

Business lobby groups such as the Business and Industry Advisory Committee, which focuses on the OECD, and Britain's CBI have questioned how far companies use such techniques, suggesting widely publicized avoidance by big names such as Apple, Google or Amazon might be the exception. "It is unclear how significant this issue is," the CBI said in an April submission to the OECD.

The Reuters examination found that 37 of the top 50 U.S. tech companies don't have a tax residence in their biggest European markets for their main businesses.

There is no suggestion any of the techniques are illegal, and those companies which responded to requests for comment said they follow the tax rules in all countries where they operate. Some, including Microsoft which sells software to customers across Europe from Dublin, said their arrangements were driven primarily by a desire to effectively serve customers, rather than tax reasons.

Managers have an obligation to investors to use legal means to reduce their tax bill, said Chas Roy-Chowdhury, Head of Taxation at the Association of Chartered Certified Accountants. "Corporation tax is another cost to the business," he said.

The Reuters examination found that only a quarter of the top tech firms report income in the countries where most of it is earned. The rest declare a permanent establishment in smaller markets that offer lower tax, such as Ireland, Switzerland and the Netherlands. This ensures German, French and British tax authorities cannot even assess their income, let alone tax it.

"People should find it surprising," said Philip Kermode, Director of the European Union's Directorate-General for Taxation and Customs Union of the finding.

Pascal Saint-Amans, director the OECD's Center for Tax Policy, declined to prioritize the different measures the OECD should take, saying it was important to address all the tax avoidance tactics identified in last week's report.

But he added "PE issues are clearly important and this is why we have a couple of actions dedicated to this."

Editor's Note: The IRS’ Worst Nightmare — How to Pay Zero Taxes

© 2024 Thomson/Reuters. All rights reserved.


FinanceNews
Most big U.S. technology companies cut their tax bills by not declaring a tax residence in their main European markets, preventing tax authorities in those countries from even assessing their income, a Reuters analysis of hundreds of corporate filings shows.
tech,europe,tax,america
494
2013-38-23
Tuesday, 23 July 2013 07:38 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
 
Get Newsmax Text Alerts
TOP

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved
NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved