> That ultimately the taxes owed should probably be paid out to the countries where the sale occurs.
This is hard to implement in practice.
Imagine selling in a country with 50% tax, and having a country with 10% somehwere, anywhere in the world.
For easier math, let's say you buy dildos from a chinese manufacture for 1eur (including shipping), and sell them for 11eur to end customers. You've just earned 10eur, and you're taxed 5eur, giving you 5eur of profit.
What you then do is open a company in a low-tax country, the company is "completely independent" and the owner (your cousin) works with both the manufacturer and you. You buy the dildos from your cousin for 10eur, he buys them from china for 1eur has them shipped directly to you, and you sell them for 11eur.
So, your cousin earned 9eur, and will pay 10% tax on that (90c, 8.10eur of profit) and you earned 1eur, and will pay 50% tax on that (50c, 50c of profit for you).
So instead of paying 5eur in tax, you only paid 1.40eur, and pocketed 8.6eur. Yes, there are some additional costs (another company + paperwork, some percentage for your cousin) but you still earned more.
The same can be done with patents and licences, branding deals, etc. Company in rich country made 100M of profits... just have the company in a cheap-tax country charge them 99M for licencing, 1M gets taxed in the expensive-tax country, and 99M in the cheap one.
Multinational corporations have subsidiaries not cousins.
A great number of tricks go away if you treat subsidiaries as a single company. Countries are reluctant to pierce the corporate veil, but it’s all arbitrary rules.
Ultimately profits flow to a single entity. Taxing 1 levels down and stopping was clearly not the intent of my suggestion. If it’s under the control of Alphabet/ its profits go to Alphabet treat it as a single entity Alphabet.
The idea that subsidiaries, trusts, etc have any meaning whatsoever when collecting taxes is simply a loophole which can be closed at any time.
That is not a fictional example, in case any might still be wondering.
I worked many years for an american/canadian/global company in europe.
The software WE developed would be owned by a separate company entity.
Whenever we sold "OUR" software systems to our real local customers, "we" would 'borrow/rent' OUR software from that separate entity, at a hefty silly price.
Incidentally, that silly price was so high, that "we" (our company entity) would consistently produce a loss each year (even though our parent entity was raking it in, through that separate entity and the silly-price money we were transferring to them).
Those losses of course are tax deductible, so our company would consistently pay zero taxes or worse (I don't know if they were also able to trigger things like the state having to reimburse them..)
It is/was, as far as I know, totally legal and totally disgusting :-/.
The irony as I see it, was that the software was developed by us locally and used by local clients, but somehow ended up being "owned" by carribean islands.
That's basically how Hollywood accounting works, with some of the highest grossing films and franchises in history not paying a penny in tax due to showing a 'loss' on paper.
Harry Potter and the Order of the Phoenix (2007) ended up with a $167 million loss on paper after grossing nearly $1 billion. According to New Line's accounts, the LOTR trilogy made "horrendous losses" and no profit at all. Same as Forrest Gump, Men in Black, and Return of the Jedi.
The Music industry is far worse in its financial machinations.
With some minor exceptions, the companies involved in this are all American.
Ikea does the same with everything they sell in their stores, the stores have to licence design rights from the Netherlands, where royalties are only taxed a few percent. All the stores imposable amount are reduced to zero.
This is hard to implement in practice.
Imagine selling in a country with 50% tax, and having a country with 10% somehwere, anywhere in the world.
For easier math, let's say you buy dildos from a chinese manufacture for 1eur (including shipping), and sell them for 11eur to end customers. You've just earned 10eur, and you're taxed 5eur, giving you 5eur of profit.
What you then do is open a company in a low-tax country, the company is "completely independent" and the owner (your cousin) works with both the manufacturer and you. You buy the dildos from your cousin for 10eur, he buys them from china for 1eur has them shipped directly to you, and you sell them for 11eur.
So, your cousin earned 9eur, and will pay 10% tax on that (90c, 8.10eur of profit) and you earned 1eur, and will pay 50% tax on that (50c, 50c of profit for you).
So instead of paying 5eur in tax, you only paid 1.40eur, and pocketed 8.6eur. Yes, there are some additional costs (another company + paperwork, some percentage for your cousin) but you still earned more.
The same can be done with patents and licences, branding deals, etc. Company in rich country made 100M of profits... just have the company in a cheap-tax country charge them 99M for licencing, 1M gets taxed in the expensive-tax country, and 99M in the cheap one.