I was reading an overview article the other day in English from the Finnish news which had what they considered a "bold claim" from a highly experienced tax professional at the Finnish Tax Authority;
"Uber will never pay taxes in Finland. They will never make any significant taxable profit in Finland. Not now, nor in the future. This will mean higher income taxes and lower pensions for Finns,"
According to him, platform companies are eroding Finland's tax base. They take out large loans from their own subsidiaries in tax havens and pay high interest rates back to them.
Surprise, surprise.
This is something that I have been harping on about for years here in Finland and globally, where global companies of all kinds (not just digital) are effectively financially raping countries of wealth, with the majority of them being US based. And as I see it, it is this process that allows the same companies to over inflate their earnings, attract investment due to higher ROI, and fund the US capital debt system to keep the US economy the largest in the world. Cut off the wealth-funnelling heads of these hydras, and the US economy is far, far less attractive to invest into, and the demand they can generate lessens significantly.
And it is easy to cut off the heads of the companies that don't actually offer much in country other than digital service, by simply forcing them to pay their entire taxes locally. No loopholes. Unlike manufacturing industries that could invest or pull out of a country based on tax conditions, the digital service providers require customers to use their products in order to make money, whether selling something, or through ad revenue. If they pull out of a country after being forced to pay the fair share of the tax locally, they lose the market and they use any potential ad revenue from the market. And, while they will create a vacuum in the short term, it will quickly be filled by companies who are willing to pay locally, or by local companies themselves, which also hire locally.
Currently, there are a lot of questions around the overvaluation of AI companies, where a bubble exists due to all the hype, without much to back it up yet. However, all of these global platform service companies are also overvalued, because they are able to lower their tax liabilities in some cases to near zero. This means that they are able to offer 20-30 percent higher returns in regards to profits that they pull from governments. But the governments need to make up for the continually growing shortfall, which means increasing debt at the expense of citizens, and increasing taxes at the expense of citizens.
The corporations are returning less to society, but taking more.
As I have stated before, in the past there was an arrangement between government and company where companies would pay lower taxes, but they would also employ people who will pay higher tax percentages. The idea was an incentive to build companies to generate wealth. This also tied in with public education systems, where public taxes would be used to train people to a certain level, so that companies could hire them already trained. It was a pretty effective system, when what the companies were producing not only required many people, but also were products and services that would benefit society in some way. Now, the products and services of many of these platforms actually hold us back, and they take less people to operate, meaning profit is far higher on what harms us, than what helps us. And that process will harm us even further, when they don't even pay their taxes locally, like people in the country are forced to do.
If I am forced to pay taxes locally, they should be too.
While many might disagree with taxes, they are currently part of the economic system. But, they are unevenly used to harm the majority of citizens to generate even more wealth for the already wealthy. There is no way the tax systems are going to disappear overnight, but there can be a changing of them to start shifting the focus away from profit at any cost to an incentive process that empowers people to participate locally, to build and to benefit from their work. Yes, a lot of the companies who are using these loopholes to supercharge their value will lose value, but the value will be redistributed across many more service points, and many local opportunities will open up that didn't exist earlier due to economies of scale from the corporations crowding out local business.
Changes have to happen, because on the current trajectory, countries are going to collapse under the weight of social obligation and needs of citizens, because corporations will increase their economic rape of the countries financial potential. And along this path, society itself will increasingly fail, with communities torn apart, violence increasing, and opportunity for health and wellbeing taken away.
It might seem idealistic, but companies are a function to support humanity, not the other way around. The current economic system has been twisted over the space of several decades to put wealth generation for a few above the wellbeing of everyone else. It is unsustainable, because it will always eat itself, because it isn't providing a renewable food source.
It has to change.
We have to change.
Taraz
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In general I agree with you, you are absolutely correct on tax avoidance by corporations. And yes it is American companies that are doing that, but they are the ones engaging in that because they are the strongest companies in the world and not because they are American.
These companies have zero allegiance to USA, they are truly global entities beyond any of the governments. And they are doing it in America just as much as they are doing it in Finland.
It is really hard to make them pay their fair share, that is why while we as individuals pay 37% federal tax, 7.5% or 15% social security/self employment tax, property taxes of $20k usd per year, 11% sales tax, etc...
Trump administration in the last ditch effort lowered the effective corporate tax rate to only 10% ! That's one of the lowest corporate tax rates in the world! I guess some tax from corporations is better than none as is frequently the case now...
It is a self-fulfilling prophecy though, isn't it? Essentially, they are able to be strong and generate additional wealth through tax mechanisms, which then feeds into all kinds of other strengthening activities. Tax shouldn't be a tool for wealth generation, should it? It is now though, but it is only available to some.
Yes they are, but there is also a difference in the US, because the people making the wealth are also investing it back into the US, right? They are taking money globally and investing it locally, inflating the value of the companies they support. Again, it is a cycle that just keeps building more gap.
I don't think it is that hard. Just legislation and precise book keeping. If only there was a way to record transactions that could be trusted....
You know what is funny? The average paid by the fortune 500 companies was only something like 11% anyways. So, ten is not a big difference - except they will use the same loopholes to end up paying 5.
I don't think the wealth is being invested back into US... And yes the taxes corporations pay have declined for years:
Check this out:
And if you want to read about S&P 500 there is great article:
https://www.investors.com/etfs-and-funds/sectors/sp-500-companies-paid-no-tax/#:~:text=What's%20The%20Typical%20S&P%20500,companies%20got%20off%20scot%20free.
I love this quote about Tesla:
Not invested into America, but in America, for more inflated ROI. It is a wealth creation mechanism, that syphons from everyone else who has to pay more tax and service more debt. It is a bloody terrible system for 99.5% of people.
I guess I don't understand what they are doing. I might have to go back and read it again. It's been a messy day.
Take a loan from their own companies in a have and then pay high-interest loans back. Creates loopholes as the loan gets paid reducing profits locally, so they end up paying nothing locally, but the profit from the subsidiary is taxed at a haven rate.
Ah okay!
It is concerning to realize that while regular people have to pay their taxes, big companies can avoid paying what they owe.
Well, I think taxes needs to be transparent on first place. We need numbers of every spend made with our taxes. I'm agree with taxes just in case it would be used in people social benefits.
In other way I think is meanless. Corruption is everywhere, that's why we need transparency.
Now, company paying low taxes and people paying high taxes, is just one of the ways the big fishes keep their power.
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BEERKING.You are right. You have said what can be expressed clearly. These platforms and companies have decided to turn profit making into a kind of legalized exploitation. They take so much from every state and country but they give back almost nothing.
The part about eroding the tax is very real. We usually see this in underfunded schools or healthcare or pressure systems. Forcing companies to pay taxes locally will never destroy innovation you just make it more ethical and sustainable which I agree with. Things has to change.
I read in Robert Kiyosaki's Rich Dad Poor Dad that taxes were originally invented to skim wealth off of the rich and redistribute them to the poor. But the rich discovered legal loopholes which they exploited to flip the situation to their advantage. The effectiveness of the taxing system as a tool of wealth redistribution has collapsed, it now serves to make the wealthy in the society wealthier and the poor poorer.
The problem is that the government is not interested in the well-being of the members of the society, so far they make their money all is well. I think policies should made to encourage investors to invest in aspects that will actually better the lives of the members of the society. Like agriculture, healthcare, infrastructure, education, etc. I see no reason throwing billions into the AI sector when hunger is ravaging most parts of the world. I guess the investors just go where the profit is and not ones that can actually impact society. Pathetic, to say the least.
Yes. taxes are needed for roads, and health care, also military and other stuff.. (not the personal bank accounts of certain politicians).
I can agree this is a powerful take on what is really happening in the global economy not just in one country. The idea that companies can operate in a country and make huge profits yet they pay no taxes. This is unfair to the system, it makes me wonder how citizens are beginning to lose trust on both the government and this corporation. When you talk about that digital companies that can't just pack up and leave, they need the markets to survive us. If they want to earn from us they should be able to contribute to our society
You have described a situation where this also affects everyone in most of the country. Even in my country. And it is as if most don't notice it or they are not ready to speak up. These big digital companies are like parasites. They know how to feed on the national economies without giving anything back. This is a very scary thing to do. And if you think about the long term, it even affects pensions, healthcare and social welfare. As we complete that, reform is needed, especially with tax laws that ensure fairness. So the wealth must circulate within society and not escape through those loopholes, through tax havens. It is time to take that accountability and make that change now.
The system being twisted over time, it's so true. It feels like everything has been set out to keep benefits the corporations instead of the people that are still patronizing this corporation.
Government keeps giving them space
to keep expecting people every day. Workers are taxed to the limit.
I agree that this kind of economic imbalance can collapse the system. Progress will only come when we reward companies that are built locally, that hire locally and pay their taxes, their complete taxes. This change might be tough, but it is the only way to sustain these parts.
What you just said is truth. You talk about how big corporations are taking advantage of these loopholes to avoid paying their fair share. And this is so painful to see our ordinary citizens and the ones that are carrying the burden through high taxes and at the end benefiting less from it all.
The system was built for balance but now it's completely tied to people and towards corporate greed. This is a big problem.
There has to be a change which is to demand accountability and transparency. If people must pay taxes locally, companies operating here should too. At least it will bring fairness to the system. And this fairness should not depend on wealth or influence.
Taxes are very important for a country, especially in terms of government spending (such as salaries of employees, construction of roads, and many infrastructure reforms). However, what I think in this case is that the government needs to be transparent. Strict policies should be adopted in collecting taxes, whether it is big companies or whales or citizens.