Microsoft Irish subsidiary paid zero corporate tax on £220bn profit last year

Which is what Microsoft is doing.

Alternatively lobby your government to replace corporation tax with a company payable tax on the labour a company uses - which is actually what tax is for: to release manpower for the government use.

Then Microsoft can't avoid it by profit shifting.

Of course you'd also have to pay self-employment tax on top of the regular income tax though (can get around some of that by using an S Corp).

And they keep making it worse for small companies too!

edit: ah, it looks like you are paying yourself via dividends.

Meanwhile, individuals are paying 20–50% income tax.

What a wonderful world.

And what this is saying is that Ireland’s GDP will double in 2020?

    Profit after tax increased ... due to the liquidation of two subsidiaries. 

See: https://www.documentcloud.org/documents/20794038-microsoft-r... for the actual directors report.

TRW, in this case, is a cascading infinity of corporate law, tax law, accounting practices, jurisdictions, lobbyists, parliaments and special interests. None of these exist in economist's models, unless they're modeling public choice theory or somesuch.

Capital gains is just as gameable as corporate income, in practice... and more politically explosive.

IMO, if there is an actual interest in taxing wealth, just tax wealth. Assume 5%-8% return on wealth, and tax total wealth on this basis.

https://ie.globaldatabase.com/company/microsoft-round-island...

It lists 9bn in profit.

The quoted document > https://assets.documentcloud.org/documents/20794038/microsof...

Disagrees with the public finances above: the issue is that the document says "$ 000".

It's a typo, the numbers are just dollar amounts.

And the text of the report proves it, it explicitly says profit of the year was 13bn.

EDIT: the report is very confusing. It looks like there could be an argument to say it is genuinely 300bn -- the issue is there's *operating profit* of 13bn... but a secondary "profit" from the liquidation of subsidy companies.

So the issue is the article presents this as an operating profit, but it isnt.

From the financial report "Profit after tax increased .. to $314.73Bn reflecting gains made upon liquidation of two subsidiaries".

I'm guessing this is a company that exists to receive licensing fees from around the world and the profit just about equals revenue apart from cost of the accountants.

The reporters might have been looking at the "total assets" line of MSFT's financials, which was $301B at the end of FY2020. But you don't pay tax on total assets. Just speculation on my part.

These reporters can't even check basic facts.

It figures that the "company" licensing all of this IP has very little in the way of operating costs. Maybe they need to pay the rent of the local mailbox that they've registered themselves to, or maybe they even need to rent an office in an office complex somewhere, but the entire operating exists purely to redirect the flow of money.

This approach is evil, nothing less. Companies benefit from government infrastructure all around the world and pay nothing back. The bookies that set up these schemes will tell you that they're perfectly ethical because they're totally legal, but their moral compass has stopped functioning years ago. It's not just Big Tech either, most companies operating worldwide use tactics like these.

It is true that huge corporations already "give back" a lot of the money they collected under various forms (income tax, VAT, etc.)

But if you think that the role of government is necessary, then you agree that it should collect taxe to exercise this role. And money is taken where money is. We tax corporations because they make benefits, and a benefit is just a way of saying that even after deducting everything they can think of, they still have money they don't need. So why not take a part of it and re-invest it elsewhere where it is needed ?

Ultimately there is no proper justification for any tax, except its necessity to let society fonction properly.

£220bn in profit last year.

It's in the headline.

E.g., "The separate taxation of the incomes of corporations and their shareholders follows the legal principle that corporations and shareholders are distinct entities. Some scholars argue that it also accords with economic reality, particularly for large corporations with many shareholders who do not participate actively in controlling the enterprise. They consider a corporation income tax justified as a charge for the privilege of doing business in the corporate form, as a means of covering the costs of public services that especially benefit business, and as a way of capturing part of the profits of large enterprises."

Individuals shouldn't see tax. That way the voters don't complain when you need to put it up.

Sales tax is similarly a pain - particularly when you have differing rates. At which point we get into the famous is it a cake or a biscuit type cases to decide where the dividing line is.

Pure ideological point of view with no grounding in reality. It's totally possible to tax corporations. In fact, some state like Japan and South Korean get more money from enterprises than individuals, the reverse of Europe and US (until recently consumption tax was 5% in Japan, now is 8%, still far less than EU's typical 20%).

The solution you propose doesn't even work well, since it's one more incentive for (mega-)corps to not raise salaries, as keeping salary low means also low taxes.

To act like there's no additional benefit on taxing literally billions in revenue is absolutely nonsensical.

> The company, Microsoft Round Island One, posted profits last year equal to nearly three-quarters of Ireland’s entire gross domestic product (GDP) – despite having zero employees.

That, to me, sounds like maybe the plan to collect personal income tax on salaries might not be so straight forward.

the argument for taxing profits:

- incentivise investments

- companies are less likely to hide expenses like salaries

- It's more fair for high cost business (car company vs google)

Personally, I'd tax all corporation 3% of their revenue. You could lover it by to 2% by what is your operating profit ratio to revenue. You can lower it to 1% by a list of 20-30 deductibles e.g. you install solar panels. BUT the minimum you have to pay is 1%.

If your company cannot pay 1% of the revenue you don't have a viable business. Average corporation spends more on accounting and consulting.

Restructuring taxes will take a lot more work, and then end up with hundreds, if not thousands of extra taxes, each of which will be "avoidable" if you have enough lawyers, simply because the system won't be able to keep up.

How are you meant to afford a house and stuff with taxes like that?

We need wealth tax - go after the shareholders and landowners, who don't directly create value and dodge a lot of tax.

As a simple example, consider owning a house vs. renting. If you own the house, the actual number doesn't matter. If you're renting, the ratio between rent and salary is highly critical for your lifestyle.

You just buy assets, like stocks, gold, property, etc.

It's not like they have to scramble to get by, unlike many people in those countries whose tax systems they (ab)use.

Overtime, all our policies changed to squeeze the regular citizens to protect and enrich the top 1%. It's wealth redistribution to the top.

Instead Americans would rather flight each other instead of banning together to reverse course.

It doesn't have to be this way.

I love how this website shows this in data:

https://wtfhappenedin1971.com

"the rich" pay income taxes as well: https://itep.org/who-pays-taxes-in-america-in-2020/

In fact, the top 1% paid 24.3% of all income tax. And the top 5% paid 40.6% of all income tax.

So it is most definitely taxing the rich.

The top 25% paid 66.4% of all income taxes, so to suggest that this is somehow a very regressive tax system seems to not hold water.

/justkidding

If you're opening a location in another country, and that location takes X in revenue, the tax should be paid in that country.

Why on earth do you think its fair for US based organizations to spread across the globe, reap the huge profits from that but funnel all the cash back into the US?

In 10 years from now it could easily be China that owns many of these mega cooperation's. Would you find it fair if the tax money from china "MS", china "apple", china x all would go to China and the USA would get zero.

Or generally, each UK newspaper has a particular take on UK politics, and generally employs journalists or freelancers that have the same or more extreme views.

The guardian's headline is definitely mildly inflammatory, but it's a headline, and it's true. This particularly subsidiary had an income of €200bn, and very little expenditure. That's the textbook definition of profit, although it's definitely creative accounting!

So by your argument, we definitely can not trust nearly any other news organisation, because they have shareholders and are operating for profit? How about your conflict of interest? Do you own stock? If yes, by your own argument you have a financial conflict of interest and can't be trusted.

Then it's a consumption tax (aka sales tax), which we already have and is generally regressive.

Some ideas seemed a bit unlikely, but overall great refreshing read in my opinion.

Once they have set up a UK subsidiary then they will need to pay a corporation tax based on their total UK sales - UK costs. Sales are sales to the UK; any sales made to other countries, then no tax needed as those countries might (and probably should) have their own tax schemes. Costs would be employee costs, payments made to other UK companies such as an advertising agency or truck leasing and any other taxes they have to pay like rates or VAT.

The sanctions can also be used against the shareholders and executives of the companies taking advantage of these situations.

And use some protectionist measures to help grow national industry - see Baidu, Yandex, etc.

You require them to play along, you sanction them if they don't, and you penalize anybody locally who does any business with the companies who are 'based' there.

The EU maintains a current list of "non-cooperative tax jurisdictions", and applies these kind of rules today: https://en.wikipedia.org/wiki/European_Union_tax_haven_black....

If the global tax changes being discussed come to fruition, I'd expect that list to extend and the penalities involve to tighten up a whole lot further.

Basically you could just penalize and persecute companies that funnel their profits to small tax-haven countries with little or no employees but excessive profits and hence, are considered avoiding taxes. The general gist of it is that since there is no penalty they lose nothing currently except small reputational damage. It's definitely a solvable problem but one needs a consensus to enforce it across the borders.

Does a corporation want to sell their products and services in country X? Very well, they must agree to the following regulation. The country X reserves an option to, at any point in time, buy up any subsidiaries or parts of the corporation, for value based on generally accepted accounting principles (GAAP). For example, if the accounting profit of Microsoft Germany is $0 over the past decade, the country has an option to purchase Microsoft Germany for its fair GAAP price - $0. After doing this, the country also has an option to reverse the trades the subsidiary has done. So, if Microsoft Germany sold its IP to Microsoft Ireland for the total value of $100, the country X can buy it back for $100. Repeat with Microsoft US, Microsoft UK, etc. The shareholders will be left with their extremely valuable (according to GAAP) Microsoft Ireland and Microsoft Singapore.

Any sufficiently large country with sufficiently motivated government can pull this off. No revolutionary overhaul of the existing tax system is necessary. The regulation is clear and fair. But again, it's never gonna happen.

If you want to understand why we ended up here you need to get at the root of the issue. Exemptions, tax breaks, and writeoffs. Once those were created there will be an accountant that will max/min that thing. You may think 'oh flat tax'. The problem is unless everyone does flat tax no one can. This is due to putting yourself at an economic disadvantage in relation to other countries. An interesting prisoners' dilemma if you will.

Paying tax is good for society, what's not great is companies avoiding it. The latter doesn't negate the former.

Well you can look at it in the round and realise that your income is similarly higher than it otherwise would be because government spent money into the economy that it is now extracting as tax.

Moving the tax around doesn't avoid you paying it. It just gets rolled into the price of what you buy instead. That's because in aggregate corporate costs including taxation are a component of final consumption expenditure.

While there are fewer jobs than people that want them the incidence of charges on corporations will always end up being paid by workers one way or another. That's the whole point of the 'unemployment buffer' put in place during the neoliberal era - to make sure that price changes can't be easily passed through to wage rises and thereby resolve the distributional conflict in favour of capital.

So do all the engineers, PMs, etc working at Microsoft.

It's a tough question. The tendency is to react superficially: Moralizing reactions, emotional reaction, first principles takes. The way tax actually works is via accounting "standards," tax law and corporation law... across multiple jurisdictions. A thousand-detail complex , where morals, emotions and first principles are literally meaningless. Actual meaning can only be derived with scenario plans and spreadsheets. Words like "profit," "company," "revenue" and such don't have inherent meanings, in that world. They're just objects with associated rules.

The pro-corporate side of this debate (debate is the wrong word) deals entirely in the latter terms. Terms that the majority of journalists and politicians can't work with. They tend to win.

When the other side does consider the reality of mess, they tend to conclude radical/unrealistic conclusions like "throw everything out and start from scratch."

At this point, complexity is hardened by international agreements and trade rules.

IMO the actual place to start is corporation law, not tax law. If entities can own other entities, or part thereof in an endless cascade...words like "tax rate" have no meaning.

Another, more radical approach is rethinking the idea of public wealth. The currently ongoing collapse of monetarism is, perhaps, an opportunity. Tax public companies x% of their shares per year. Hold, to avoid price deflation. Offload shares as part of macroeconomic/monetary policy (ie, when we run deficits), to avoid inflationary scenarios such as the current one.

I would take the same approach for wealth taxes. Capital gains, property, etc. Tax x% of current market value annually, not income or realized gains. It won't be perfect, but everything gets marked to market eventually.

https://www.bankrate.com/finance/taxes/tax-brackets.aspx

This is really just the first thing I looked at, but it seems to provide the desired information.

The highest bracket, for income above roughly 550k, is 37%. So considering only federal income tax it is impossible to pay 40% of your income in taxes, but also the first 550k or so of your income would be taxed at lower rates.

But they don't dare to take a firm stance, because the politicians that make the decisions benefit from the system. Just look at how many politicians had accounts revealed via the Panama Papers.

If the cost of getting to net Y cash inflow is X gross income where X = Y + (.66Y) then solve for X and move on, or perform the cost benefit analysis for moving to another tax jurisdiction. The solution is yours to execute.

Microsoft did not even make £220B (apx $310B) revenue globally in the 2020 fiscal year, much less in one subsidiary. Their total global revenues were $143B and total global net income (aka profit) was $44.

If The Guardian can't fact check the basics, how can you trust anything else they write?

If it's the first one I can't disagree more, I'm paying kinda the same percentage and I'm happy to do so personally.

If it's the second one, I can't agree more that this is infuriating indeed.

The corrupt bolsheviks where I live would ratchet it up to 95% in a few years. As would everyone else's government.

The Big tech firms benefit from all of the above, but are not contributing anything back. The system is broken and needs to be fixed, so let's not pretend there is no problem.