As a simple employee I cannot evade taxes (and might have to pay double taxes in the EU and US if I am a US citizen/perm resident working in the EU), yet large corporations can.
In fact, I use a ton of software made by people who, by chance, were born in Europe. But the moment you start to rail against 'US companies' (I work in a US company) I begin to think, waitaminuite, that guy is against me - he wants to hurt me, maybe I shouldn't use his stuff either ...
It is really incredible that if I sell the 99.99% of my product out of Luxembourg I pay all taxes only in Luxembourg, for example. (edit obviously using the various holes in the EU law system)
BUT .... that doesn't mean they avoid the US taxes! For Google the money ends up sitting in Bermuda: not a place noted for its abundance of cheap colo space or computer scientists. Obviously it isn't going to stay there because there's nothing to spend it on. Instead the money sits offshore until something more useful is found.
What US companies want to happen is that the US Govt puts in place a "tax holiday" in which they temporarily stop being idiots and use the same tax rules as the rest of the world, thus allowing those companies to move the money earned abroad back into the USA without it being taxed twice (once by the country where it was earned and once by Uncle Sam). This has happened before so they think maybe it'll happen again. Then they can spend it on building fancy offices and hiring splurges, all of which yields taxable income inside the USA.
What actually tends to happen is that politicians, even the ones that acknowledge the sense of this, don't like being seen to give big companies a tax break. So they prevaricate and eventually the money gets spent abroad in places like Europe or Asia, where double taxation treaties work properly. At that point the money gets taxed via payroll taxes, employee income taxes, VAT etc. Own goal for America.
Still ... the money doesn't sit there because they want to avoid US taxes. They generally want to avoid double taxation, and then spend the money saved inside the USA.
Like - all money made in Germany will be taxed at 20% and you pay your taxes with priority where you are incorporated.
So if in Luxemburg the taxation is 5% - you pay 5% to luxemburg but cough the rest 15% to germany on the profits made in germany.
The key is do they have the jurisdiction to tax you in the first place? If you only have a factory & employees in Luxemburg and just exported your product to the rest of the EU, is it really fair to tax you at Scandinavian tax rates for example?
But when you have English customers buying product in English shops from your English staff in your English branches - well, that sounds like an English business. To then have a Luxemburg company that sells very expensive coffee beans to those English coffee shops, thus making those shops operate at a loss but making the coffee roasting Luxemburg business very wealthy - that's just a scam and it needs to be shut down. How to shut it down when you're coordinating the tax raising laws of many different countries is going to take some time.
If the Luxembourg company opens up a sales office in Sweden, but it has only 4 employees and there are 500 in Luxembourg, does that suddenly mean all those companies sales to Sweden get taxed twice? If so why would they ever open up an office there? Why not just insist customers fly to Luxembourg and visit their office instead?
Governments are whipping up a mob over this issue and aren't thinking it through. Does Google really need an office in London? No. One exists there because, in the absence of other factors, it makes sense to hire internationally so you can access good employees who might not want to live in America (or vice versa). But if the first Google employee who started work in the UK suddenly meant ALL money coming from UK based customers got taxed twice, that first employee would never make financial sense. Companies just wouldn't do it. They'd insist the employees moved to them instead of them moving to the employees.
This outcome makes no sense, but in their desperate quest to squeeze ever more blood out of the stone, maybe that's where governments are going to take us ...
No one is asking for companies to be taxed twice.
But there is a strong concept in England of "not taking the piss" - people don't mind reducing your tax burden. That's expected behaviour. Reducing your burden from 50% to 38% is probably fine with most people. Reducing your burden from 40% to 3% is not fine with most people.
> but in their desperate quest to squeeze ever more blood out of the stone,
These are huge, very profitable, businesses that avoid tax in most jurisdictions. Governments are not squeezing blood from stones; they just want a few drips of blood from the very juicy blood-soaked sponge.
I'm from south of Manchester, for what it's worth. And I think British politicians need to drop this issue as it's way beyond taking the piss by now. Tax avoidance isn't even a thing. It means whatever the speaker wants it to mean. Tax evasion is a thing, that's pretty well spelled out by law, but avoidance just means someone legally paying less tax than the speaker would like them to. Your assertion that 50% to 38% is "probably fine with most people" is in the same area: it's an entirely arbitrary set of numbers. I'm sure there are plenty of people who wouldn't think that's fine, however, it doesn't matter because there's no moral obligation to pay more tax than necessary. Governments are not charities, the British government especially so!
[1] http://www.forbes.com/sites/kellyphillipserb/2014/07/05/euro...
The reason taxing a person's income is (relatively) easy is because you can't split a person up. Just count the number of days they spend in a country, if it goes over a certain level then they are resident for tax purposes and away you go. America ignores this of course with citizen based taxation a.k.a. modern slavery but in all the other civilised countries that's how it works.
Now consider Google. A German user goes to YouTube and sees an advert. Is this money made in Germany? Or was it made in America, where the software was developed? Or in America and Switzerland because there's a YouTube team in Switzerland too? Or was it made in Finland where the request was actually processed? Or was it made in Canada because that's where the advertiser is? Or was it made in Ireland because the advertisers contract was with Google Ireland Ltd?
Pretty quickly you realise this is a fools errand. There's no way to say where the money was made in such an international operation. Any definition you come up with will be fought over by governments endlessly because they all want to buy votes by taxing foreign companies which smells to them a lot like free money (and thus free voters).
So we end up with the simplest definition possible - the money is made where the company is headquartered. The headquarters can be anywhere. This solution was arrived at in both America and Europe. It sorta worked for a while because most companies were already established and new companies were small and poor so nobody cared about them much. Now we have the phenomenon of new companies that are extremely profitable, do all their business on the internet and therefore could pick a country to headquarter in purely for tax reasons. Cue moaning and wailing from stupid politicians who ran up enormous debts and now want a bigger slice of the pie.
But attempting to change this simple definition will just reopen pandora's box.
The best solution would be to just finish off the race to the bottom entirely and push corporate tax rates to zero everywhere. This would yield an approximately 25% hole in for example the UK budget. However the money can be made up elsewhere, such as by increasing VAT or personal income taxes. Of course that is politically difficult - people like corporation taxes because they don't like corporations, and taxing them feels like free money too.
We can see how arbitrary this all is with the fact that these companies, which have done business this way for years in full view of national governments, are only now getting investigated once government spending cuts start making politicians unpopular. If these arrangements actually were illegal under clearly defined law they would have been investigated and tried a long time ago.
IIRC the OECD thinks corporation tax has much higher deadweight costs than other forms of tax. I read this in an interesting article on the subject here:
http://www.theregister.co.uk/2012/11/25/tax_and_tech_biz/
.. however the original link was dead last time I looked.