Comment by chris_va | Hacker News Reader

Comment by chris_va | Hacker News Reader

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You have to love politicians ability to dissemble and appeal to emotion rather than just fix the problem.

1) Taxes: This tax structure is legal, and used by the majority of large international companies operating in the EU. The EU has the power to change it, if it wants to, rather than just bitch about it. The US will also get its chance to tax this money, if Google/Amazon ever bring it back into the US (the US, unlike the rest of the planet, loves to tax companies for money made elsewhere).

2) Data: Data retention and anonymity is actually fairly regulated by the EU and the US (sometimes conflictingly). It is again within the power of the EU to change their regulations, which they have done in the past, instead of just bitching about it.

3) Antitrust: I like how they play up the search result "alleged" anti-trust angle. There are anti-trust laws on the books in all of these countries, and there were even congressional hearings in the US about this topic (which found nothing). Unless they are implying that the legal system in the EU is broken, I don't get why the politician is banging the drum on this one.

You need to realize that the EU is not federal in the sense like the USA - the EU and its member states have a much more complicated relationship. The EU is a supranational entity and the EU Commission is the executive body of the EU alone. EU institutions like the EU Commission, the European Court of Justice etc. can sometimes have agendas that are NOT part of the agendas of the EU's member states.

So Point 1): Clear NO. The EU does not have the power to change tax laws, that is in the domain of the national EU member states. That is actually what the whole article is about - that the EU commission is using the trick of declaring tax advantages as a form of "state aid", because then it falls under EU competition law, for which the EU commission's DG Competition does have a competence. For the same reason the LIBOR price fixing that is investigated in the USA by the SEC was dealt with by the EU's DG Competition under antitrust law - because otherwise the EU probably wouldn't have been able to act.

Point 2): No it is not easily in the power of the EU to change the data protection regulations - there is actually a huge fight going on at the moment about the new EU data protection regulation, mainly because Germany is blocking it.

Point 3): The USA and the EU are two different organizations with different legal systems. Because something does not violate US antitrust law doesn't mean it is ok under European antitrust law - Microsoft has already paid billions of fines under EU competition law for offenses that were dropped under US law. Moreover there is the famous Honeywell merger, that went through in the US and then got blocked in the EU.

Apologies, you are correct on the EU vs EU member distinction. I used "EU" above when I was internally thinking "EU member states".

On the various points, thank you for adding detail, but I don't see any contradictions with what I have above.

> This tax structure is legal,

Some corporations really stretch the boundaries of legality. See, for example, Starbucks. Starbucks (the beanroasters) sell very expensive beans to Starbucks (the coffee shops). This weird set-up means that Starbucks (the coffee shop) in the UK makes no profit and thus pays very little tax.

While the company is not evading tax, and will have legal advice telling them their systems are legal, we don't really know for some of the schemes until they're tested in court. And it's expensive to take all these very rich multinational tax-avoiders to court, so we end up with deals being done. (See Vodafone paying a very small amount of the avoided tax after their scheme was shut down.)

In any quality legal system there's no such thing as "stretching the boundaries of legality". It's either allowed, or it's not. Once you get into the realm of random bureaucrats issuing opinions that define law you enter a whole world of pain (see: EU right to be forgotten, FTC child protection regulations, US SDN list).

Tax law, being very old and quite well worked out, is pretty specific. Starbucks is not breaking tax law by doing this unless governments give into temptation and try to retroactively change the rules.

The core problem is that attempting to slice up the profits of a fundamentally international business is a losing proposition that can ONLY end in bitter arguments. It's not surprising there are a billion loopholes; it can never be any different. Who is to say what Starbucks beans are worth? If you go in and say, well that's obviously "tax avoidance", you'll immediately hit lots of other much less clear cut cases. But once you abandoned the rules there won't be any way to decide on those less clear cut cases and it'll just turn into chaos.

> In any quality legal system there's no such thing as "stretching the boundaries of legality".

Of course there is. Law is what's on the statute books and also how the courts interpret that. Some tax schemes seem to follow the letter of the law, but not the system, and the courts may well rule against them.

> Who is to say what Starbucks beans are worth?

There are a bunch of methods. You could use naive measures such as cost of beans + cost of roasting + transport and labour costs + X%; or you could compare market costs of other roasted beans; but it's probably a good idea to have a look at the effect of the expense of those beans on the company that they are sold to. And the beans are so expensive that the company make no profit, and thus avoids tax.

So I set X% to be whatever I need to minimise profit at my subsidiaries. Who are you to say X% is wrong? Did you build a successful coffee company?

Law is interpreted by the courts according to what it says, not according to what would be convenient at the time. This is why you hear about people getting off on a technicality. At least that's how it's supposed to work.

If you look at the right to be forgotten, the problem there is that the underlying law is so vague that basically anything can be read into it. So then judges end up legislating from the bench, which they aren't meant to do, that's why we have separation of powers.

How fondly I remember these types of discussions at the HFT company I worked for.

"We're not doing anything illegal.", they'd say. "The law allows for this."

I've learned that as soon as a company says something like that, they're doing something ethically shady.

Like applying for government funding when replacing whole datacenters full of slow, old, energy-slurping HP servers. How old? 6 months old.

"But these new machines are much more eco-friendly than the ones we're currently running. So we're entitled to government funding for replacing all those bad bad units with more eco-friendly units!"

After replacing those machines with more energy-efficient (and faster!) machines, we'd make more money in a day than most of us will make in a lifetime.

The 6 month old machines got scrap-heaped. With money that the Government was supposed to have spend on ecologically sound business cases.

We weren't doing anything illegal. But it sure felt like it.

The law does say that manipulating transfer pricing is illegal. However it is hard to prosecute where the thing being transferred is non tradeable (eg IP is sold to local subsidiaries in many od these cases not just coffee).

Starbucks also makes very little net margin the US, and as an entity pays very little in taxes directly, but that does not mean that the US does not make a lot of tax revenue from Starbucks.

After cost of goods, the gross margin is spent on operations like payroll, marketing, logistics, etc. Each entity in the line pays some form of tax (e.g. VAT in the UK, sales in the US), not to mention the billions in payroll taxes.

It is also surprising that litigation would be seen as so cost-ineffective. Google gets sued 100s of times per year, and I suspect the UK government would have a lot more to gain than the typical claimant.

Hang on: In England sales tax - VAT - is a tax paid by the customer (although collected by the business). That is not Starbucks paying the tax, that's me as a customer paying the tax.

Similarly for income taxes - I pay those as an employee although it is collected by the company.

The company makes use of the UK infrastructure (roads; policing; education; etc) so they should consider paying a bit more tax.

It's worse where a company charges the customer full UK VAT at 20% but pays a lower rate to some other country. (Not sure if this does actually happen, but I've heard it does. And I'm not sure if it's an intended part of the laws or a loophole.)

Maybe this is a semantic issue.

At the end of the day, it doesn't matter if you or Starbucks wrote the UK government the tax check. None of Starbucks' money started with them, it all starts with the UK consumer. Without Starbucks the entity, £0 gets paid to the UK government for both VAT and payroll tax. With Starbucks the entity, a lot of money gets paid to the UK government. As a result, Starbucks generates a lot of tax revenue within the UK, regardless of whose name is on the check.

But the laws as enacted said they would pay much more tax than that. In the UK people complaining are domestic coffee shops that dont have the advantage of expensive tax lawyers and use of tax havens. Marketing and logistics are not VATable. Starbucks pay minimum wage pretty much, which means there are few payroll taxes, indeed their employees may well also be getting state benefits because they have low income. So pointing at some amount of tax they do pay is not very helpful. Their claim that the UK is simply an unprofitable market is also odd, why have they expanded so much if it is unprofitable, why don't they fire management for failing to make any money?

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