An interesting question here

Does the Tax Justice Network actually read the posts on the Tax Justice Network site?

I want to emphasise that these two examples come from the same post, not from different ones.

So: the transaction was an offshore sham, designed to avoid tax on the sale of real assets in India. The Indian authorities saw through the sham, and decided to act on what was happening in the real world.

Mmmmm

Leahy has misunderstood the \”greater issue.\” Which is that companies ought to be taxed according to the substance of the economic transaction that has taken place, not whatever bizarre offshore manipulation the lawyers and accountants have hatched up. Now that is the greater issue.

For the moment, if you say so.

This concerns its $180bn purcase of Manesmann a decade ago, routed through a Luxembourg subsidiary called VIL. In what is surely the result of transfer pricing strategies, Vodafone has earned $15.5bn in that Luxembourg subsidiary up to March 2009, taxed at less than 1%. That, plus the income since them, has cost the British taxpayer some $5 billion.

Mmmmmm

So, taxes shoulod be paid where the economic substance of the transaction takes place.

So, capital gains tax on assets in India should be paid in India.

And further, profits tax on profits made in Germany should be paid in Britain.

I\’ll have to admit that there\’s a hop, skip and a jump there in the logic that I\’m unable to follow.

I could understand insisting that the tax system pierce the corporate hymen so as to look at the economic substance, just as I could understand a tax system which insisted that only place of incorporation is to be taken into account.

I do find it extremely difficult to follow why both should be true for the same company at the same time.

5 comments on “An interesting question here

  1. Posted at TJN, and here, because Murph don’ like my steenking comments:

    Worstall must be too tired to comment, so I’ll steal his words:

    “So, taxes should be paid where the economic substance of the transaction takes place.

    So, capital gains tax on assets in India should be paid in India.

    And further, profits tax on profits made in Germany should be paid in Britain.”

    I look forward to my comment being deleted.

  2. Oh really. The question of residence-based taxation and source-based taxation is a highly complex one, as I am sure you know (or do you?) Nobody advocates a one-or-other approach – and the tax justice network blog is an example of taking that reasonable position of supporting both types. This is a question about whether giant multinational corporations pay tax or not, according to the substance of what they do and what they earn. Or whether they twist themselves into artificial, gymnastically challenged legal freaks in order to escape tax and free ride on the public goods that they benefit from. There is no contradiction in that blog – and you must have known that when you wrote it. Or did you? Perhaps you were just being frank when you said “I’m unable to follow.”

  3. This is where economics and populism collide. If only they’d said “has cost the German taxpayer” in the second example, it would have been a consistent and sensible piece – but it wouldn’t have had the same propaganda value for UK readers…

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