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So in November, a huge investigative
story hits the news, namely
the Panama Papers, you may recall that,
and they revealed how big companies like
Apple or people with power
and money use offshore the offshore
tax industry to evade taxation.
That's why this talk is important,
because Vivoda is here now from
the Open Knowledge Foundation, who
will explain to you everything you need
to know about Internet international
taxation and why this
should concern you as hackers.
Please give an applause to avoid.
Thanks.
Yeah, good morning, Latin, and thank you
for having me here so early and I will
try to make this talk, although the topic
is like really a dry and boring,
as exciting as it can be for taxation.
So I work for a knowledge foundation.
I do normally data policy and
transparency stuff.
And, uh, I will present today
why taxation is a perfect hooved
issue and it's a worldwide issue
and how it connects to the Internet, uh,
C.C.C. and technology
and also how we shape the society with
it. So how we got here I'm
from Austria is normal.
I have to call. Excuse me.
That's my cousin Daniel Blatche
from Vienna and Harvard University.
And we're trying to change something in
that area.
And, uh, talk will have three parts.
So it's like the status quo, uh, intro
and fine examples how you make, uh,
tax loops working for your company.
Uh, then the second part is why is that
the policy and the history and the third
one has done what you can do about it,
politics and the future.
So I got into the topic reading about an
article about Exxon Mobile, which is the
sixth largest company in the world by
market cap and revenue, uh,
and especially Exxon Mobile, Spain.
So they had like 2009 and
2008, one employee
earning forty four K a year
and making nine point nine billion net
profits in just two years.
So do understand this, that like effect
of one hundred twelve thousand, uh, from
his income to the profit for the company
and as like. Well that's basically like
this. John Doe from Spain is the state
of capitalism.
There's nobody else in the world who is
outperforming this guy for two years.
And that's basically just done through
like making use of tax hold.
So the take away is like some
corporations pay not so much corporate
taxes and it's a lot of dough in Germany.
We say it's about skilled.
And at the end of the day, if you have a
billion here, billion there, pretty soon
you're talking about real money.
And other people say the only two things
for certain life, that's death and taxes.
Uh, we would like to add that second,
third, uh, certain in life, and that's
inequality.
And while some discussing about reducing
the taxes, we also want to talk about
like reducing the inequality.
And this will be to talk about and
where everybody can agree on it.
It's like the tax rates are too damn
high. But you should also consider the
taxes are always helping, uh, funding
public goods like schools, transportation
and so on.
So in Germany, you have like Steuer
Stoyanov, Doyon, it's like what
kind of society we want to have and
how to contribute it is to pay for it,
in which direction we are moving.
If you see that, it's like basically get
tax being important.
You want to achieve social goals
or, uh, like stimulate economic growth
with them.
So the formula basically is if you have a
tax revenue at the top, if
city, for example, the company pays
less taxes than somebody else
has to pay more taxes or you have
less tax revenue to fund
those public goods.
And this talk will mainly about like the
legal optimization, there's a lot of
illegal stuff going on, like in Germany
of like the comics tax evasion,
which is trying to think about OK, which
adds up to 12 billion.
Or you have to like the regular Swiss tax
fund in Germany, like enervated.
So like one point nine, one point eight
billion. Well, just like Swiss Picart
called finding the link for in
Germany.
And there's the famous quote from Barack
Obama from 2006 Brazil.
But all of this is legal, but that's
exactly the problem.
So we basically say legal, illegal
is a girl.
We're living in a time where we need to
discuss about that, because we have
basically, as Andreessen Horowitz
said, software is eating the world.
So I robots
may eat the jobs or not and we
end round of discussion.
Should we have like a universal basic
income or outcome.
And this is the trend
which is unique. So you have like the
last decades, like basically to download
Slope's.
That's like the trend of corporate
income tax as a share of GDP,
and that's like the tax rate by itself.
And that's like causing some issues.
So the corporate tax rates basic rule is
that the less profit, the less taxes you
pay and you try to pay the
taxes where the tax rate is lower.
So when you're thinking about that and
since we're here, you can always thinking
about like hacking the tax code.
And, uh, you have like
hackers working 24/7 for the four
big accounting firms, which would be
PricewaterhouseCoopers, Ernst and Young,
KPMG and Deloitte.
And not only like they're hacking
actively, some of them are also making
like the smart move and writing back to
us. That means like they're like involved
in the process of writing the tax code,
the law, what a leader will
exploit it.
So there's a lot of cyber going on, a lot
of dough for the US that means like this
to drill in US dollars overseas
and any leaders like around 60
billion, adding on top of it
for the European Union, we are talking
about somewhere around
50 to 70 billion a year like
where I come from. It's like a sixth of
the schnitzel of Australia.
That's like not a it's like 10
billion airport.
And the OED calls it
a base erosion by shifting report it
reaches there's other reports like
some textualists that
saying that up to like 500 billion
annually and why this is happening,
that's basically part of it increased in
the last decades because we're moving
from a economy really based
on real goods to intangible
goods. And that means like
patents, trademarks
and so on.
And you can see that really nicely in how
the top five market cap changed
from.
2006 to 2017.
So you had like 2006, you had like Exxon
Mobil, General Electric's Microsoft,
British Petrol and Citigroup,
which means banking, energy and industry.
And then 11 years later, you have
like basically like five tech companies.
And those tech companies, the valuable
stuff they're doing, like software code
and so on, can easily jump from one
zero two zero compared like if you have
like BP like a oil refinery.
So that's like makes it easy to move
something around if it's just digital.
And the most famous tax loophole
was the double Irish, that sandwich,
and that's basically what they
need for there. You always need like two
Irish companies, then you need
a Dutch companies.
Then you need like a company some and the
mahmud's or what you call like offshore
financial center and you transfer
the money around.
So there's like the Chinese version
because it doesn't matter much.
It's just about the flag.
So you start like some in the US, then
you have like some offshore company who
holds like the patents or the
intellectual property stuff, which
gives it to one Irish company.
And basically you go to another
Irish company who has here like
sales to the customers.
So the customers are paying in here.
Then they pay like some money to the
Nederland company, then they pay the
money to the Irish company.
Then the Irish company pays it to the
Bermuda company.
The stuff feel like a little bit more
detailed and it's the same stuff like
going around here.
So it's all is basically two Irish
companies, one Dutch company, some
company in a tax haven.
And in that BROSSET what is happening
really reduce the corporate tax rate
to almost like nothing.
And that's basically a trend among
the big companies.
Pretty much everybody does it.
So it's Microsoft, Apple, Google,
Facebook, Amazon, Starbucks,
or is it a German company as
or Inditex, which is the Spanish
clothing company?
And I want to point out one example.
It's Google. So basically, Google has a
worldwide revenue in 2014
of forty six billion.
And when you take it
down to the UK, it's like a tenth of its
four point six billion.
And on this profit of 10 billion
annually worldwide, they're paid
somewhere around two point three billion.
But in the UK they only paid like 13
million. And that's because they're using
like this Dutch sandwich to pay
less profits on the revenue in the
UK. And then when you take a look like
where Google got famous in Europe lately,
which is the digital news initiative,
that's like 150 million they're using
to spend on news organization.
That's what it basically you can call
them like peanuts, because that's
basically less than what they save
in one year just on the tax
paying in the UK alone.
Same goes with Apple.
So Apple is sitting right now on a cash
pile of 250 billion.
And it's partly due because the same
system or they had like a tax rate of
just zero point five zero
point zero zero five percent
2014.
Just put that in relation.
That's like two thirds of the GDP
of Austria, of like eight million people
or two thirds of the depth of Greece,
twice the GDP from Berlin or
fifty upwards.
And so, uh, the European
Commission wanted to force
Ireland to tax, uh, Apple higher.
But of course they refused because that's
partly their business model, taking
less corporate taxes.
And that
was last year, 18 billion.
And by December seventies, Ireland was
forced to collect 13 billion from
Apple because it's like about
competition.
We will see how that ends up.
I hope somebody collects that.
And 2014,
Ireland was scraping the infamous
double Irish tax, uh,
sandwich loophole.
And everybody was like, oh, finally.
But then they also replaced at the same
time called something like patent box or
knowledge development box.
So it's the similar stuff, a different
name and a little bit less dodgy.
But it will keep like tech companies and
pharmaceutical companies, uh, ongoing.
Doing the tax scheme and not
a great example is an investment
opportunity from Switzerland,
Hungary and the Netherlands.
So that was General Electric's on the
21st of December 2015.
At twelve o'clock, uh, the
Dutch sold, uh, General
Electric Swiss to, uh,
Hungary for like forty thousand
francs an hour later,
they sold it again in a different
direction for six point four billion.
So that's like sixty minutes effect of
sixty 167, five thousand.
In order to understand that, that's like
you upgrade your old modem to a six
gigabit line or you upgrade your floppy
disk to a 230 gigabyte hard drive,
or you work only one point five hours in
your whole life.
And that's why I did that.
It's basically they were selling some
rights for eight billion and
with the tax difference from Hungary to
Switzerland, instead of paying
18 percent taxes, the only two
percent tax is saving one point four
billion Swiss francs in one hour.
And there are many more examples like
that, especially from Luxembourg.
Madeira is like a European island
tax haven.
IKEA has a hilarious
tax example, but I don't want to bore
you and I want to go quickly through what
happened on the reporting side.
So 2013, there was offshore leaks, which
was the first big, uh,
reporting addressing that issue.
Then a year later, you had like Lux
leaks addressing Luxembourg.
Interesting. There was like it happened
right after Juncker was like, uh,
getting the head of the European
Commission. Uh, you can read
that up in the German duplicable,
the slides online and
everything linked.
And it was like about, uh, twenty twenty
eight thousand pages on like more
than 500 ruling on companies how to get
like special deals in Luxembourg.
And did you have to understand why it is
important for every country in Europe,
basically just trying to lower the
corporate tax rate in order to attract
businesses. And he's now ahead of the
European Union, which exactly should have
waited. And 2016,
two years after reporting there was
actually four times more, uh,
special deals in Luxembourg, then
we had the Panama Papers.
Uh, that was a done or
made available by, uh, whistleblower.
We don't know who it is.
John Doe.
The reporting started, uh, 2016.
And it was mainly about, uh, Mossack
Fonseca, which was one of the service
providers. It was the biggest leap,
uh, in data show.
And I listen, uh, eleven million,
um, documents and
two point six terabytes.
And, uh, one of the consequences
of not consequent what happened
afterwards was like the 16th October
this year, uh, in Malta, where, uh,
Daphnia, Guana, Galizia, uh,
her car got bombed.
And then in November, the Paradise
paper came, uh,
seem like almost similar to the
Panama Papers, different and different
companied was approved by everybody
and it was like in nineteen Texas
station and it was like high profile
cases. So this leaks and papers
are tremendous work.
Really amazing. And I think it helps a
lot of moving the discussion forward.
I just want to remarket the system.
The systematic place behind it
were known before that.
So I would say it's like don't hate the
player, hate the game or hate the
enablers. And the enablers are literally
like those who are writing the law or
like politicians.
So sum it up.
That's like a lot of talk pattengale.
And we are going to the second part.
How did that happened?
So over the last
century, we had basically three deals,
how to get Texas done.
That was like Swiss country based arm's
length pricing and bilateral treaties.
So big Swiss contrabass, that means
like you tax where the production is
happening. So if you have a car company
in Germany, uh, it just
happens their arm's length pricing
when it's getting more complex.
If a car company buying parts from
Austria and it means that you have two
separate units and you priced
them where they are.
So we need to and that's important.
It's like you have to find out the price
and that finding out a price paying for
the Austrian company, if it's like a
regular product, like some car.
But it's easy because you have a market
on there. You can't make up the
margins like 10 or 100 times
more if you do it with digital stuff.
The question is like who knows how much
is the Google algorithm versus so
you can't prices because there's no
market on it. The same goes with St.
Marks. One famous case was like the
Nike swoosh.
So with real goods, if
you have competitors, you know what the
pricing will be with tangible goods, it's
difficult to figure it out.
So they're treating the Nationals as
independent companies and making
market prices for this and then
moving, why these are the problems.
So basically on the source,
country based corporations can move the
production from A to B.
Let's say you have a car company you can
produce in Poland
cheaper than in Germany.
Then you move the production or whatever.
So arm's length pricing, you can make up
the prices and shifting profits around.
That's basically the case.
What happened with
Google and the Bermudas.
So out of nowhere, Google headquarters
for like algorithmic stuff is in the
Bermudas.
And then the third is bilateral
treaties and bilateral treaties.
You pay a bunch of lawyer really good
money to figure out how to exploit the
different tax treaties.
That would be the case with the double
Dutch are double Irish Dutch sandwich.
And so we have two scenarios
which adds up to are making promises to
shift profits. We are counting move
to actual production.
And now that the kicks and the really big
part is like it leads to tax competition
between countries because you want to
attract those companies.
And that's basically what this graph
where you see like from the 90s to 2016,
we have different countries, Germany,
Ireland, France, the
lowering the corporate tax rate.
So Germany started out with 60 and
up the sudheer.
Ireland was once up at 50 and
is now 12 percent.
So that's the business model attracting
US companies and getting less corporate
taxes compared to their European
neighbors.
Same goes with, uh, the US
used to be stable long time.
That's always like the difference between
a statutory corporate tax rate and
the effective. The effective is lower.
That's basically what to really pay.
And, uh, since we got a new president
in the US, you can see like this is the
historic chart from 1980,
like a century.
It used to go up before and
after the Second World
War. Then it was stable a long time.
And in December it was announced that it
will go from 35 down to 22.
So you have like then an international
competition for tax rate.
So the question is like what can be done
about that?
And one of the proposals, among others,
is like you put something in like a sales
based apportionment tax.
That means that you require from the
multinational companies that the reported
global profit and
sales and taxes in the country.
You multiply the global profit and
buy the share of the global sales
happening in that country which want to
tax. And then you tax the percentage
of this number.
The question is how how can we get there
or what we can do about that?
Well, one thing is you can always pray
about and pray that the brain will
help changing tax structures or you can
laugh about it when you remember, like
Exxon Mobil saw Starbucks,
IKEA, the big
two came from regular phenomics because
that's part of the problem
because they told us it will trickle
down.
And what means trickle down is like one
of the most important things, in my
opinion, is realizing what trickle
trickling down means.
And that's basically when you take a look
at this child's like in the 1980s,
it started like you see like the change
in shear of income.
So you have like the top one percent, a
gain of 120 percent.
Then you have like the top 20 percent
raising a little bit like above
25 percent.
And everybody else is losing out.
That means that and they are
charged. That is like you have from
45 to as
you're five productivity gains.
And it used to align like pretty much
like with real wages.
So everybody got their fair share of
that. But somewhere here, it's
splitted way. So if, like productivity
gains, but the real wages are stagnant.
So you should ask yourself what happened
to this pie?
Where did it go?
And so this also leads in to create two
classes like those working for this
company, taking the shit out of it,
which is not always the case.
If you take a look at, for example,
workers leaving the Googleplex, they also
have like two different, uh,
working classes and those who are
not and remember this like
adds up to almost like a 100 Europea each
European citizen each year on the
conservative estimate.
And that brings back like everybody's
complaining about, like the the
governments don't have money anymore.
But if you add it up, you get like
Ferrol since the financial crisis,
roughly around five percent.
So you would have in the instead
of 90 percent, that
GDP ratio only 85
percent.
So when you go to, uh, offshore
wells, uh, the estimates
from TucumÃ¡n, which I can recommend,
is like a student of Picardy
who made that calculation based on the
Panama Papers, that an average
of like 10 percent of the GDP hiding
in the tax havens of Germany,
for example, is like right here
with around.
I think it was summer 15, you
have, uh.
Spain with somewhere around 10, and
then you have Greece, which is striking
out at 35 or something like that,
and why this is important, because
normally the discussion right now is
about some tax haven sitting somewhere
on Zom Islands.
But as you can see here, you talking
about Switzerland, Hong Kong, USA,
Singapore on the sixth place, you have
on the fifth place, your sixth place, you
have done Luxembourg and an eighth
of Germany.
So the framing of that, the the only
effects like these tax havens
on some small island, I would say
it's not completely correct.
And you can see the difference.
Cool. So Pennyman
discharge from tax
to tax Justice Network only comes
in at number 13 and you have like
Switzerland, Hong Kong.
So this is basically the problem we have
to attack. It's not so much about like
this completely dark money laundering,
illegal money.
It's like a lot of stuff happens, like
right in your face, known to everybody
for decades.
So although the leaks were amazing,
it was nothing new.
And you have like other cases, like in
Germany, the comics which
are around like for more than 15 years
and nothing is changing.
And that's the sharing of the tax havens,
given the.
Started out with Switzerland, which is to
be number one, our Asian tech segment
coming up. But the issue is like you have
still like city or around 30
percent European
tax havens.
And why this is important, because
some countries try to do something about
it. And when they do something, that's
the case with the Ukraine, where the
people in Ukraine trying to find out
where that money went, they got stuck
in Germany because we couldn't provide
them the information because they don't
have, like beneficial ownership.
In Germany, there's
an initiative called ownership trying to
solve that. And that's like once you have
a weakest link where you block
information, know who is
the owner of the company,
you can't get any further.
So this one has to
be addressed.
And the positive note
as to the Ettus abyssal.
So there's like some progress going on.
On December the 17th, there's a
new anti money laundering
directive from the European Commission.
That was the first step after the
Panama Papers.
Basically, it means that all those
companies registered in Europe
has to be within the next 18
months figuring making
entry in the registry, which is available
to the public.
That's good in one way.
Again, it's not addressing like those
companies like Apple because it's like
legal.
Not a step would be like the European
Parliament elections 2019.
And you have to remember, this is a
political question. Two years ago when
we had, like the eurozone crisis,
Mario Draghi, Super Mario, the
head of the ECB, stepped
up and basically said, whatever
it takes, we will fix it.
And I think for taxation, that needs to
be done as well.
And basically, we need structural
reforms.
That we avoid like having a situation
like this again, that I I'm OK, I'm
landed on the taxpayer
and in one part of that, it's like
a framing issue you should
see, like paying the taxes when
they are spent well, as a positive thing.
And in the United
States, there was a long discussion about
if you call a tax death,
tax or estate tax to conservatives
label as a death tax, because then you
frame it better, badly and
on the person who is dying.
And the opposite way would be like
estate tax because the person is gone,
something is left over and it's about
contribution to the society.
And not a thing is like this whole shit
is like really boring.
And I really don't
think it's part of it.
Like, it's boring and complicated to keep
you falling asleep.
So you should get familiar with certain
things like too big to jail when it comes
to justice.
I will be gone. You will be gone.
Like how incentives are split up and
banking sector and uh,
stuff I always recommend is the big
short. It's like a movie about the
financial crisis, which I think is
brilliantly done and explains the things
which normally sounds like really
complicated, completely easy.
And you should have a Europe world which
exist in the Brexit of technology and
that the purpose of tax optimization
itself.
And when you remember the opening
keynote from Strauss,
he called like old slow eyes
cooperation's.
And I think it would be easier to
regulate those corporations on
a tax level compared
to attack level, because the
framing and the time,
it's not that crucial.
Which let me do the one, Quada, when
you have corporations are people.
Why don't we have a corporate death
penalty for companies?
That was the case of smile and that was
the Equifax data leak and insider
trading this fall.
So we have a certain responsibility to be
successful because there's an alternative
and I just want to say, remember, this
isn't rocket science.
It used to be there and see like it's
natural duality. We need a level
playing field for global corporations
to like local companies,
many shops, because they basically pay
nothing. And so you divide up the product
while you have net neutrality, despite
what you can transport here to
just like the idea of him, easier money
flow.
And so come to the end.
That's like the ideas like solar punk,
taxation, solar punk is like something.
How does a sustainable civilization look
like and how can we get anything?
Taxation is probably one thing.
We will be stuck in the near future.
So we think we should think about it to
have like this two scales lined
up so we end up in a nice, sustainable
civilization.
So the takeaway is like things changing
because of intangible goods and
technology.
Three ways companies pay less taxes.
Somebody probably has to pay
up, take up the bill.
It's more than zero point five
percent of the European GDP.
And that was me.
Remember the logo and
the tax? Truthfully, that was is.
Thank you so much.
Yeah, it is light online,
and if you have any questions after
next for the Q&A, just contact
me at at FAVORITO,
that thing that we have
time for a very few questions
if you have one, and want to
be lucky to be one of those, please line
up at the microphones, but please
signal Angel.
Are there any questions from the
Internet? Yes, they are.
Go ahead.
How will the universe universal basic
income deal was too big to fail?
As in, how will we deal with a company
who does bad?
Yet we are so dependent on their
contribution to universal basic income
that we can't punish them in any
meaningful way.
Can you maybe rephrase the question?
How do you see the universal basic
income in connection with that
too big to fail phenomena?
Well, I think the too big to fail
phenomenon is one thing you normally
at a certain level, you should speed up
company that was done to
the Dell years ago, to oil companies
years ago. And one, you want
to come to the situation that you have
too big to fail and you're basically
in game theory for leverage.
We have seen that in banks.
You couldn't let them go down because
if they would have go down, that would be
a systematic risk and it couldn't be at
risk.
Uh, that would
be my answer to that.
Independently from our universal basic
income, we
go, may we?
Since we started a little bit later, we
go until five past.
So we have time for I see how
the questions fit in.
Microphone number two, please,
I. Hello. I have two questions.
Um, there is no
alternative to Bitcoin called
Geocache and Monero, and
the advantage of those two cryptocurrency
is that it's basically untraceable
compared to Bitcoin.
So my question is, in the future,
if many more companies are going to
adopt, adopt this untraceable
cryptocurrency and start paying,
for example, the employees with it, how
how are you going to manage to tax those
people or corporations?
And the second question is a
moral reflection on the State of the
European Union.
The EU was created
and has opened the borders
in 1992.
And I'm part of a region
from south of Belgium where everybody
goes to Luxembourg to
fetch their gas because
it's cheaper. And it's still the case
because we do have different
member states that has very
different fiscal laws
that and at the EU level, there's
no legislation
as in the US, there's no legislation
to harmonize those fiscal,
uh, laws.
And it's actually a
union. I'm sorry.
Well, what is your question?
You asked one question and maybe you
also don't have a lot of time.
So India in the US, there's no fiscal
there's fiscal competition between the
states, the same in Europe.
And I don't see with unanimity in the
Council of Ministers that is going to
change in the near future.
The what you mentioned earlier,
Luxembourg, Malta,
Holland, apparently
blocked this 17
December initiative.
So I don't see with unanimity like
at some point one country like Luxembourg
to fuck off and then we
can't make any progress.
So the first question with cryptocurrency
is, I think
the leverage on the state like so
basically if Company A and company
decides to go to see cash making
the transactions
anonymously, good luck with that, because
then basically the tax
system strikes back.
Uh, I don't think there's like unless
you want to go completely underground,
there's no chance that you can avoid
that. Maybe they have a certain advantage
from the speed when they implement it,
but you will not be able to
provide the books you need for a tax
audit and then they get you on something
else if they want to get a deal with get
you, even if everything else is fine.
And the second one, yes, the European has
a competition. The question is how far
you want to let the competition go.
And, uh, that's
the same thing with your income.
And Juncker did a phenomenal job for
Luxembourg when he was the finance
minister and prime
minister. But, uh, it hurt
like other countries. So at the end of
the day, what we do in politics, you have
to find a solution together, how you deal
with it. Uh, the first step is that, uh,
Ireland has to basically
being forced to take the money from Apple
because it's like, uh,
not fair competition to everybody else.
And then and it's a question the society
has to ask you. You can go down this
year, corporate tax if you say that you
don't need it. There's some people
arguing for that. And at the end of the
day, somebody has to pay the bill or
you basically say you privatize
everything and you don't want to have a
government that's like, uh, on the one
side, there may be a middle ground.
You have to find a solution how you make
your revenue. And, uh, this is
one part where you clearly see a trend
that the revenue from that area goes down
and maybe has some implications.
I mean, we're living in Europe, which is
half we're falling apart.
And partly because of that reason,
because, uh, if erosion of
the tax base and, uh, at
the end of the day, are people getting
blamed for that, which they didn't cause?
As I said, it's a political question.
I'm sorry. We are up.
We ran up with our time.
Microphone one, you can reach avoider
by Twitter or by email.
I'm sorry. I will be around here if you.
Yeah. So you can go directly to him and
ask him. Thank you for coming here for
this talk and please give a.
Warm round of applause to avoid a thank
you very much.