Tax avoidance: a necessary evil? | Alexandre Stylianoudis | TEDxUniversityofKent

Summary

This video script explores the issue of tax avoidance by multinational corporations like Apple, Amazon, and Vodafone. It explains how these companies use complex strategies to minimize their tax liabilities, ultimately paying a fraction of the tax rate. The speaker argues that while tax avoidance is problematic, governments, especially in the UK, encourage such practices due to the economic benefits corporations bring. The speaker stresses that chasing corporations for taxes is ineffective and counterproductive, suggesting a more balanced approach that acknowledges both the need for fair taxation and the significant contributions of these corporations to society.

Takeaways

• 😀 Multinational corporations, like Apple, use complex tax strategies to pay lower taxes, including techniques like the 'Dutch Sandwich' and shifting profits between countries.
• 😀 Apple’s tax avoidance practices involve routing profits through subsidiaries in Ireland, the Netherlands, and the British Virgin Islands to reduce its effective tax rate to as low as 1%.
• 😀 High tax rates in countries like France and Spain have led many companies to relocate to the UK, where the tax environment is more favorable.
• 😀 This shift of corporations to the UK has created a 'tax exodus,' causing significant economic losses in countries like France and Spain, leading to job losses and a drain on local economies.
• 😀 While corporations avoid taxes, they still contribute to the economy by providing jobs and infrastructure, such as Amazon’s warehouses in underdeveloped areas in the UK.
• 😀 The UK has become a hub for multinational companies, despite these companies often not paying the full tax rate, because the economic activity they generate benefits the country in other ways.
• 😀 Amazon, through its global operations, benefits a wide range of companies and individuals, from its suppliers like DPD to writers and small businesses leveraging its platform.
• 😀 The government recognizes the broader economic contributions of corporations like Amazon and Vodafone, which invest in infrastructure and create jobs, despite their tax avoidance practices.
• 😀 Tax avoidance by corporations is costly to governments, with estimates suggesting it cost the UK £4 billion in lost tax revenue last year.
• 😀 The speaker argues that while tax avoidance is a problem, a strict war on corporations is ineffective and counterproductive, as it may drive businesses away, hurting the economy further.

Q & A

What is the core issue discussed in the transcript?

The core issue discussed is tax avoidance by multinational corporations, particularly how companies like Apple, Amazon, and Vodafone use complex tax strategies to minimize their tax burden and the broader impact of these practices on society and governments.

How do companies like Apple avoid paying high taxes?

Apple and other multinational corporations use complex tax structures such as shifting profits through different jurisdictions with lower tax rates, like Ireland and the Netherlands. This allows them to pay much lower taxes than the standard corporate tax rate in the U.S.

What is the 'Dutch Sandwich' and 'Irish Double' method?

These are tax avoidance strategies where companies shift profits between various companies based in low-tax countries. For example, Apple shifts profits through a network involving an Irish subsidiary and a Dutch intermediary, reducing their tax burden to as low as 0.9%.

Why do governments allow these tax avoidance practices?

Governments often allow tax avoidance because they are aware that multinational corporations bring significant economic benefits, such as job creation, infrastructure investment, and attracting international businesses. They are hesitant to intervene too harshly due to the potential economic impact.

How does tax avoidance impact national economies?

Tax avoidance can lead to significant revenue losses for governments, but it also allows multinational companies to contribute to the economy in other ways, such as through job creation, investment in infrastructure, and business opportunities for smaller companies.

What example does the speaker provide to show the impact of Amazon's operations?

The speaker highlights Amazon's warehouses and logistics network, which have significantly reduced unemployment in areas like Staffordshire, where Amazon built its facilities. Additionally, the broader economic impact includes thousands of employees and other companies benefiting from Amazon's business activities.

What is the argument against focusing solely on corporate tax avoidance?

The argument is that focusing too much on corporate tax avoidance ignores the broader economic contributions of these companies. Multinational corporations create jobs, invest in infrastructure, and enable smaller businesses to thrive, which can outweigh the tax revenue lost through avoidance.

What does the speaker think about politicians' approach to chasing taxes from corporations?

The speaker argues that chasing corporations for their taxes is ineffective and counterproductive. While it may be popular politically, it leads to negative economic consequences, such as job losses and diminished investment, without addressing the underlying complexities of tax systems.

What role does Switzerland play in the speaker's understanding of tax avoidance?

The speaker grew up in Switzerland, a country known for its favorable tax policies, and has witnessed firsthand how tax avoidance operates. This experience has influenced the speaker's perspective on the issue, seeing both the benefits and drawbacks of such systems.

What conclusion does the speaker draw about tax avoidance?

The speaker concludes that while corporations should pay fair taxes, the traditional approach to fighting tax avoidance through punitive measures is ineffective. A more nuanced understanding of corporate contributions to society and the economy is needed to address the issue more effectively.