As part of a new Financial Times’ series, the Great Tax Race, the FT’s taxation correspondent Vanessa Houlder was online on The World Blog on Tuesday and answered your questions about tax avoidance. Please see the comments section for her answers.
Here is a sample of some of the pieces in the series:
From Vanessa Houlder on the tax race:
Against the backdrop of aggressive avoidance and competition, the Paris-based Organisation for Economic Co-operation and Development has warned that a failure to collaborate risks a “race to the bottom” on corporate tax. Profit shifting to lower tax countries is estimated to cost governments tens of billions of dollars in revenue a year, according to the European Commission. What is at stake is no less than “the integrity of the corporate income tax”, an OECD report says.
A 20-year long period of stability in corporate tax revenues could be coming to an end as a result of falling tax rates, said Jeffrey Owens of the Institute for Austrian and International tax law. “We have reached a tipping point,” he says.
Yet despite the growing public furore about aggressive avoidance, a long-running campaign by Brussels and expected OECD proposals to tackle the problem, reformers face serious challenges in convincing governments they should collaborate instead of compete.
A modest ten-story office block on the eastern edge of Amsterdam houses the headquarters of Energyco, Agro Trade International, Banzai Venture Investments and about 2000 other companies.
Fully 1942 of those firms list their address as Postbox 990, which one might think would get overstuffed with all that mail. But just one company is responsible for all the others: Intertrust, a trust firm that creates and manages subsidiaries for multinationals even if some of them have little or no real business activities there. Intertrust did not respond to requests for interview.
The Netherlands has about 23,000 such “letterbox companies”, managed by 176 licensed trust firms. These companies attract huge flows of money through the Netherlands, making €8tn worth of transactions in 2011 – 13 times the country’s gross domestic product.