Taxes should be paid where economic activity is generated.
By Ianik Marcil
Originally published on January 28, 2015
See original French text here: http://www.journaldemontreal.com/2015/01/28/se-payer-un-chum-par-annee
Apple just announced record profits of $18 billion for the last three months of 2014. This represents $200 000 per day. Of profits. Despite all of this, the business manages to only pay 2% taxes on these earnings.
The last few years, some journalists have brought to light the fiscal strategies that allow Apple and some other very big businesses, notably the giants of the technology sector, to pay almost no taxes, despite their formidable profits. They do not falsify their declarations of revenues any more than they hide bundles of bills in safes in their basements. Rather, they have recourse to what we call “fiscal optimization” – a euphemism for tax avoidance.
Networks of subsidiaries
What they do is actually fairly simple: they establish a network of subsidiaries in various countries where the tax rates are low and there they register their principal financial activities. Otherwise said, on paper they realize their profits in these subsidiaries, even though they produce very little business activities in these countries.
So nothing illegal. A serious moral problem, though. It is completely legitimate that taxpayers look to legally minimize the taxes that they pay. Nevertheless, taxation ought to respond to a very simple elementary principle: taxes should be paid there where economic activity is generated. That is the case for individuals. If you receive a salary in Québec, you pay your taxes in Québec. As simple as that.
Impact on our lives
Tax avoidance is not just billions of dollars that armies of tax specialists and accountants juggle in the great financial centres of the world, to which you and I have no access. It has a direct impact on our daily lives. Because this lack of earnings for governments means money that does not go towards the construction of roads, towards hospitals or schools.
In Québec, the tax specialist and accountant Brigitte Alepin calculated that tax avoidance of all kinds represents between 3.5% and 5.5% of provincial and federal government budgets. The equivalent of 3.4 to 5.3 billion dollars just for the government of Québec, meaning between $425 and $650 for each Québecker, babies included. Given that Québec’s operating deficit in the last Leitão budget is a bit more than 1 billion, this means that if we were to get back just 25% of this tax avoidance, the problem of the deficit would be solved and we could avoid the austerity measures imposed by the Couillard government. With all this money, we could pay for at least one new CHUM [Université de Montréal hospital centre] per year. Imagine it with 50%. Or even, if we dream a little bit, with 100%.
Why do governments do almost nothing to solve this problem, since it consists of legal practices, so it should be possible to change the laws? Due to a lack of political will, in large part. We pretend that if the government were to crack down on businesses, they would flee and we would lose money. This is a false argument: we are already losing considerable sums, which is enough reason making it necessary to act right now.
Translated from the original French by Language and Dissent, a collectively-run blog supporting the anti-austerity struggle in Quebec. These are amateur translations written by volunteers; we have done our best to translate these pieces fairly and coherently, but the final texts may have their flaws. If you find any important errors in any of these texts, we would be very grateful if you would share them with us via email (languageanddissent [at] gmail [dot] com). Please read and distribute these texts in the spirit in which they were intended; that of solidarity and the sharing of information.