Foreign Tax Compliance in the News – In response to the global financial crisis, many countries have stepped up their surveillance of the tax obligations of companies within their tax jurisdiction, especially those that have multinational subsidiaries. In fact, tax compliance and tax avoidance were two of the key issues discussed at the G8 summit held last year in Northern Ireland. Since that time, multinational companies such as Google, Starbucks and McDonalds, among others, have come under increased scrutiny for tax practices that may have resulted in reduced tax bills.
- Dolce and Gabbana
Last week the owners of clothing company Dolce and Gabbana were convicted of tax evasion for failing to pay taxes on over $1.3 billion in royalties concealed in a Luxembourg holding company. The designers were given an 18 month suspended sentence as well as being required to pay their back tax bill.
- Starbucks
In 2013, Starbucks agreed to pay the British government over $16 million in back taxes followed by an equal payment in 2014. These voluntary tax payments were made in response to accusations that that they were using a practice called transfer pricing to avoid paying the United Kingdom’s 25 % corporate income tax rate. Transfer pricing is the practice of shifting profits from a foreign subsidiary in a high tax country to one in a country with a lower tax rate in order to reduce the company’s overall tax bill.
- McDonalds
In January of this year, tax authorities in France accused McDonalds of shifting over $3 billion in income to subsidiaries in Switzerland and Luxembourg in order to avoid tax payments they would have incurred if the profits had been reported in France.
This past month Google was hit with a large bill for outstanding tax liabilities that came as result of a 2011 audit by French tax authorities. Although the exact amount of the back tax bill is unknown, it is estimated to be in the neighborhood of $1 billion. A spokesperson for Google was reported as saying that, while the Company maintains that all of its tax practices are perfectly legal “… it is reasonably possible that resolution with French tax authorities could result in an adjustment to our tax position.”
- Prada
In December 2013, after voluntarily disclosing pertinent financial information, Prada Holding Company paid the Italian Government the equivalent of over $550 million in back taxes.
- Giorgio Armani
Just last month Giorgio Armani paid the Italian Government an amount equal to almost $375 million to settle a back tax balance attributed to some of the Company’s overseas subsidiaries.
Tax avoidance policies such as those described above have come into increased focus in both the United States and numerous foreign countries in recent years. Although most such measures are technically legal under current tax law, they remain controversial because they allow multinational companies to avoid certain tax payments in the countries where they are actually doing business. Going forward, it is almost certain that governments will use more and more energy to ensure that they receive the tax payments they are owed!
If you have questions about any type of foreign taxation or about a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your situation free of charge. For more information about our tax services, call us today at 877.889.6527 or visit us at www.professionaltaxresolution.com. With over 16 years in the business of resolving tax debt, we have a thorough understanding of both domestic and foreign tax law together with the experience to know how to apply that knowledge to your specific financial situation.
