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Corporate tax controversies proving it's a small world after all

Some call it corporate tax avoidance. Others call it strategic tax planning. Regardless of what one calls it, there's no doubt that it's been the focus of a lot of attention here in Washington, D.C. in recent months.

But the U.S. isn't the only country interested in making sure it's getting its full share of the corporate revenues pie. While Congress has been looking for alleged worms in Apple's activities, the United Kingdom has been painting the practices of Google, Starbucks and Amazon as a major international tax controversy.

The claim in all instances is that these multinational corporations are employing strategies aimed at making sure their taxable income is accounted for in those places with the most favorable tax formulas. European Union officials estimate that the cost to the various national governments from taxes at least avoided, and some allegedly evaded, amounts to more than $1 trillion.

Surely some countries must be benefiting from collection of some corporate taxes, but which ones? According to the Tax Foundation, which looked at the corporate filings of all U.S. multinationals from 2009, the top five, in reverse order, were Luxembourg, Norway, Canada, Netherlands and United Kingdom.

Here's the strict breakdown of how things went back then.

  • Luxembourg collected more than $7 billion on taxable reported income of $29 billion.
  • Norway realized $7.8 billion in revenue on just $12.7 billion of corporate income.
  • Canada's take was closer to $8 billion on nearly $28 billion.
  • The Netherlands generated $46 billion in taxable income, and even with a low tax rate garnered $9 billion in foreign taxes.
  • United Kingdom's tax rate is among the highest and so, even with income reported of just $38.5 billion, it collected $9.2 billion in taxes.

    What the study reveals is that taxes are indeed being paid. They might not be being paid at a level that each country would like. But the question posed then by some pundits is whether that's an issue of tax avoidance or one of countries failing to work together to address the issues that have created the opportunities being taken advantage of.

    Source: The Motley Fool, "The 5 Countries Where Apple and Its Peers Pay the Most in Foreign Taxes," Dan Caplinger, May 30, 2013

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