Tax Evasion or Tax Avoidance

We all know that the world’s financial systems are not working well. Entire countries are having trouble, with Greece being the best example.

What was not surprising to me was this article in The Toronto Star about how the rich avoid taxes.

I want to refer you to one simple example from that article. Google.

In 2011, Google reported $629 million revenues in the UK but paid only $9.5 million in tax. The company admitted that tax havens influenced where it formally located its companies, and it minimizes tax to “within the letter of the law,” according to the report.

Google billed its British sales in Ireland, which offers a 12.5-per-cent tax rate, nearly half of Britain’s corporate tax rate. Revenues were then sent to a subsidiary in the Netherlands and to an entity in Bermuda, where it pays no tax.

There are many more examples in the article.

MoneyThe bottom line on the tax haven issue is that experts estimate tax avoidance used by the rich and their companies cost world economies an amount equal to about 1/2 of all of Europe’s Deficit last year.

Thus, it is not simply a case of taxing companies more, but of taking away the loopholes.

In other news, it seems to this grandpa that big corporations are successfully using countries against each other using the “we can’t afford to open here and make jobs because you are not offering us enough incentives” line. Free trade is probably helping the corporations in this scenario. Build in Mexico and sell in Canada. Not as good an idea in the past due to import duties, so you used to build where your customers were.

On yet another related note. My advice to the young? Get into careers that cannot be outsourced to Mexico and India. For the most part, that means service industries. Kind of hard to pay someone in Mexico to fix your car in Canada, or wire your house. Then push politicians hard to keep a better lid on immigration for jobs. Train our own instead.

What do you think? How do we fix our economy, where there is a growing gap between rich and poor?