A new report tagged “Masters of Tax Evasion” has chronicled the way in which huge companies around the world have avoided paying equal share of taxes over the years and in simple terms concluded that the poor pay for the powerful, Nigeria CommunicationsWeek has learnt.
The report was however guilty of generalizing and not taking into account the harsh operating environment in Nigeria replete with multiple taxation.
“Masters of Tax Evasion” went on to raise red-flags in the hope that tax authorities worldwide would latch on them to compel the big corporations to pay fair taxes.
Around the world, corporate tax evasion unfairly shifts the burden of taxation onto small businesses and individuals, and limits governments’ revenue to spend on necessities and development.
But the new infographic from MastersDegreeOnline.org showed that most profitable companies, especially in the tech industry, are paying less in taxes than everyone else.
Molly Brooks, part of a team of designers and researchers that designed infographic in an email to Nigeria CommunicationsWeek said the report focused on how much less big companies pay.
The report discussed many multinational corporations but was particular about Google, Apple and Amazon which it claimed pay on the average one third less that other companies.
According to the report, this allows the companies make more money.
The infographic did not offer much insight into how these companies are getting away with tax evasion fundamentally flawing its own argument.
The report also failed to provide thorough explanation but merely pointed that the technology industry generally owes less in taxes than other companies anyway.
Nigeria CommunicationsWeek raised a few rhetorical questions asking; would paying more taxes hinder these companies’ profitability? And who is in a better stead to determine fair taxes?
Tax evasion in practice works as either transfer pricing or transfer mispricing. In the first, which is legal, occur when a multinational corporation sets up subsidiary companies in countries that have very low tax rates, called tax havens.
These subsidiary companies charge fees for intangible services such as brand use, procurement, insurance, management, and trademarks.
The overhead costs of such a subsidiary are minimal and the profit, which comes directly out of the annual income of the parent company, is subject only to the tax rates of the tax haven.
Transfer mispricing, which is illegal, occurs when subsidiaries of a parent company sell goods to each other at artificially inflated or deflated prices.
Again, parent companies can manipulate the location of their profits in order to minimize taxes
Nigeria CommunicationsWeek gathered that the report did not take into account local environment which is unfriendly to businesses.
According to the World Bank’s Doing Business 2011 report, Nigeria ranks 137 out of 183 countries surveyed on the ease of doing business and 134 on the ease of paying taxes.
In the 2010 report, Nigeria ranked 134 and 131 on the ease of doing business and paying taxes respectively.
Multiplicity of taxes which is paying similar taxes on the same or substantially similar tax base, for instance; Companies Income Tax, Information Technology Tax (NITDA Levy), Education Tax, Nigerian Content Development Levy all of which are based on income or profits and Value Added Tax, Sales Tax and Hotel Consumption Tax all based on sales.