Masters of Tax Evasion “Houdini” Style

“What the eyes see and the ears hear, the mind believes” a well known quote by the famous illusionist and escape artist Harry Houdini. In a nutshell he never did any magic, he simply tricked people into looking in a certain place while the real action happened somewhere else. What the big companies are doing these days is the same exact concept but each of them has a style.

For 20 years now Amazon has been dazzling the world with its new services and innovative and most of the time weird ideas (remember the delivery drone they paraded recently?) and for all that time Amazon has never reported profit or distributed equity to any of its shareholders. For 20 years Mr. Bezos has been able to convince his shareholders (who interestingly enough keep flocking in) that not recording any profit is a cool thing. By doing so, he has been able to avoid paying anything to the IRS, and avoid their scrutinizing. That in short is his “escape plan”.

Mr. Zuckerberg on the other hand likes the limelight and glamour in all what he does. Ranking the second biggest philanthropist in 2013 and the biggest in the under 30 years old category, Mark Zuckerberg donated almost half a billion dollars. He surely has reserved himself a big spot in the headlines and attracted more attention and interest in his social networking site, (Imagine this as a reason to start a facebook account: Mark is so sweet in all what he does, I am going to support him by starting my own FB account and maybe post a few unsuitable and nude pictures while I’m at it….) But before you jump into such hasty and life changing decisions such as having your own profile, take a minute to reflect on that fact that he is entangled in tax evasion issues in New Zealnd, Ireland, UK and Singapore among others. In Ireland alone, Facebook paid only 1.9 million british pounds on a gross profit of 1.75 billion pounds. How he did that? Very simple, create a company wherever you want in the world and incorporate it or create a mother company for it in a tax haven country to funnel your money to it. Ireland’s Facebook used the Cayman Islands whereas Google went for Bermuda. Perhaps this is the reason all major companies choose Ireland, the country itself has made many rules on lowering taxes in order to attract investors and does much less work to go after those who funnel their funds outside the country. Just like Houdini, they make people focus on their good deeds in order to distract them from what’s happening elsewhere. The same applies to Apple and Microsoft for that matter.

Dick Cheney always does things the “hard way”, by the end of 2007 and while the company was coming under heat for its “not so transparent” accounting techniques and tax issues, they decided to take drastic decisions that included moving their headquarters from Texas to Dubai. Of course the excuse was to “intensify their focus on Middle East markets” but the truth was to be found somewhere in the courts in the middle of all the litigation that the company was entangled in. Needless to say, that deprived Uncle Sam from a very big and important source of revenue and hiked up the company’s revenues.

The US government prides itself for it notoriety in enforcing its Foreign Corrupt Practices Act which bans all companies whether American based or have business in USA to pay any form of bribes outside the US territory (don’t be fooled with the shiny titles, most companies are evading that by creating “PR” budgets and those are not for lunches and dinners only. Ironically that’s another Houdini trick), yet they don’t seem to be so stringent on tax evasion. Of course everyone hates taxes and everyone wants to get rid of them. But it has been a trend in the last few years whether in the USA or anywhere else on the world that whenever the government needed the money they went after the poor regular individuals and enforced tax hikes on them.

There is no need to increase taxes on big companies; actually it is not a good thing because they are the biggest employers and the movers of economies. But forcing them to be transparent about their profits and paying their fare share of taxes will be more than enough and a good place to start at.

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