LinkedIn - fiscaal linke soep

Toen ik eind jaren tachtig van de vorige eeuw bij de Belastingdienst werkte waren er medewerkers die niets anders deden dan advertenties en artikelen uit kranten knippen waarvan men dacht dat dit relevant zou zijn voor de belastingheffing. Deze info werd op een formulier geplakt (een zogenaamd renseignement) en vervolgens doorgestuurd naar een bevoegd belastingkantoor. Het verzamelen van gegevens verloopt anno 2014 heel wat moderner. We weten dat de fiscus gebruikt maakt van Internet. Ook social media worden ingezet. Opmerkelijk is dat de laatste tijd met name LinkedIn grote populariteit onder belastingdiensten geniet.   

De Engelse fiscus gebruikte LinkedIn profielen van Google medewerkers in het Verenigd Koninkrijk om aan te tonen dat er meer activiteiten door Google medewerkers worden verricht dan Google zelf aangeeft. De reden voor de Engelse fiscus om tegen Google te keer te gaan is helder: Google genereerde 11,5 miljard pond omzet in het VK (2006-2011) en betaalde “slechts” 10m Pond vennootschapsbelasting. Google gebruikt een fiscaal legitieme constructie door de Engelse verkopen via een Ierse principaal te laten lopen. Dit betekent dat de bulk van de Engelse verkoopwinst in Ierland wordt belast tegen een laag vennootschapsbelasting tarief van 12.5% in plaats van de 25% die in Engeland wordt geheven. Deze constructie werkt alleen als de verkopen ook echt via Ierland plaatsvinden. De Engelse fiscus bekeek 150 LinkedIn profielen van Engelse Google medewerkers en zag dat deze medewerkers verkoop deals afsloten en actief betrokken waren bij verkoop onderhandelingen. Dat is nu precies niet de bedoeling als je claimt dat de verkopen via Ierland plaatsvinden. Bovendien had Google op hun Corporate website vacatures geplaatst voor hun kantoor in London waar verkoopmedewerkers werden gezocht. Waarom verkoopmedewerkers werven voor London als alle verkopen plaatsvinden via Ierland? 

Onlangs heeft een belastingrechter in India uitspraak gedaan over de vraag of de Indiase fiscus LinkedIn profielen als aanvullend bewijs mag gebruiken in een fiscale procedure. General Electric had een zogenaamde Liaison Office (LO) in India. Een LO is in feite een kantoor dat alleen maar representatieve functies mag verrichten en niet actief betrokken mag zijn bij de verkoop. De Indiase fiscus had indicaties dat medewerkers van het LO wel degelijk actief betrokken waren bij de verkoop van GE producten in India. De fiscus vroeg eerst meer informatie van GE met name over een aantal expats die in het LO in India werkten. GE werkte in de ogen van de Indiase fiscus niet goed mee en toen besloot men zelf aan de slag te gaan. LinkedIn profielen van expats werden bekeken en vervolgens als aanvullend bewijs overlegd in een fiscale procedure tegen GE in India. De rechter stond dit toe.

Wat moeten bedrijven hier tegen doen? Kunnen bedrijven hier wat tegen doen? GE voerde aan in de procedure in India dat een LinkedIn profiel eigenlijk alleen maar een eigen visie van een werknemer is op zijn/haar werkzaamheden en zeker niet goedgekeurd is door de werkgever. Vaak zijn LinkedIn profielen gemaakt met een wat te rooskleurige instelling. Laten we eerlijk zijn, vele werknemers hopen door middel van mooie LinkedIn profielen de aandacht van headhunters te trekken. Juridisch zal het een hele klus zijn om werknemers te dwingen hun LinkedIn profiel ter goedkeuring aan hun werkgever voor te leggen. Waarschijnlijk is dit onmogelijk. Bedrijven zouden er echter verstandig aan doen om wel over social media gedrag te communiceren met hun werknemers. Het zomaar “oppimpen” van een LinkedIn profiel zou negatieve consequenties kunnen hebben voor een bedrijf. Een afdeling Human Resources (HR) zou steekproef gewijs LinkedIn profielen van medewerkers kunnen bekijken en vergelijken met de functie omschrijving. Mochten er grote verschillen geconstateerd worden dan kan men hierover van gedachten wisselen met de betreffende medewerker. Bewustzijn creëren is belangrijk in dit geval. Het kan ook geen kwaad om fiscale specialisten eens naar de website van een bedrijf te laten kijken. PR specialisten of HR medewerkers hebben vele kwaliteiten maar zijn geen fiscaal ingestelde professionals. De fiscus staat het vrij om overal gegevens vandaan te halen om te checken of een belastingplichtige wel de juiste hoeveelheid belastingen betaald. Het valt ze dus niet kwalijk te nemen dat een zakelijk medium zoals LinkedIn ook wordt bekeken en wordt gebruikt. Ten slotte, als een bedrijf beweert dat iets niet gebeurd in een land moet dit ook echt niet het geval zijn. Fiscale structuren werken prima, maar alleen als de theorie overeenkomt met de praktijk.

BEPS........fools rush in where a wise man fears to go!

The whole BEPS project has been launched by the OECD with a lot of publicity. Not only did they publish a lot of reports, they also organised webcasts where everyone can find out what the BEPS team is doing. The impact this whole circus has on companies is clear, everyone is worried about the possible impact. Probably exactly that impact is what the OECD wants. Or should I say, what tax authorities want, because do not forget that the OECD is a group of civil servants mainly out there to please tax authorities. It really needs to been seen what the ultimate impact of the BEPS project will be. A lot of countries have really nothing to gain by implementing these proposals. And I am not only talking about the little tax friendly countries like Switzerland, Luxembourg, the Netherlands and Ireland to name a couple of obvious examples. What about the UK? The current government is turning the UK into a tax haven, with already a lot of succes. So there is not really a broad consensus about all of the BEPS propsals. The big questions is: what should companies do?

Fools rush in where a wise man fears to go. You should indeed look into your current business model. Not because of BEPS, but simply because the overall tax climate changed. Any tax efficient model should be revisited every couple of years anyway. The biggest mistake companies made over the last couple of decades is implementing structures without aligning the model to the business. Everyone agrees that business model planning with only tax planning as the prime objective, is short sighted and dumb. An example: when you set up a principal model with commissionairs or LRDs, you should fully align the business with the model. So when you set up a principal you should set up a real principal. This means that the key decision makers should be relocated to the principal. A principal should have real serious substance, because a principal really is an HQ. 

Multinationals...take my advise. Look critically at your current business model and make it up-to-date. Do not change your whole business model only unless you want to do this for business reasons. If you have a principal with commissionairs or LRDs, don't worry. If properly set up, it will hold for many years to come. Even if everyone embraces the BEPS proposals (very unlikely), before all of these proposals are converted to tax treaty law and national tax law.....I am pretty sure I am retired by then.

Linkedin ......a great help for tax authorities

That was interesting news this week. In an attempt to find proof that Amazon UK undertakes more activities in the UK than they claim, HMRC  (Her Majesty's Revenue and Customs)  checked out Linkedin profiles of Amazon UK employees. About 140 profiles were checked. And we all know why a lot of people have Linkedin profiles, they want to be attractive to headhunters and new employers. So what do they do...they pimp up their profile. This can now hurt Amazon UK. Amazon UK employed more than 4000 employees in the UK who all performed auxiliairy activities, according to Amazon. The Linkedin profiles told a different story, a lot of Amazon UK employees did contribute significantly to the UK profits of Amazon. Over the last six years Amazon reported in total $23 billion of sales in the UK. They paid in total $9 million of Corporate Income Tax to the Inland Revenue. Is that paying your fair share? 

HMRC also checked out the Corporate website of Amazon and looked at job adverts. It might be a good idea to have your tax department check all these pieces of information to see if there are no conflicts with the tax set- up. Every bit of information which is available on the net (don't forget Facebook, Twitter, Blogspot) can and will be checked by tax authorities. And why not? Free and accessible information up for grabs. 

Companies need to be aware that tax authorities know everything. We all know that former employees, certainly the ones who have been fired at some point, are good sources of information for tax authorities. An company cannot prevent employees stealing information and selling this to tax authorities.  Social media can be an ally of tax authorities. An company cannot prevent employees using Linkedin, Facebook or Twitter. Companies need to be aware of that fact and check what is happening. The Amazon UK case proves this might be the smart thing to do.

Automatic exchange of information.

Trending topic in the tax world today- automatic exchange of information. Luxembourg and Austria are under siege. Luxembourg wisely threw the towl in the ring. Austria tries to resist, but it is hopeless. 

On the surface it looks like common sense to automatically exchange information. However, there is a downside to this. If two states agree on the automatic exchange of information, and the agreement is published, no control whatsoever is applied on stream of information. The tap is running and no one is checking the water. Data of corporations and individuals are exchanged and no one can and will check if the data is correct. So if a local tax official makes a mistake and includes - for example - the wrong group of people into the automatic flow of information, no one can do anything about this. The individual taxpayer cannot appeal, has no rights whatsoever.

Is it all worth it? I mean, one could argue that the rights individual taxpayers are less important than the rights of the EU. The EU is entitled to fair tax revenues. Yes, a lot of taxes are evaded, but then again, often based on legal frameworks (like tax treaties). EU member states concluded tax treaties with a purpose, namely to stimulate trade. The UK now officially announced they want to attract many more companies to the UK. Only one way they can do that, namely introducing favourable tax regimes.

Smaller countries like Belgium, The Netherlands and Luxembourg were forced to do that many years ago. That is the only way for small countries to attract business. Big countries like the UK, France and Germany did not feel that need because they already have a lot of multinationals within their borders.  But because of the worldwide financial crisis we are in right now, the rules have changed and big countries (like the UK) will also actively promote favourable tax regimes.

From that perspective it is politically easy to divert the attention to individuals and corporations in stead of addressing the root cause namely the fact that we do not have a harmonised tax system in the EU. That is what European policitians really should focus on. 

Tax revolution in the UK. Starbucks revisited.

Starbucks is voluntarily paying more taxes than they should in the UK because of political pressure. Political pressure companies can usually handle, except if it leads to loss in revenue. In the case of Starbucks it was obvious; UK customers avoided the US coffee shops and started to drink their coffee in English coffee shops. That hurts. The Politicians were double successful in attacking Starbucks; they received additional tax revenues and excercised protectionisme without anyone objecting. Except for Starbucks obviously.

What did Starbucks do? They established a Dutch company that owned the Starbucks trademark probably for all non-US coffee shops. This can be achieved multiple ways, because the trademark is a US trademark. Either the Dutch company paid for the use of the trademark by means of a one time payment, or they have to pay an annaul license fee to the US owner of Starbucks. The IRS likely attacked this structure and demanded either a higher payment from the Dutch company (leading to US taxation ) or a higher lincense percentage or annual payment to the US Starbucks trademark owner. In both scenarios the IRS would benefit.

The result of this set-up is that the UK Starbucks coffee shops need to pay the Dutch company for the use of the Starbucks trademark in the UK. That HRMC feels that Starbucks is not paying enough UK corporate income tax is cynical, because the UK concluded many tax treaties including a treaty with The Netherlands. Starbucks applied the tax treaty and if the UK do not agree with the consequences of the application of this treaty they should renegotiate the treaty. What they did now is bypassing treaty law and abusing internationally agreed tax principles.

Bonus culture - it's money that I love

There is a lot to do about the bonus culture in the current business environment. Is it pure greed that is driving people when it comes to bonusses? When I reflect on my own career it is pretty simple. When I started in government service working for the tax authorities, salary was not a big thing, for me at least. You knew exactly what you would earn, because every payband was linked to a certain base pay. No bonus system. Then I moved to academia. When I was hired at the university I did not discuss salary at all. Actually, I was rewarded in a lower Payband then I was used to at the tax authorities. That didn't worry me at all. The first time money became important was when I started to work for a consultancy firm called Arthur Andersen. I could pick out a lease car and boy that was exciting. You do get greedy when you can choose a lease car. Everyone in that company was money and status driven. Having money meant being succesful.

The bonus became a fact of life when I made another career move. From consultancy to working as a tax director for a US multinational. I landed right in the middle of a bonus driven environment. Everything was linked to the bonus. If in the third quarter it looked like we would not hit our target at year end, everyone got nervous. The CEO implemented a travel ban and hire freeze straight away. If we missed the target there was a danger we would not receive the full bonus. But let's not forget one thing: in a US company bonusses are considered to be an integral part of the salary. Financial planning is done based on the yearly bonus. Mortgages are paid off by the bonus, contributions are made (tax free) to the pension plan.

What is the lesson to be learned? There are more important things than money, that's for sure. But when everyone around you is caught by the bonus fever, you will be infected by it as well. So get rid of the bonusses. Bonusses influence behaviour. If a sales rep is afraid he will not hit his target and therefore will not receive the full bonus he will do anything to hit the target. Making deals that are too risky, for example. Make sure people receive a fair market value salary. Performance based salary, a high performer should earn more then a low performer. Reward people by creating pleasant working circumstances. There are more ways to reward employees then by money alone.

Tax Control Framework & Exchange of Information

Tax Authorities are urging companies to enter into agreements called in the Netherlands " horizontal supervision". If a company can demonstrate they have the right controls in place, the authorities come in and audit and if they agree with the controls, a company will be less bothered by tax audits. This all sounds really nice, but there is a downside to this mechanisme. You are obliged upfront to fully disclose all business transactions which could impact the tax position. In other words, you cannot control the timing of disclosing information to tax authorities.

Another consequence relates to the exchange of information. Tax authorities are obliged by law to disclose tax information to other countries. In the EU there is a directive in place since 1977 which more or less forces EU Member States to spontaneously disclose tax relevant information to other Member States. Everything they have on file, they can disclose. So if you entered into an agreement regarding horizontal supervision, all your pro-actively disclosed information to - for example - the Dutch Tax Authorities, are bascially disclosed to all EU tax authorities. A consequence that the Dutch Tax Authorities clearly want to downplay. This is a serious issue, which should be addressed at an EU level. The EU Mutual Assistance Directive (that is the aforementioned directive from 1977) should be adapted in such way that information obtained by tax authorities based on a horizontal supervision agreement should not be regarded as information which can be exchanged.

Let me be straight: tax control is the right thing to do. Companies should have a tax control framework in place, but not because tax authorities like them to. They need to have this in place because they want to have this for themselves. A tax director needs to be "in control", needs to have good tax processes in place with the right controls. I have embarked on a tax control voyage some time ago, and I am really glad I did decide to do this. I was fully supported by senior management, I must say. Because without support from senior management this will not work.