united-states corporate-tax-laws
Why do tech companies have an easier time avoiding taxes than non tech companies?
<p>First of all, is this true? I mean it's one of the claims of one US presidential candidate.</p>

<p>I suppose that the reason is because IT company can shift their profit to offshore companies.</p>

<p>Why can't normal companies do the same?</p>

<p>Why can't all restaurants set up corporation in Seychelles and pay "royalty" to their Seyschelles company?</p>

<p>What is so special about tech companies that allows them to avoid taxes?</p>

<p>Some source:
<a href="https://www.youtube.com/watch?v=nzPoDCmYmwI" rel="nofollow noreferrer">https://www.youtube.com/watch?v=nzPoDCmYmwI</a> he claims here that tech companies are hard to tax</p>

<p>I also know that Microsoft, Google, and Apple pay very little taxes.</p>

<p>I also know that tech companies do not need infrastructure as much as non tech companies. However, that would make sense if government tax land, or gasoline for example. If government tax income, I do not see why normal companies have a harder time avoiding tax.</p>

<p>We also need to take into account tax evasion. While normal companies often deal with many other companies around, tech companies often deal globally with people around the world. However, I am not seeing that tech companies are evading tax illegally. It seems that they legally avoid paying taxes.</p>

<p>A substantial part of the value of the goods and services provided by tech companies is in intangibles. </p>

<p>For example, <a href="https://9to5mac.com/2016/09/20/649-iphone-7-estimated-to-cost-apple-220-heres-the-component-breakdown/" rel="noreferrer">this</a> analysis suggests that approximately 1/3 of the price of an iPhone is in materials and labour and the rest is in the patents, copyrights and brand value that the names "Apple" and "iPhone" provide. If these intangibles are owned by, say, Aplle (Ireland) then Apple (USA) will have to pay them to use them - whatever amount those two companies agree on will reduce Apple (USA)'s profit and raise Apple (Ireland)'s profit - the tax rates in each of these countries is <a href="https://taxfoundation.org/corporate-income-tax-rates-around-world-2016/" rel="noreferrer">not the same</a>.</p>

<p>Now, tax law says that such transfers have to be at fair market value. So, what is the fair market value of all the IP needed to build an iPhone? Or the value of the names "Apple" and "iPhone"? You don't know, I don't know, Apple doesn't know and the tax authorities don't know. Whatever figure they pick is defensible as "fair market value" because there isn't actually a market - fair or otherwise.</p>

<p>Resteraunts <em>can</em> do this too - McDonald's (Australia) pays a licence fee to use the name "McDonalds" but this is the only intangible McDonalds have - there is no patent on how to make a hamburger - so the scope for them to take advantge of this is less than for tech companies. </p>
