this post was submitted on 11 Nov 2023
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If I have understood correctly from the article, this tax seems to apply to profits instead of revenue. If that is the case then all this does is justify companies hiring 10 more accountants and lawyers to find more novel ways to launder real corporate profit from exploitation into personal profit. Publicly traded companies might take a small hit to their next annual reports, but private businesses will experience almost no effect at all.
If a company has bought and "loaned" or given their executives cars, phones, food and rent stipends, paid for lavish parties with ~~friends~~ clients, bought out their family's "startup" and put their kids on the payroll, started their own charity that functionally does nothing, and employed people to be their personal ~~butler~~ assistant, and contracted out their everything to other friend's businesses, then those are considered "expenses". The actual profit has been "reinvested back into the business" and the tax is applied to what is basically pocket change because the money has been spent. It doesn't matter that the gold toilet in the CEO's personal office bathroom isn't necessary, it still counts as an expense. The core problem persists, the only thing it just changes the numbers on the documents.
"Reducing tax" is how companies strengthen social imbalance by consolidating power amongst a small group of people and exploit global markets. It's not something to write off as an understandable necessity. This is why GDPR specifically targetted revenue instead of profits as the base value.
But it's late and I may have missed a key phrase or three in the article. That also happens.
The really annoying thing is this shit doesn't fly for small businesses. I worked as an accountant for over ten years, for SME's (small and medium enterprises), and there were extensive rules on what was and wasn't allowed as an expense for tax purposes. There's tax rules on cars, phones, etc given to executives that ensure somebody is paying tax on it, and there's tax rules on capital investment/reinvestment in the business that separates it from business expenses for tax purposes (basically, tax is generally calculated based on what's on the profit&loss, not the balance sheet, and investment is a balance sheet item).
A lot of good could be done by ensuring large businesses are forced to comply by the same tax rules as small ones - and accountants for large businesses that try to hide the owner's personal expenditure amongst business expenditure should be held to the same standards as accountants for small businesses. If I'd tried to deliberately pass off a gold toilet as a business expense for a client, I wouldn't just have gotten fired. I'd have gotten arrested for fraud. Accountancy is a regulated profession, but the big accountancy companies often just ignore the regulations that would get a smaller company in a lot of trouble.
So yeah, I broadly agree with you. This move by Germany is meaningless without some serious overhaul of how tax laws apply (or don't apply) to large corporations and their accountants. Closing all the loopholes so there's no legal route to reducing profit without genuine business expenses (not fake, made-up "expenses") would make it much harder for companies to bend the rules to their favour.
~Disclaimer: all the above is based on my experience with accountancy in my own country. Legislation and tax rules vary by geography.
It's embarrassing you're an accountant and yet indulge in conspiratorial thinking. I've worked in and audited small, medium and large companies. Public companies have the strictest controls around personal spending of company resources. All public companies have to comply with SOX. I've never seen a private company voluntarily comply with that standard.
Plenty of known loopholes for tax avoidance.
Used to work for a company that made killer profit, but 85-90% of it was funneled to the parent company to pay for the leverage of the PE investors who bought the company for 10x their EBITDA. Say we made 100 million EBITDA, the official result was around 10-15 million, and was the basis for our taxation.
All this money was paid as various fees and licenses and was calculated into the budget the year before. We had specific goals that we needed to hit and, and bonus payment was based on these goals. Our collective bonuses was a drop in the ocean compared to the result of the company.
The parent company in Germany then had at least three levels of holding companies, all incorporated in Luxembourg, between them and the owners.
Was a fun place to work when we got sold as suddenly there were som extra rounds of bonuses to go around as carrots for us to stay on during the sale, and even more stay-on bonuses for those who staid on after the sale.
According to my boss at the time - the perk of being in a PE backed company.
Wouldn’t be surprised if they’re up for sales again next year.