Thailands Tax Essay

1383 words - 6 pages

International Taxation 347 - Assignment 1Part AIt is hard to determine just how much tax is being avoided but estimates are some $20 trillion is stowed in tax havens, with about $160 billion each being stripped from developing countries due to tax avoidance by multinational companies according to the economist, which in fact is easily more than they receive in Aid from rich countries. [1: Tom Allard, 'Global tax avoidance-a trillion dollar evil', Sydney Morning Herald. 21 February 2014. ]Recently, within the last month, one of the world's biggest heavy machinery manufacturing company Caterpillar (CAT) is coming under investigation, most specifically in America by the Senate for using complicated corporate techniques in order to avoid large amounts of tax.It's found that between 2000 and 2012 that CAT had shifted $8 billion of profit overseas to Switzerland to escape $2.4 billion in tax. Along with CAT, their tax consultants and audit firm PricewaterhouseCoopers (PwC) is also part of the investigation to whom CAT paid $55 million for devising the strategy of this 'Swiss Structure' and helping them transfer the $8 billion profit off-shore.[2: Dan Roberts, 'Senate report claims Caterpillar avoided $2.4bn in US taxes', The Guardian. 1 April 2014. ][3: Hampton Pearson, 'Caterpillar dodged paying $2.4 billion in taxes: Senate report', CNBC. 31 March 2014. >http://www.cnbc.com/id/101540226>.]The investigation was sparked by Daniel Schlicksup, who was a global tax strategy manager for Caterpillar between 2005 and 2008. His complaint was concerning this Swiss Structure which according to him involved "many shell corporations with no business operations". Schlicksup was also suing CAT for demoting him, allegedly after he had raised internal concerns about these strategies. Other multinational companies including Microsoft Corp., Hewlett-Packard Co. and Apple Inc. have been subject to hearing by this Senate. [4: Richard Rubin and Jesse Drucker, 'Caterpillar Said to Be Focus of Senate Overseas Tax Probe', Bloomberg L.P, 21 March 2014. < http://www.bloomberg.com/news/2014-03-20/caterpillar-said-to-be-focus-of-senate-overseas-tax-probe.html>.][5: Ibid.]This structure was put in place revolving around CAT's parts department through a Swiss subsidiary, Caterpillar SARL (CSARL). From around 2001, CAT transferred ownership of most of its parts to this Swiss subsidiary, CSARL, however they still continued to store these parts in the US and the vast majority of associated manufacturing, research and employment remained in the US. CAT would then sell these parts to overseas customers and ship them out to the buyers with CSARL never actually having any physical possession of the parts. Despite this, the profits from the sales to overseas customers were then accredited to CSARL. This amount to over 85 percent of these profits being declared as Swiss Income by CAT and taxed at as little as 4 - 6% through a deal struck with the Swiss tax authorities.[6: Dan...

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