 So in November a huge investigative story hits the news namely the Panama Papers you may recall that and they revealed How big companies like Apple or people with power and money use offshore the offshore tax industry to evade taxation? That's why this talk is important because Vavoida is here now from the open knowledge Foundation Who will explain to you everything you need to know about? International international taxation and why this should concern you as hackers, please give an applause to Vavoida. Thanks Yeah, good morning. Let's again. Thank you for having me here so early And I will try to make this talk although the topic is like really a dry and boring as Exciting as it can be for taxation. So I work for the open knowledge Foundation I do normally open data policy and transparency stuff and I will present today why taxation is a perfect two-word issue and it's a world-wide two-word issue and how it connects to internet CCC and technology and also how we shape the society with it. So how we got here I'm from Austria as normal I have two colleagues with me That's Max Kasi and Daniela Platsch from Vienna and Harvard University and we're trying to change something in that area and The talk will have three parts. So it's like the status quo Intro and fun examples how you make Tax loops working for your company Then the second part is why is that the policy and the history and the third one is then what you can do about it? politics and the future So I got into the topic reading about an article about Exxon mobile Which is the sixth largest company in the world by market cap and revenue And especially Exxon mobile Spain. So they had like 2009 and 2008 one employee Earning 44k a year and making 9.9 billion net profits in these two years So to understand this that's like a fact of a hundred twelve thousand From his income to the profit for the company and as I like well That's basically like this John Doe from Spain is the stock on office capitalism There's nobody else problem in the world who is outperforming this guy for two years And that's basically just done through like making use of our tax holes So the takeaway is like some corporations pay not so much corporate taxes And it's a lot of dough in Germany We say it's a button guilt and at the end of the day if you have a billion here billion there pretty soon You're talking about real money And other people say there are only two things for certain in life. That's death in Texas We would like to add that's like a certain certain in life And that's inequality and while some discussing about reducing the taxes we also want to talk about like reducing the inequality and this will be to talk about and Where everybody can agree on it. It's like the tax rates are too damn high But you should also consider the taxes are always helping finding public goods like schools transportation and so on So in German you have like Steuer Steuern or Steuern it's like what kind of society we want to have and How to contribute it versus to pay for it in which direction we are moving if you see that it's like basically get tax Being input and you want to achieve Social goals or like similar economic growth with them So the formula basically is if you have a tax revenue at the top if CT for example The company pays less taxes then somebody else has to pay more taxes or you have less tax revenue to fund those public goods And this talk will mainly about like the legal optimization There's a lot of illegal stuff going on like in Germany of like the comics Taxivation which is Steuer Hinterziehung or betrug which adds up to 12 billion or you have done like the regular Swiss tax Fun in Germany like in and evaded so like 1.9 1.8 billion we're also like says Swiss bygarde caught finding the leak for in Germany and There's the famous quote from Bob Obama from 2016 was it a but all of this is legal But that's exactly the problem. So we basically say legal illegal Sheisegal we're living in a time where we need to discuss about that because we have Basically as Andrezen horse that said soft is eating the world. So either AI robots May eat the jobs or not and we're in a round of discussion should we have like a universal basic income or outcome and This is the trend which is unique. So you have like the last decades like basically two download slopes that's like the trend of corporate income tax as share of GDP and that's like the tax rate by itself and That's like causing some issues so the corporate tax rates basic rule is that the less profit the less taxes you pay and You try to pay the taxes where the tax rate is lower so when you're thinking about that and since we're here you can always thinking about like hacking the tax code and You have like your hackers working 24 seven for the four big Accounting firms, which would be price water scuba earnest and young KPMG and Deloitte and not only like they are hacking Actively some of them are also making like the smart move and are writing back to us That means like they are like involved in the process of writing the tax code the law Where they later will exploit it? So there's a lot of cyber going on a lot of dough for the US that means like there's two trillion US dollars overseas And annually there's like around 60 billion adding on top of it for the European Union. We are talking about somewhere round 50 to 70 billion a year like where I come from that's like a sixth of the schnitzel of Austria or that's like another But there's like 10 Berlin airports and The OECD calls it in a base erosion price shifting report a reaches There's other reports like from Texas this point net Saying that's up to like 500 billion annually and why this is happening That's basically part of it increased in the last decades because we're moving from a economy really based on the real goods to Intangible goods and that means like patents trade marks and so on and You can see that really nicely and how the mark top five market cap changed from 2006 to 2017 so you had like 2006 you had like X and mobile channel latex Microsoft British Petrol and city group which means banking energy and industry and then 11 years later You have like basically like five tech companies and those tech companies the valuable stuff They're doing like software code and so on can easily like jump from one server to the other compared like if you have like BP like a oil refinery. So that's like makes it way easier to move something around if it's just digital and The most famous tech so loophole was the double Irish dots sandwich And that's basically what you need for that. You always need like two Irish companies Then you need a Dutch companies then you need like a company somewhere in the Mermuda's or what you call like offshore financial center And you'd transfer them the money around so there's like the Chinese version because it doesn't matter much It's just about the flag So you start like somewhere in the US then you have like some offshore company who holds like the patents or the intellectual property stuff which gives it to one Irish company and Basically, you go then to another Irish company who has here like sales to the customer So the customers are paying in here Then they pay like some money to the Netherlands company then they pay the money to the Irish company Then the Irish company pays it to the Bermuda company Same stuff here feel like a little bit more detailed and it's the same stuff like going around here so it's always basically two Irish companies one Dutch company some company in a Tax-Aven and in that process what is happening really reduce the corporate tax rate to almost like a nothing And that's basically trained among the big companies pretty much everyone does it So it's Microsoft Apple Google Facebook Amazon Starbucks also the German company SAP or Indie tax, which is the Spanish closing company and I want to point out one example. It's Google. So basically Google has a worldwide revenue in 2014 46 billion and When you take it down to the UK, it's like a tens of it's 4.6 billion and on this profit of 10 billion annually worldwide They paid somewhere around 2.3 billion But in the UK they only paid like 30 million and that's because they're using like this Dutch Irish sandwich to pay less Profits on the revenue in the UK and then we're going to take a look like where Google got famous in Europe Lately which is the digital news initiative That's like 150 million. They are using to spend on news organization. That's what it basically can call them like peanuts Because that's basically less than what they save in one year just on the tax Paying in the UK loan Same goes with Apple. So Apple is sitting right now on a cash of pile of 250 billion and it's partly due Because the same system or they had like a tax rate of just zero point five 0.005 percent 2014 To put that in relation. It's like two thirds of a schnitzel the GDP of Austria of like eight million people Or two thirds of the depth of Greece or twice the GDP from Berlin or 50 airports and so The European Commission Wanted to force Ireland to tax Apple higher, but of course they refused it because that's partly their business model taking less corporate taxes and The tap was last year 18 billion and by December 17th This island was forced to collect 13 billion from Apple because it's like about Competition we will see how that end up. I hope somebody collects that and 2014 Ireland was scraping their infamous double Irish tax Sandwich loophole and everybody was like woo-hoo Finally, but then they also replaced at the same time called something like patent box or knowledge development box So it's the similar stuff a different name and a little bit less dodgy But it will keep like tech companies and pharmaceutical companies Ongoing doing the tax scheme another great example is an investment opportunity from Switzerland Hungary and the Netherlands So that was general electrics on the 21st of December 2015 at 12 o'clock the Dutch sold the general electric Swiss to Hungary for like a 40,000 Franks and now a later to sold it again in different directions for 6.4 billion So there's like 60 minutes effect of 167,000 in order to understand that that's like you upgrade your old modem to a six gigabit line Or you upgrade your floppy disk to a 230 gigabit hard drive Or you work only 1.5 hours in your whole life And That's why did they happen it's basically they were selling some rights for 8 billion and with the tax difference from Hungary to Switzerland in Instead of paying 18 percent taxes. They only paid 2 percent taxes saving 1.4 billion Swiss francs in one hour And there are many more example like that, especially from Luxembourg Madeira is like a European island tax haven Ikea is a hilarious a tax example But I don't want to bore you and I want to go quickly through what happened on the reporting side So 2013 there was offshore leaks which was the first big Reporting addressing that issue Then a year later you had like Luxe leaks addressing Luxembourg Interesting there was like it happened right after Juncker was like Getting the head of the European Commission You can read that up in the German Diplo cables the slides online and it's everything linked And it was like about 28,000 pages on like more than 500 ruling on companies how to get like special deeds in Luxembourg And then you have to understand why this important So every country in Europe basically just trying to lower the corporate tax rate in order to attract the businesses And he's now a head of the European Union, which exactly should avoid that and 2016 two years after the reporting There was actually four times more special deeds in Luxembourg then we had the Panama papers that was a done Made available by whistleblower. We don't know who it is John Doe. The reporting started 2016 and it was mainly about Mossack Fonseca which like was one of the service providers. It was the biggest leap in data journalism 11 million documents and 2.6 terabytes and One of the consequences or not consequences happened afterward. There was like the six is over this year in Malta where Daphne, Kuran, Agalicia her car got bombed and Then in November the paradise paper came Same like almost similar to Panama papers difference was in different company. It was Apple by Applebee and It was like in 19 tax year station and it was like high profile cases. So this leaks in papers Dramandus work really amazing and I think it helps a lot of moving the discussion forward I just want to remark it the system the systematic place behind it Were known before that so it's I would say it's like don't hate the player hate the game I hate the enablers and the enablers are literally like those who are writing the law or like politicians So sum it up It's like a lot of dough butts and gild and we are going to the second part. How did that happened? So over the last century we had basically three deals how to get taxes done It was like source country based arms length pricing and collateral treaties So by source country based it means like you tax where the production is happening. So if you have a car company in Germany It just happens there arms length pricing when it's getting more company You have a car company buying parts from Austria then it means like you have two Separate units and you priced them where they are so what you need there and that's important Is like you have to find out a price and that finding out a price paying for the Austrian company if it's like a regular product like Some carpet it's easy because you have a market on there and you can't make up The margins like ten or a hundred times more if you do it with digital stuff The question is like who knows how much is it is the Google algorithm worse? So you can't price this because there's no market on it the same goes with trademarks one famous case was like the Nike swoosh So with real goods if you have competitors, you know what the pricing will be with tangible goods It's difficult to figure it out So they're treating the national subsoil as independent companies and making market prices for this So then they were moving why these are the problems? So basically on the source country based corporations can move the production from a to b Let's say you have a car company. You can produce in Poland Cheaper than in Germany then you move the production over there So arms length pricing you can make up the prices and shifting profits around that's basically the case what happened with Google and the Bermuda's so out of nowhere Google headquarter for like algorithmic stuff isn't the Bermuda's and Then the third is a bilateral treaties and on bilateral treaties You pay a bunch of lawyer really good money to figure it out How do I exploit the different text treaties that would be the case with the double Dutch are double Irish Dutch sandwich? And so we have done two scenarios which adds up to assert making prices to shift profits We are counting move the actual production and now that the kick saying the really big part is like it leads to tax Competition between countries because you want to attract those companies and that's basically this graph where you see like from the 90s to 2016 we have a different countries Germany, Ireland, France the Lowering the corporate tax rate. So Germany started out with 60 ending up with 30 here Ireland was once up at 50 and is not 12 percent So that's the business model attracting US companies and getting less corporate taxes compared to the European neighbors Same goes with The US used to be stable a long time There's also like the difference between a statutory corporate tax rate and the effective the effective is lower That's basically what to really pay and since we got a new president in the US You can see like this is the historic chart from 1980 like a century it used to go up before and after the Second world war then it was stable a long time and in December it was announced that it will go from 35 down to 22 So you have like then an international competition for tax rate So the question is like what can be done about that and one of the proposal among others is like you Put something in like a sales based apportionment tax that means that you require from the multinational companies that they report the global profit and sales and taxing in in the country you multiply the global profits and By the share of the global sales happening in that country which want to tax and then you text the percentage of this number The question is how can we get there or what we can do about that? Well one thing is you can always pray about and pray that Braing will help changing tax structures or you can laugh about it when you remember like ExxonMobil Saar Starbucks Ikea The picture came from regular economics because that's part of the problem Because they would told us it will trickle down and what means trickle town is like one of the most important things in my opinion Is that you realizing what trickle trickling down means? and that's basically when you take a look at this chart so like in the 1980 it started like you see like the change in share of income So you have like the top 1% again of all over 120% then you have like the top 20% raising a little bit like a rough 25% and everybody else is losing out that means that and the other job that is like you have from 45 to Zero five the productivity gains and It used to align like pretty much up like we're real wages So everybody got their fear share of that but somewhere here it's split it ways We have like productivity gains, but the real wages are stagnant So you should ask yourself what happened to this pie? where did it go and So this also leads them to create two classes like those working for this company Taking the shi out of it, which is not always the case if you take a look at for example workers leaving the Google Blacks They also have like two differently Working classes and those who are not and Remember this like adds up to almost like a hundred you appear each year you've been citizen each year on the conservative estimate and That brings back like everybody's complaining about like the the governments don't have money anymore But if you add that up you get like for the since the financial crisis roughly around 5% so you would have in instead of 90% That GDP ratio only 85% So when you go to offshore wells The estimates from took man with John I can recommend he's like a student of Piketty Who made that calculation based on the Panama papers that on average you have like 10% of the GDP? hiding in the tax havens Germany for example is like right here with the round. I Think it was summer 15 you have Spain with somewhere around 10 and then you have freeze which is striking out at 35 or something like that and Why this is important because normally the discussion right now is like about some tax haven sitting somewhere on some islands But as you can see here you be talking about Switzerland, Hong Kong USA, Singapore on the sixth place you have On the fifth place you six place you have done Luxembourg and on eight you have Germany So the framing of that the only effects like this tax havens on some small island eyes would say it's not completely Correct and you can see the difference cool. So Panama and discharge From tax jet tax justice network only comes in at number 13 and you have like swiss land, Hong Kong So this is basically the problem you have to attack. It's not so much about like This completely dark money laundering illegal money It's like a lot of stuff happens like right in your face known to everybody for decades So although the leaks were amazing It was nothing new and you have like other cases like in Germany the comics Which I around like for more than 15 years and nothing is changing and that's the sheeran of the tax havens given Started out with swiss land which used to be number one now Asian tax havens coming up But the issue is like you have still like buff 30 or around 30 percent European tax havens and Why this is important because some countries try to do something about it and when they do something There's this case with the Ukraine where the people in Ukraine trying to find out where their money went They got stuck in Germany because we couldn't provide them the information because you don't have like beneficial ownership in Germany There's initiative called open ownership trying to solve that and that's like once you have a weakest link where you block information Know who is the owner of the company? You can't get any further. So this one has to be addressed and Positive note is to see at this abyssal. So there's like some progress going on on December the 70s There's a new anti money laundering director from the European Commission. That was the first step after the Panama Papers Basically, it means that all those company registers in Europe has to be within the next 18 months Figuring making entry in the registry, which is available to the public That's good in one way again. It's not addressing like those company like Apple because it's like legal another step would be like the European Parliament elections 2019 and You have to remember. This is a political question. So years ago when we had like the US own crisis Mario Draghi Super Mario the head of the ECB Stepped up and basically said Whatever it takes will fix it and I think for taxation that needs to be done as well and basically we need structural reforms That we avoid like having a situation like this again at the I'm okay. I'm landed on the taxpayer and One part of that it's like a framing issue you should see it like paying the taxes when they're spent well as a positive thing and in the United States there was a long discussion about if you call a tax death tax or a state tax the conservatist label is death tax because then you frame it better badly and on the person who is dying and The opposite way would be like it's a state tax because the person is gone some is left over and it's about contribution to the society another thing is like this whole shit is like really boring and I'm really Sometimes think it's part of it like it's boring and complicated to keep you falling asleep So you should get familiar with certain things like too big to jail when it comes to Justice I will be gone you will be gone like how incentives are split up in banking sector and One of the stuff I always recommend is the big short It's like a movie about the financial crisis Which I think is brilliantly done and explains the things which normally sounds like really complicated completely easy And you should have a Europe or a world which exists in the Brexit of tax already another the purpose of tax optimization itself and When you remember the opening keynote from C straws, he called like old slow ai's Corporations and I think it would be easier to regulate those corporations on a tax level Compared to a tech level because the framing and the time. It's not that crucial Which led me to the one crater when you have corporations are people Why don't we have a corporate desk penalty for companies and that was the case with my land? It was the equity hex data leak and insider trading This fall so we have a certain responsibility to be there successful because there's no alternative and Just want to say remember this isn't rocket science. It used to be there and see it like it's natural reality We need a level playing field and for global corporations to like local companies or Mini shops because they pay basically pay nothing and so you divide up the problem while you have a natural reality It's the speed or what you can transport. He it's the just like the dfm easier money flow And so come to the end that's like the idea is like solar punk taxation solar punk is like something How does a sustainable civilization look like and how can we get there and I think taxation is probably one thing We will be stuck in the near future. So we think it should think about it to have like this two scales Lined up so we end up in a nice sustainable civilization So the takeaways like things changing because of intangible goods and technology three ways our companies pay less taxes somebody Probably has to pay up Take up the bill. It's more than 0.5 percent of the European GDP and That was me Remember the logo and tight the tax crews firmly that was this. Thank you so much It is lights online and if you have any questions after or next to the Q&A Just contact me at at Favoy or Walter at single net We have time for a very few questions If you have one and wanted to be lucky to be one of those please line up at the microphones But please signal angel are there any questions from the internet? Yes, they are go ahead How will universal basic income deal with too big to fail as in how will we deal with the company hood as bad yet? We are so dependent on their contribution to universal basic income that we can't punish them in any meaningful way Can you maybe rephrase the question? How do you see the universal basic income in connection with the too big to fail phenomena? Well, I think the too big to fail phenomena is one thing you normally at the certain level you should split up company that he was done to the Delcos years ago to oil companies years ago and One you once you come to the situation that you have too big to fail then you basically In games here we have a leverage. We have seen that in banks You could let them go down because if they would have go down that would be a systematic risk and you couldn't bear that risk That Would be my answer to that independently from universal basic income We go maybe we since we started a little bit later. We go until five past So we have time for I see how the questions fit in microphone number two, please Hello, I have two questions There's now alternative to Bitcoin called the cash and Monero and the advantage of those two Cryptocurrencies that it's basically untraceable Compared to Bitcoin. So my question is in the future if many more companies are gonna adapt adopt this Untraceable cryptocurrency and start paying for example the employees with it. How? How you gonna manage to tax those people or corporations and The second question is a moral reflection on the state of the European Union the EU was created and has opened the borders in 1992 and I'm part of a region from south of Belgium where everybody goes to Luxembourg to fetch their gas Because it's cheaper and it's still the case because we do have different member states that has very Different fiscal laws that and a deal level. There's no legislation Us in the US. There's no legislation to harmonize those fiscal laws And it's actually a Unanimity what is what is your question you asked one question and maybe you answer that we don't have a lot of time So in the in the US, there's no fiscal There's fiscal competition between the states the same is in Europe And I don't see with unanimity in the Council of Ministers that it's gonna change in the near future The what you mentioned earlier Luxembourg Malta Holland apparently blocked this 17 December initiative, so I don't see with unanimity like at some point one country like Luxembourg say Fuck off, and then we can't make any progress so the first question with script occurrence is I think The leverage on the state like so basically if company a and that company decides to go to see cash and making their Transactions anonymously good luck with that because then basically The tax system strikes back I don't think there's like unless you'd want to go completely on the ground There's no chance that you can avoid that. Maybe they have a certain advantage from the speed when they implement it But you will not be able to Provide the books you need for a tax audit and then they get you on something else if they want to get you They always get you even if everything else is fine The second one. Yes, the European has a competition the question is how far you want to let the competition go and That's the same thing with Yonka. I mean Yonka did a phenomenon job for Luxembourg when he was their finance minister and Premier minister, but it hurt like other countries So at the end of the day what you do in politics you have to find a solution to get a how you deal with it The first step is that Ireland has to basically being forced to take the money from Apple because it's like Not fair competition to everybody else and then and that's a question the society has to ask you You can go down to see your corporate tax if you say that you don't need it There's some people arguing for that and at the end of the day Somebody has to pay the bill or you basically say you privatize everything and you don't want to have a government It's like on the one side There may be a middle ground you have to find a solution how you make your revenue and This is one part where you clearly see a trend that the revenue from that area goes down and maybe has some Implications, I mean we're living in Europe Which is halfway falling apart and partly because of that reason because with a erosion of the tech space and At the end of the other people getting blamed for that which they didn't cause As I said, it's a political question We I'm sorry We run up with our time microphone one you can reach for voida by Twitter or by email I'm sorry, I will be around here if you yeah, so you can go directly to him and ask him Thank you for coming here for this talk and please give a warm round of applause to avoid out. Thank you very much