Microsoft never earned $10 billion in China, they sold $10 billion worth of goods to an overseas entity using a tax avoidance scheme. Different thing.
I understand that parent/daughter company relationships are hard but the only thing that matters is who holds the final holdings shares. Everything else is just window dressing and obfuscation.
So by your argument, when we purchase a physical book, we should pay taxes in every locality that that book passed through.
So let's say it was manufactured in Florida, shipped from New York, and sold in California, by your logic we should be paying state taxes in Florida, New York, and California.
>So let's say it was manufactured in Florida, shipped from New York, and sold in California, by your logic we should be paying state taxes in Florida, New York, and California.
I do not think that is an accurate example of what occurred in the article.
1. MS bought a Danish Company, (This is a taxable transaction),
2. MS then sold the assets (software) of the Danish Company to an MS subsidiary in Ireland, (This is a 2nd taxable transaction, but this is where MS "allegedly" sold the Danish Company asset at a price far below the market value effectively cheating Denmark out of taxes it would receive had the Danish Company sold its asset to an independent company)
Nevermind the obvious reasons "Why" MS engaged in the second transaction, MS is paying less taxes on the asset selling it from Ireland than in Denmark.
So to change your hypothetical to more accurately reflect the article - It is more like manufacturing a book in Florida, selling it to your own company in NY, who in turn sells it to someone in Florida just to avoid charging FL Sales tax which would need to be charged by a Florida company selling to a Florida resident. Of course at first glance this seems like a smart business move, but assuming the legal analysis of the article is true, then also imagine in your hypothetical there is a law prohibiting this type of transaction to its own subsidiaries in other states to prevent the circumvention of State sales tax.
A book is exactly the wrong sort of example because publishers don't generally own the rights to the book, authors do. So the argument is that if I own, manufacture, and distribute a product or service that I shouldn't be able to dodge paying taxes on it by establishing a wholly owned sham company off shore and transferring the "ownership" of some product to that sham entity and then assign all the profit to that entity thereby making it a "foreign profit" which is only taxed when repatriated. Apparently, this is going on not only with products sold outside the US but also products that never left the country. It has nothing to do with double taxation.
Sounds right to me. The manufacturer will pay tax in Florida, the shipping company will pay tax in New York, and the retailer will pay tax in California— all those taxes get sent down the line to me. If any of these entities are legally based out of somewhere else, I would expect them to pay tax there in addition. If the shipping company and the retailer are owned by the same entity, and they said that their revenue from shipping was $0 so they don't owe New York any tax, I'd expect New York to take a different view.
If I live in Massachusetts and earn money in New York, both states expect me to pay income tax.[0] And why shouldn't they? I'm using both of their resources.
[0] The amount paid to NY is deducted from the MA tax, down to 0. That might be different elsewhere?
I understand that parent/daughter company relationships are hard but the only thing that matters is who holds the final holdings shares. Everything else is just window dressing and obfuscation.