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If there is any corporate fiscalist over here, feel free to correct me but I believe a lot of Group 2 entities don't follow the normal tax code because they have specific agreements with local govs outside of the common law. The idea is that the companies tell the govs "either we pay a lot of lawyers to avoid taxes and you get zilch and you can't do anything about it or we agree in advance on a small sum for you and you leave us alone."

If you want to get rid of that, you need to get rid completely of tax havens and to heavily regulate intangible transfers across subsidiaries of a same multinational (a shell game that moves profits and losses from one subsidiary to another, depending on which local tax codes are the most profitable for each cases). For the little I understand, neither task is technically easy, not to say a word of political will.
by Francois in Paris on Thu Apr 6th, 2006 at 11:36:46 AM EST
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I'm not a fiscal specialist but I know a thing or two about the topic and I think your description is pretty accurate.

It can get sleazier since with enough tax paying clout and and a decent payroll (ie jobs thank can be relocated) a company can still cut a deal after being caught paying insufficient taxes.  Once the auditor has told you how much back taxes you owe, the haggling can begin in earnest and there's now way in hell the big players ante up the full amount penalty and all.

by Guillaume on Thu Apr 6th, 2006 at 12:08:05 PM EST
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