Companies only pay tax on profits*, and therefore some of them are shuffling money around different countries, by buying services from themselves**, in order to move those profits to places with less tax.
My initial solution to this is to say "Fine, you pay tax on what profits you would have had if you hadn't repaid yourself. You can pay _anyone else_ before tax, but if you and the other company are both part of the same corporate structure, or own shares in each other, then you can only pay each other back after tax is paid."
I feel sure that there is a massive hole in this, otherwise I would have seen it suggested elsewhere. Can anyone tell me what it is?
*Leaving aside their share of income tax, VAT, etc.
**For instance, AndyStuff (UK) pays AndyStuff (Bermuda) for the right to use the AndyStuff logo. Or AndyStuff (UK) takes out a loan from AndyStuff(Bermuda) at high rates of interest.
Original post on Dreamwidth - there are comments there.
- A question about profits and tax