This document discusses tax fraud and corruption in the tech industry, focusing on several major companies. It provides background on key concepts like tax evasion, avoidance, and corruption. It then examines issues at Samsung, IBM, and Siemens. Samsung has faced antitrust concerns and a major corruption scandal. IBM is accused of using tax avoidance strategies like the "Dutch Sandwich" and storing profits offshore to lower its tax bill. Siemens had a major corruption scandal in the 2000s, resulting in billions in fines for bribery.
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Presentation about the major trends, drivers and inhibitors of the European IT Services Outsourcing market, given by Frederic De Meyer in Jilin, China in August 2014.
Addressing the Tax Challenges of the Digitalisation of the EconomyOECD Berlin Centre
Power Point Presentation by Dominika Langenmayr, professor of Economics at Catholic University Eichstätt-Ingolstadt, as part of the OECD Berlin Centre's webinar on 2 June 2020 on the challenges of the digitalisation of the economy.
There are two videos in PPT, where are black slides:
Video1: https://www.youtube.com/watch?v=wxW8GP59Sq8
Video 2: https://www.youtube.com/watch?v=VcZF_DxQ5cU
The digitalization of the global economy has amplified the problem of tax avoidance and tax fairness and led to a rise in digital taxes around the world. This webinar seeks to discuss ways for East Africa to address two crucial issues:
Linking taxation rights to where value is created
Reforming the current corporate income tax system to disincentivize transfer pricing to the jurisdiction with the lowest tax rate.
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- Way forward on implementation
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4. Any act or omission, which results in a
person paying less tax than, is legally due.
WHAT IS TAX EVASION ? 3
Tax evasion activities include:
• Underreporting income
• Inflating deduction or expenses
• Hiding money
• Hiding interest in offshore accounts
Tax liability : assujetti à l’impôt
Overstate: exagérer
Tax deduction : déduction fiscale
Shell company : société écran
5. SOME TAXE HAVENS
2016 : The European Union
establishes the tax haven list
Tax evasion is responsible
for a “tax gap” :
• €60B to €80B in France
• $385B according to the
american IRS
4
Tax haven : HAVRE fiscal
IRS : Internal Revenue Service
6. AVOIDANCE DOESN’T MEAN EVASION 5
Tax avoidance
Is Legal
The application of all
exemptions and
deductions provided by
tax laws to reduce
taxable income.
Tax evasion
Is a crime
A person unlawfully pays
less tax than the law
mandates.
Tax avoidance : optimisation fiscale/ Tax evasion : evasion fiscale/ To mandate : obliger
8. 7
The main forms of corruption are bribery,
embezzlement, fraud and extortion
In the Tech Industry : secure advantages
over business competitors
Information is the sinews of war
The abuse of entrusted power for personal gain
WHAT IS CORRUPTION ?
Bribery : corruption/ Embezzlement : détournement/ Undue : injustifié
10. ACTIVE CORRUPTION : SUPPLY SIDE
Request
I give you some money to obtain undue advantages
Undue advantage Money
9
11. PASSIVE CORRUPTION : DEMAND SIDE
Request
You accept my money and give some undue advantages
Money Undue advantage
10
12. 11HOW FRANCE AND THE US TACKLE CORRUPTION
The Foreign Corrupt Practices Act
(FCPA) :
• The most widely enforced anti-
corruption lax
• A large field of actions
The Sapin 2 Law :
• Creation of the National Agency
to fight Corruption
• A legal protection for
whistleblower
• The obligation to implement a
corruption prevention plan in
large companies
Corporate liability : responsibility for employee acts
Whistleblower : lanceur d’alertes
14. WHAT IS SIEMENS ? 13
German company headquartered in Berlin and Munich
Electrical Engineering and electronics products and services
190 countries
285 production and manufacturing facilities
360.000 employees worldwide
Main activities :
• Power and gas
• Power generation services
• Building technologies
• Financial services
15. HOW SIEMENS GOT INTO BRIBERY ? 14
External agencies and organizations : payed Siemens without reporting it
Siemens channeled millions of euros in bribes to customers in Nigeria, Russia, Libya,
and other countries to win infrastructure
1999 : Government started looking at their transactions
2003 : German government started investigating
SEC : securities & exchange commission = COB : commission des opérations de bourse
Pleaded guilty : plaider coupable
16. HOW MUCH SIEMENS HAD TO PAY FOR THAT ? 15
2008 : pleaded guilty to violating U.S anti-corruption laws
$1.6 billion : Germany and U.S.A
U.S.A : $800 million ($350 million for American justice & $270 million for SEC)
Germany : $395 million for insufficient management control
At the end, this case cost the company $2.5 billion
SEC : securities & exchange commission = COB : commission des opérations de bourse
Pleaded guilty : plaider coupable
17. THE GREEK BRIBERY SCANDAL 16
2004: Bribery scandal involving Siemens and the Greek government during the
Olympics in Athens
2007-2011: Siemens bribed to get telecoms & security contract from 1997 to 2002
Tassos Mantellis (former transport minister) admitted receiving 100,000 euros in
1998
Charges were filed on the 1 July 2008
2012 : company agreed to pay 270 million euros to the Greek state
Charges filed : chefs d’accusation
19. SAMSUNG IN A FEW WORDS 18
South Korean conglomerate
Headquartered in Seoul
Digital leader
Flagship company: Samsung Electronics
The company spotlights some specific values
and philosophies
Flagship company : entreprise phare
20. SAMSUNG’S ISSUES 19
Antitrust concerns + Price fixing + Labor
abuses
Financial scandal in 2007:
The then chairman of Samsung masterminded a broad
scheme of bribery and illegal transactions
The whistle-blower: the former Samsung Chief lawyer
Samsung is too important to South Korea’s economy
and thus, it has literally become too big to fail
To mastermind : piloter/ Sluch funds : caisse noire/ prosecutors : procureurs
généraux
21. 20SAMSUNG’S RECENT CORRUPTION SCANDAL
Hiding assets overseas : cacher des actifs à l’étranger
Perjury : parjure
Seek bail : payer la caution
Impeachment : mise en accusation
Jay Y Lee, the
de facto head of
Samsung Group
Park Guen-hye, South
Korea’s president
Choi Soon-sil,
business leader
and Park’s friend
€34M bribe
23. IBM IN A FEW WORDS 22
American tech firm known for their IT outsourcing, cloud
services and business software such as Watson and Lotus
Created in 1905 and headquartered in Armonk, NY
Probably the most influential tech firm because of its history
its patents
377K employees > Apple (105) + Google (57) + Microsoft
(117) + Cisco (73)
170 countries and 12 research labs worldwide
Patent : brevet / Influential : influente
24. 23
SALES
Dropped from $104B to $79B in four
years
PROFIT
Droped from $16.6B to $11.87B in four
years
INCOME TAX
Droped from $5.3 in 2012 to $449M in
2015
IBM’s DIFFICULT FINANCIAL SITUATION
0
20
40
60
80
100
2012 2013 2014 2015 2016
Sales Net profit Income tax
Rate : 24.19% 15.58% 21.18% 16.19% unknown yet
25. IBM’s PRACTICES : THE DUTCH SANDWICH 24
Rounting their EMEA sales through their Dutch subsidiary
IBM International Group BV incorporated under Dutch laws in 1999
Acts as a holding company for more than 40 IBM-owned companies worldwide
Employs 200.000 workers but only 6.000 actually work in the Netherlands.
To rout : acheminer/ EMEA : Europe, Middle-East and Africa
26. IBM’s PRACTICES : OFFSHORE PROFITS 25
$44B accumulated offshore in 2012 : didn’t pay US taxes on them
6th highest amount for an American company at that time
“No company is better than IBM at managing their annual effective tax rate,” said Ed
Outslay, an accounting professor at Michigan State University.
From 2008 to 2012, they didn’t report $18.4B in overseas profit
With the statutory 35% rate, they woul’ve paid $6.4B
27. IBM’s PRACTICES : REAL WORLD CONSEQUENCES 26
We found a file describing the consequence of IBM’s malpractices in North Carolina
“Head Start” is that helps children from low-income families get ready for
kindergarten.
It has generated long term academic achievement and regional economic
performance
• In Alleghany County, it ended one week early and reduced staff hours by nearly
one month
• In Durham County, there were 50 fewer spots available
28. IBM’s PRACTICES : MAKE UP FOR A POOR MANAGEMENT 27
Cloud
Cloud computing helped competitors like Salesforce emerge
IBM’s strategy to maintain 20$-a-share earnings was compromised
They shed 57.000 jobs from 2012 to 2015 = Google’s entire payroll
They saw in taxes a lever to drive earning growth
28% in 2007 to 16% in 2015 with an all time low of 11.2% in 2010
Not a viable solution so they invest in the next big trend : Big data
Lever : levier/ All time low : point le plus bas
29. IBM HELPS TAX AVOIDANCE 28
Partnership with H&R Block : company that helps its 20 million clients manage
their taxes
Associate their expertise to IBM Watson’s processing capabilities
Purpose : help H&R Block identify every single credit deduction that they could
have missed
Federal tax code : 74K+ pages and thousands of yearly tax changes that impact how
much people get back
Credit deduction : deduction fiscale
30. IBM FIGHTS TAX FRAUDS 29
Finding fraud is difficult because tax codes are complex
Complicated for tax investigators to enquire on every
case so they need help
Big Data and analytics provide a method to find
anomalies and predicting were they could happen again
Watson, the same software that helps H&R raise the tax
credits of their clients can also help governments track
down tax frauder by analysing financial flows and
financial realeses.
31. IBM WATSONNED 30
Redundancy plan : plan de licenciement
The internet seem to praise their products instead
of mentioning their redundancy plans or tax
avoidance schemes
33. 32CONCLUSION
“Tax avoidance is like buying a product on sale. Tax evasion is like shoplifting”
-Some guy on Reddit
Tech Companies, a new and corrupted industry :
Many of these companies are definitely ruled by a new state of mind, but the use of old and
bad practices are remained
Something to keep in mind :
The legal duty of executives in corporations is to increase long term shareholder value for
shareholders. If they don’t they could be sued. If a company doesn’t take advantage of the
loopholes, the executives could suffer the consequences
Shoplifting : vol à l’arrachée
34. 33QUESTIONS ? COMMENTS ?
Quizz yourself on our vocabulary list at :
https://quizlet.com/_36659z
35. REFERENCES 34
SAMSUNG (1995) Values & philosophy. Available at: http://www.samsung.com/us/aboutsamsung/samsung_group/values_and_philosophy/ (Accessed: 27 February 2017).
Chen, S.-C.J. (2007) Samsung’s Lee family accused of corrupt dealings. Available at: https://www.forbes.com/2007/11/13/samsung-corruption-investigation-face-markets-cx_jc_1113autofacescan01.html (Accessed: 27 February
2017).
CSIMarket (2017) International business machines (IBM) sales per country and region, Dec. 30. 2014 annual report. Available at: http://csimarket.com/stocks/segments_geo.php?code=IBM (Accessed: 25 February 2017).
Editorial, R. (2007) Korea’s Samsung stirs controversy over corruption claims. Available at: http://www.reuters.com/article/us-korea-samsung-idUSSEO889720071210 (Accessed: 27 February 2017).
IBM: Countries of operation - historical data visualization - business history - Harvard business school (2016) Available at: http://www.hbs.edu/businesshistory/teaching/resources/Pages/historical-data-visualization-
details.aspx?data_id=10 (Accessed: 25 February 2017).
Internal revenue service (2017) Available at: https://www.irs.gov/ (Accessed: 26 February 2017).
L, B. (2014) IBM uses Dutch tax haven to boost profits as sales slide. Available at: https://www.bloomberg.com/news/articles/2014-02-03/ibm-uses-dutch-tax-haven-to-boost-profits-as-sales-slide (Accessed: 25 February 2017).
Lohr, S. (2017) IBM gives Watson a new challenge: Your tax return. Available at: https://www.nytimes.com/2017/02/01/technology/ibm-watson-tax-return.html?_r=0 (Accessed: 26 February 2017).
McNeill, D. and Kirk, D. (2018) Tax evasion, bribery and price-fixing: How Samsung became the giant that ate Korea. Available at: http://www.independent.co.uk/news/world/asia/tax-evasion-bribery-and-price-fixing-how-samsung-
became-the-giant-that-ate-korea-8510588.html (Accessed: 27 February 2017).
Moscaritolo, A. (2017) H&R block enlists IBM Watson to find tax deductions. Available at: http://www.pcmag.com/news/351508/h-r-block-enlists-ibm-watson-to-find-tax-deductions (Accessed: 26 February 2017).
O’Reilly, C. and Matussek, K. (2008) Siemens to pay $1.6 Billion to settle bribery cases. Available at: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/15/AR2008121502926.html (Accessed: 27 February 2017).
Pétain, A. (2008) Siemens met un terme à son scandale de corruption. Available at: http://www.lefigaro.fr/societes/2008/12/15/04015-20081215ARTFIG00531-siemens-l-affaire-se-termine-pour-milliards-d-euros-.php (Accessed: 27
February 2017).
Sang-hun, C. (2007) Corruption scandal snowballs at South Korea’s Samsung group. Available at: http://www.nytimes.com/2007/11/06/business/worldbusiness/06iht-samsung.1.8210181.html (Accessed: 27 February 2017).
Watson, B. (2013) Siemens and the battle against bribery and corruption. Available at: https://www.theguardian.com/sustainable-business/siemens-solmssen-bribery-corruption (Accessed: 27 February 2017)
