Starbucks and Fiat have been ordered to pay up

Taxes are mandatory contributions to state revenue which can be imposed through, a person’s revenue, a purchased item, or a business transaction. They are mandatory because they are meant to finance public investment and projects which are beneficial to the collectivity. This article presents another view on taxes. In this case, the article talks about the phenomena of not paying taxes rather than the direct impact of a rise of fall that tax rates can have on the supply or demand curve. Currently, Starbucks, Facebook, and Fiat Chrysler are potentially going to have to pay the Netherlands and Luxembourg government back tens of millions of dollars back that they did not pay due to tax evasion. The tax evasion apparently happened thanks to some the special tax deals the companies made with the national tax authorities. Even tough having low interest rates makes a country more attractive for business, it is not fair to the government that needs revenue. In the same way that imposing a tax on any particular good creates a deadweight loss, not paying a tax causes the Netherlands government a loss in the area of the total revenue which reduces its productivity and efficiency.

On behalf of Sophia N.

1 Comment »

  1. wolfi Said,

    November 23, 2015 @ 2:34 pm

    You make an extremely compelling point. My main question is how these tax authorities managed to escape criminal charges when they gave these companies special tax treatment that is not provided under the laws of these nations. Additionally, if Starbucks had previously agreed with a tax authority in good faith and paid the amount of taxes that they agreed upon, why are they being made to pay more taxes in the future?

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