Corporations use tax backgrounds to disguise profits. And the profits in movies and television are no different.
When films and shows go overseas, they make money. In fact, studios are trying to make more and more money overseas. This is not just because they want to attract more audiences to their projects, but because they are finding new and creative ways to hide those profits from the US government.
I’m not an expert, and there is a lot to read about it, but it basically boils down to a large company trying to keep as much of its taxable income as possible.
If a company makes a profit on these projects abroad, a portion of those profits will be owed to the government as taxes. This happens all over the world, not just US companies.
According to a Study published from the Center for Research on Multinational Corporations, a non-profit group Partly funded by the Dutch Ministry of Foreign Affairs, companies (including film studios) use tax breaks to withhold profits from the government.
The revolutionary thing about this is that they used an entertainment company as the main example.
ViacomCBS is the multicompany that broadcasts TV like Spongebob and movies like Impossible mission, Transformers, and Star Trek. These traits are loved all over the world and are all incredibly successful. They’re collecting a lot of money. Indeed, aApproximately 24% of the company’s total revenue comes from content licensing outside of North America.
Because of this, ViacomCBS has closed loopholes with subsidiaries in Barbados, the Bahamas, Luxembourg, the Netherlands and the UK since 2002 to avoid paying US corporation tax of $ 3.96 billion.
You may be wondering how they do this – so was I. So I looked at the claims. The study claims that ViacomCBS set up fake companies in these areas, many with one or no employees. Then they distributed the money and pretended it didn’t exist.
They also do it by moving License rights for various titles. So we take Spongebob for example. The rights are not a tangible thing, they are just paperwork. So you can move to where the show is licensed in any of the countries listed, which basically makes it seem like you don’t owe any money to the company’s home country because it is a product that is licensed elsewhere. So when a show is licensed in the Netherlands, the money from underlicensed operations goes back to Dutch companies and is technically not subject to US corporation tax.
For a simpler example, the New York Times spoke to Jeffery Kadet, an international tax expert.
“If you take money or other property like licensing rights and move it from one subsidiary to another, have you done something that economically changes the company as a whole? told the New York Times. “The answer is you didn’t. It’s like taking a dollar bill from the front left pocket and sliding it into the right back pocket. You still have the dollar. ”
And as the study says, “Companies that rely on intangible assets like shows and movies can easily move a large portion of their global profits to tax havens, where the majority of their profits go untaxed.”
This is quite a big manipulation and has driven people crazy – including ViacomCBS.
They denied the results, saying in a statement that the study was “deeply flawed and misleading,” adding that it “shows a fundamental misunderstanding of US tax law.”
Viacom continued, “It is full of mischaracterizations, key omissions, and numerous false claims. ViacomCBS performs its tax obligations in all over 180 countries and territories in which we operate and all of our income – including those listed in this report – is fully taxed in the relevant jurisdictions around the world, including the United States, in accordance with applicable law . ”
That’s all well and good, but that New York Times The investigation into the study found that ViacomCBS was in fact sued over this strategy for moving the rights of Teenage Mutant Ninja Turtles around.
We will keep an eye on these studies and these stories as they evolve.