Thanks to complex offshore intellectual property deals, the US media group behind powerful entertainment franchises such as “CSI,” “Star Trek” and “Transformers” owns nearly $4 billion in corporate taxes in the United States and an additional $1.2 billion in the United States . United Kingdom, according to a new report from a Dutch think tank.
A study by the Multinational Research Center (SOMO), a non-profit center partially funded by the Dutch Ministry of Foreign Affairs, shows that ViacomCBS has used subsidiaries in the Netherlands for nearly two decades. ViacomCBS has six Dutch entities that oversee international licensing of films and TV shows – four of which, according to the report, have never employed any staff.
By analyzing the annual reports of those Dutch subsidiaries, SOMO researcher Martin Hetland has established that the Dutch government has made tax rulings in favor of ViacomCBS since 2002. Notably, since 2011, less than 1% of subsidiaries’ billing income is taxed in the Netherlands.
The report identifies the increasing prevalence of intangible assets – such as intellectual property rights – as a major catalyst for the types of tax evasion structures that ViacomCBS favors due to their ease of transfer to another country.
If the rights to a television show are owned and operated in the United States, the earnings from that show will be taxed in the United States, even if the show is eventually sold and broadcast in another country. But the company can transfer the rights to this offer to a tax haven and enjoy its profits free of corporate tax. For example, in its Paradise Papers investigation, the International Consortium of Investigative Journalists revealed how lucrative music revenues are hidden abroad, where profits flow in tax-free.
A 2017 ICIJ study, Paradise Papers, sheds light on how music rights holders use offshore tax havens to evade taxes on property profits.
Until 2020, Dutch tax law allowed for a “hybrid mismatch” in which US companies could transfer their foreign earnings as dividends or proceeds to those partnerships – and avoid taxes at home and abroad. As Hetland put it in the report, “International rules for taxing multinational corporations are not adapted to an economy of value creation through intangible assets.”
Viacom’s CBS call the report is “deeply flawed and misleading” and said it has fulfilled all of its legal tax obligations worldwide, in a statement cited by The New York Times.
Other multinational media and entertainment companies have set up similar structures in the Netherlands, prompting Sumo to investigate the country’s role in global tax avoidance, Arnold Merckx, coordinator of the Dutch chapter of the Tax Justice Network and a contributor to the report, said via email.
The report recommends that the US government enact legislation to prevent US multinationals from transferring intellectual property rights to foreign subsidiaries and that Dutch tax authorities stop making positive judgments that make the Netherlands a frequent channel for tax evasion.
But Hetland also stressed in the report that “there is an urgent need for countries around the world to work together and coordinate” so that no country closes its financial loopholes by simply moving the breaches to a new location – such as Viacom. times from 2005 to 2019, according to the report’s report. The report cites the 2014 Lux Leaks investigation by the International Consortium of Investigative Journalists as a potential catalyst for CBS and several other companies moving their business out of Luxembourg. The recommendations come this year during international tax reform negotiations aimed at ending the shift of corporate profits between tax havens.
As Merkies said via email, “Tax advisors at multinational corporations are always looking for new structures and loopholes.”