VW Finds 1 Share Saves $1.1 Billion In Tax With Loophole

[Aaron994]

http://www.bloomberg.com/news/2012-0...-loophole.html

[NoDubJustYet]

The German government is really going to get their panties in a bunch... they really hate it when individuals and corporations get around paying taxes.

[masa8888]

The German government is really going to get their panties in a bunch... they really hate it when individuals and corporations get around paying taxes.

The government's response

“When global companies can save billions with such tax tricks, then every taxpayer has to feel like they’ve been had,” Rainer Bruederle, parliamentary leader of the Free Democratic Party, Chancellor Angela Merkel’s coalition partner, told German business newspaper Handelsblatt yesterday. “Many skilled workers can only dream of so much charity from the tax offices.”

Typical political spin

[Aonarch]

Winning. Loop holes are fantastic.

[CodeMan]

The deal structure was in large part the brain child of Michael Schaden, a press-shy tax lawyer at Ernst & Young in Stuttgart, according to people familiar with the transaction.

So VW does indeed have Schadenfreude, and with good cause.

[BostonB6]

Hopefully Schaden gets a nice big fat bonus, and a Porsche car of his choice, for doing a good job.

[Calcvictim]

It's legal, good for VW and the government can go eff themselves.

[JCJetta]

As a corporate tax professional, I applaud this. That is some crazy huge savings!

[Turbio!]

Well hell, it's legal, but I bet it won't be in the future.

The government's response

Typical political spin

All I'm seeing out of the rest of you guys is the typical corporate spin. The man does have a point. I fully support the prerogative for companies to avoid taxes any legal way they can, because that's good business...but in return, they have zero prerogative to expect or demand special treatment in the form of the "favorable business climate" of tax breaks, subsidies, investment, and direct ownership by governments. It doesn't take a great deal of insight or introspection to realize that a favorable business climate is a two-way street, and that the climate gets less favorable if policymakers perceive that they're being taken advantage of. Screwing your investors is rarely good business.

[Calcvictim]

Well hell, it's legal, but I bet it won't be in the future.



All I'm seeing out of the rest of you guys is the typical corporate spin. The man does have a point. I fully support the prerogative for companies to avoid taxes any legal way they can, because that's good business...but in return, they have zero prerogative to expect or demand special treatment in the form of the "favorable business climate" of tax breaks, subsidies, investment, and direct ownership by governments. It doesn't take a great deal of insight or introspection to realize that a favorable business climate is a two-way street, and that the climate gets less favorable if policymakers perceive that they're being taken advantage of. Screwing your investors is rarely good business.

No smart corporation will spend money they do not have to just to get on the government's good side in case they need help in the future. That makes no sense.

[Fe2O3]

It wouldn't have been quite so "in your face" if they had transferred more than just ONE share. Brilliant accounting, though

[Turbio!]

No smart corporation will spend money they do not have to just to get on the government's good side in case they need help in the future. That makes no sense.

But somehow, it always makes sense for the government to spend money it doesn't have just to get on the corporation's good side, right? Volkswagen of course has the complete prerogative to do what they did, and it was legal. They should do what they did. They increased shareholder value, which is the mission in life for any good corporation. The thing is, however, they did it with local, state, and national governments underwriting the risks they took in doing business, and then abused that patronage. Legally. But what they did reeks of the endemic hypocrisy of socialized risk to guarantee private profits, and while it's the way of the modern world, I'm not going to cheerlead for it or pretend it doesn't disgust me.

VW had the money, by the way. This little move increased their earnings per share by 7%.

[Hawk]

It's a very good outcome to be sure, but frankly I don't understand all of the pats-on-the-back.

Using non-cash consideration in order to re-classify a transaction (ex. from a take-over to a restructuring) isn't exactly novel. Stuff like that is done all the time in order to get better tax consequences.

Just last month a colleague of mine closed a deal wherein they devised a way to have a transaction considered a basic share purchase in lieu of an amalgamation in order to avoid both hefty tax implications and a prolonged legal process.

Maybe I'm being naive -- quite possible cause I am not familiar with the intricacies of the VW deal -- but I don't really see what E&Y and VW's lawyers did that was so novel. Absolutely it's a good outcome, but IMO it's exactly what any good accounting/ legal team would have done......

Maybe I'm missing something.

[masa8888]

Well hell, it's legal, but I bet it won't be in the future.



All I'm seeing out of the rest of you guys is the typical corporate spin. The man does have a point. I fully support the prerogative for companies to avoid taxes any legal way they can, because that's good business...but in return, they have zero prerogative to expect or demand special treatment in the form of the "favorable business climate" of tax breaks, subsidies, investment, and direct ownership by governments. It doesn't take a great deal of insight or introspection to realize that a favorable business climate is a two-way street, and that the climate gets less favorable if policymakers perceive that they're being taken advantage of. Screwing your investors is rarely good business.

The issue I take with the government's response is that it was somehow a shady, underhanded deal to take advantage of the spirit of the law. It was a responsible move by E&Y and the VW tax department to make, and frankly something that any other company would've made to reduce their tax liability. In other words, there should not have been any expectation for the additional tax revenues in the first place.

[JMURiz]

Good job by VW, they are in the business of making stake-holders happy, not the tax-man. Besides the added business will help the places they do business in the long run....that's why governments put loopholes on the books.

Seeing as germany has bailed out most of the euro-zone, they're just happy the VW business is growing.
First Ducati now Porsche...along with the current AudiSport success means more racing, so we all win.

[laurent]

Not sure how you can say that there shouldn't have been an expectation for tax revenue...

The spirit of the law clearly called for taxes to be paid.

Kudos to the accounting firms for coming up with a creative way to circumvent the tax code, but to act as if no harm was done and that the maneuver isn't ethically questionable seems a bit over the top.

The money certainly would have been far more useful ending up as tax revenue than being distributed to shareholders.

[shepherdgti]

Not sure how you can say that there shouldn't have been an expectation for tax revenue...

The spirit of the law clearly called for taxes to be paid.

Kudos to the accounting firms for coming up with a creative way to circumvent the tax code, but to act as if no harm was done and that the maneuver isn't ethically questionable seems a bit over the top.

The money certainly would have been far more useful ending up as tax revenue than being distributed to shareholders.

Ha..'spirit of the law'
How can you be so sure that the money that VW earned would be more beneficial as tax revenue? The term 'loophole' is a misguided one, and does not necessarily mean that a firm/individual is circumventing the law. They are following the law, and it is their duty to generate wealth for shareholders.

[ThreadBomber]

If they paid this tax Greece would just piss it all away anyway

[PolskiHetzen]

But somehow, it always makes sense for the government to spend money it doesn't have just to get on the corporation's good side, right? Volkswagen of course has the complete prerogative to do what they did, and it was legal. They should do what they did. They increased shareholder value, which is the mission in life for any good corporation. The thing is, however, they did it with local, state, and national governments underwriting the risks they took in doing business, and then abused that patronage. Legally. But what they did reeks of the endemic hypocrisy of socialized risk to guarantee private profits, and while it's the way of the modern world, I'm not going to cheerlead for it or pretend it doesn't disgust me.

VW had the money, by the way. This little move increased their earnings per share by 7%.

Where are you getting that the government underwrote the risk? What risk?

[PolskiHetzen]

Not sure how you can say that there shouldn't have been an expectation for tax revenue...

The spirit of the law clearly called for taxes to be paid.

Kudos to the accounting firms for coming up with a creative way to circumvent the tax code, but to act as if no harm was done and that the maneuver isn't ethically questionable seems a bit over the top.

The money certainly would have been far more useful ending up as tax revenue than being distributed to shareholders.

It's clear you have no accounting experience.

This isn't racing. This is tax law.

[Maxvla]

Pass the savings on to the car buyers please. I could use $1000-2000 off the TDI Golf I'm looking at buying.

[StormChaser]

[BostonB6]

Not sure how you can say that there shouldn't have been an expectation for tax revenue...

The spirit of the law clearly called for taxes to be paid.

Kudos to the accounting firms for coming up with a creative way to circumvent the tax code, but to act as if no harm was done and that the maneuver isn't ethically questionable seems a bit over the top.

The money certainly would have been far more useful ending up as tax revenue than being distributed to shareholders.

Guess that takes the mystery out of who you're voting for in November.

[SteveMKIIDub]

VW had the money, by the way. This little move increased their earnings per share by 7%.

Does it ever just boggle your mind thinking about how much money some companies have?

[laurent]

Ha..'spirit of the law'
How can you be so sure that the money that VW earned would be more beneficial as tax revenue? The term 'loophole' is a misguided one, and does not necessarily mean that a firm/individual is circumventing the law. They are following the law, and it is their duty to generate wealth for shareholders.

A loophole is an ambiguity in a system, such as a law or security, which can be used to circumvent or otherwise avoid the intent, implied or explicitly stated, of the system.

I don't know, the term loophole seems to fit quite well.

The point I made wasn't that it was illegal, I simply pointed out that it was ethically questionable.

Perhaps Germany deviates from the US in that aspect, but in Germany's social market economy the duties of enterprises go far beyond generating wealth for stakeholders.

Social welfare is just one of many other duties that corporations are expected to be mindful off, and I think it's reasonable to argue that such a maneuver doesn't put them in to favorable of a light in that aspect.

[155VERT83]

Does it ever just boggle your mind thinking about how much money some companies have?

No. What boggles my mind is that VW won't sell me a friggin' Mk3 Scirocco in the US!

[PolskiHetzen]

A loophole is an ambiguity in a system, such as a law or security, which can be used to circumvent or otherwise avoid the intent, implied or explicitly stated, of the system.

I don't know, the term loophole seems to fit quite well.

The point I made wasn't that it was illegal, I simply pointed out that it was ethically questionable.

Perhaps Germany deviates from the US in that aspect, but in Germany's social market economy the duties of enterprises go far beyond generating wealth for stakeholders.

Social welfare is just one of many other duties that corporations are expected to be mindful off, and I think it's reasonable to argue that such a maneuver doesn't put them in to favorable of a light in that aspect.

Do you even know what the law states?

[Fe2O3]

Not sure how you can say that there shouldn't have been an expectation for tax revenue...

The spirit of the law clearly called for taxes to be paid.

Kudos to the accounting firms for coming up with a creative way to circumvent the tax code, but to act as if no harm was done and that the maneuver isn't ethically questionable seems a bit over the top.

The money certainly would have been far more useful ending up as tax revenue than being distributed to shareholders.

The spirit of the tax code allows for restructures to be taxed differently. It's not circumventing anything, the tax code is there for all to see, read and use.
People turning this in to bad press have a political agenda, nothing more.

[laurent]

Guess that takes the mystery out of who you're voting for in November.

Certainly not for either US candidate considering that I am German. I find myself alternating between the CDU/CSU and the FDP though if you're curious.

[GTI 20v]

No. What boggles my mind is that VW won't sell me a friggin' Mk3 Scirocco in the US!

You really can't figure out why VW doesn't sell *another* front engine, front wheel drive sporty hatchback in the US? Really?

[1320-20V]

hawc pontificates on this financial matter as if 1b was equivalent to a peanut butter sandwich to him.... Takes 30 minutes to write out masterpiece theater 1% diatribe, which nobody even responded to causing hawc to die a little bit inside... Broken and alone he returns to uploading boxster pictures on some desolate local canadian forums..

ban hawc.

[Juniper Monkeys]

Good job by VW, they are in the business of making stake-holders happy, not the tax-man.

This is made slightly weirder when you realize that the government *is* a VW stake-holder; the state of Lower Saxony owns about 12.7% of VW, if memory serves.