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Keep watching The tax avoidance structures of ViacomCBS Maarten Hietland June 2021 Colophon Keep watching The tax avoidance structures of ViacomCBS June 2021 Author: Maarten Hietland Acknowledgements With contributions from: Arnold Merkies Jasper van Teeffelen (SOMO), Vincent Layout and graphics: Frans Schupp Kiezebrink (SOMO), Jenny Pannenbecker Cover photo: James Genchi / Unsplash (SOMO), Irene Keizer (SOMO), Anna Heredia (Intern SOMO), Ann Doherty With special thanks to Arnold Merkies (Editor) for his research assistance and insightful comments and contributions. We would also like to thank Jan Gooijer, assistant professor in international taxation (Vrije Universiteit Amsterdam) and tax expert Monique Sterk, lecturer in Dutch tax law (Amsterdam University of Applied Sciences) for their review of the draft report. Stichting Onderzoek Multinationale The Centre for Research on Multinational Ondernemingen Corporations (SOMO) is an independent, Centre for Research on Multinational not-for-profit research and network organi- Corporations sation working on social, ecological and economic issues related to sustainable T: +31 (0)20 639 12 91 development. Since 1973, the organisation [email protected] investigates multinational corporations www.somo.nl and the consequences of their activities for people and the environment around the world. Keep watching The tax avoidance structures of ViacomCBS SOMO Maarten Hietland Amsterdam, June 2021 Contents Executive summary ...................................................................................................... 4 Introduction ............................................................................................................... 6 Research methodology .................................................................................................. 7 An introduction to ViacomCBS ....................................................................................... 9 The Netherlands ViacomCBS’ IP licensing conduit ........................................................... 11 The use of the Netherlands as conduit – at least since 2002 .................................................. 11 The current use of the Netherlands as conduit ................................................................... 13 Current rulings with the Dutch government ...................................................................... 13 Why the Netherlands? ................................................................................................. 14 CBS Corporation Tax avoidance structures since 2005 ...................................................... 16 CBS Corporation’s IP in Bermuda: 2005-2010 .................................................................... 16 Corporate tax avoidance by CBS: 2005-2010 .................................................................... 17 CBS Corporation’s IP in Luxembourg: 2010-2016 ............................................................... 18 Corporate tax avoidance by CBS: 2010-2016 .................................................................... 20 CBS Corporation’s IP in the Netherlands: September 2016 - March 2019 .................................. 21 CV/BV structure ......................................................................................................... 22 Distribution agreements .............................................................................................. 22 Change of ownership .................................................................................................. 25 Corporate tax avoidance by CBS: September 2016 - March 2019 ........................................... 26 The shift of CBS Corporation’s IP licensing rights to the UK .................................................. 26 Corporate tax avoidance by CBS: March 2019 – December 2019 ........................................... 27 The logic behind relocating IP licensing rights to the UK ...................................................... 28 Corporate tax avoidance by CBS – UK base erosion payments since 2015 ............................... 29 Conclusions .............................................................................................................. 29 2 Viacom Tax avoidance structures since 2005 ................................................................... 31 Viacom’s IP in Curaçao: 2006-2012 ................................................................................. 31 Corporate tax avoidance by Viacom: 2006-2012 ................................................................ 31 Viacom’s IP in the Netherlands: 2012-2015 ....................................................................... 33 Corporate tax avoidance by Viacom: 2012-2015 ................................................................ 33 Viacom’s IP from the Netherlands to the UK: 2015 .............................................................. 33 Viacom’s IP in the UK: From 2015 onwards ....................................................................... 34 Corporate tax avoidance by Viacom - UK ......................................................................... 35 Corporate tax avoidance: Viacom 2006-2019 .................................................................... 35 Conclusions .............................................................................................................. 37 Total amount of revenues shifted offshore ........................................................................ 37 Relocation of IP licensing rights ..................................................................................... 37 Source countries have missed out on tax income ............................................................... 38 A game of cat and mouse ............................................................................................ 39 Recommendations ...................................................................................................... 39 Annex The shift in value creation from tangible to intangible assets .................................... 41 3 Executive summary ViacomCBS, a self-described “fundamental content company”, reaches about 700 million consumers in more than 180 countries around the world with its media content. About 24% of the company’s total revenue stems from content licensing outside the North American market. Through the shifting of IP licensing rights from country to country, ViacomCBS has been able to avoid paying billions of dollars in taxes in several countries. For almost two decades, ViacomCBS has been using the Netherlands to avoid paying corporate income tax in the United States. From 2002 onwards, this multinational mass media conglomerate has been sublicensing its television rights to third parties and consumers outside the North American market via the Netherlands. In total, at least US$32.5 billion in revenues has been collected by the company’s Dutch subsidiaries during the period 2002-2019. Through this conduit construction with the Netherlands, the company has managed to avoid US corporate income tax payments totalling $1.46 billion (for CBS Corporation) and an estimated $2.5 billion (for Viacom). Furthermore, due to the sale of IP licensing rights via low-tax jurisdictions and non-taxed entities, the UK government is expected to lose an estimated $365 million (through Viacom’s IP sale) and $855 million (through CBS Corporation’s IP sale) in corporate income tax. By analysing the company’s annual reports, SOMO was able to ascertain that the Dutch government provided ViacomCBS with so-called “rulings” as far back as 2002. Through these rulings, the Dutch government has ensured that only a small part (since 2011 specifically referred to as 0.8%) of the billed revenues of ViacomCBS subsidiaries in the Netherlands have been subject to taxation there. These rulings have given the media conglomerate the legal certainty that their revenue collected in the Netherlands will only be marginally taxed there. In this way, the incorporation of conduit subsidi- aries in the Netherlands has made it possible for ViacomCBS to create international tax schemes that leave billions of dollars of the company’s revenues untaxed. ViacomCBS has also been able to avoid paying US corporate income tax by shifting its intellectual property (IP) licensing rights to countries with limited or no corporate income tax, or to countries where the ViacomCBS entities will not be taxed. Following the demerger of Viacom into CBS Corporation and Viacom at the end of 2005, Viacom shifted its IP licensing rights to a non-taxed subsidiary located in Curaçao. In 2012, the IP licensing rights were relocated again, this time to a non-taxed entity in the Netherlands. In 2015, Viacom once again shifted its IP licensing rights, this time to a subsidiary in the United Kingdom. Following the transition of IP licensing rights from the non-taxed Dutch partnership to the UK subsidiary, the latter obtained an IP asset worth nearly $1.8 billion. Through the amortisation of this asset, the UK subsidiary has been able to deplete its gross profits, thus avoiding the payment of UK corporate income taxes worth $365 million. 4 During the same period, CBS Corporation shifted its IP licensing rights to Bermuda (2005-2010), Luxembourg (2010-2016) and the Netherlands (2016-2019). On 29 March 2019, the IP licensing rights of CBS Corporation, worth $4.5 billion at the time, were shifted via Barbados to the United Kingdom. Through this shift of IP licensing rights, Viacom has created an asset that