When movies and shows go abroad, they make money. In fact, studios are looking to make more and more money abroad. That's not just because they are eager to get more of an audience for their projects, but because they're finding new and creative ways to hide those profits from the United States government.
I'm not an expert, and there is a lot to read about this, but it basically comes down to a big company trying to keep as much of its taxable income as possible.
When a company makes a profit on those projects abroad, a portion of those profits is owed to the government as taxes. This happens all over the world, not just with U.S. companies.
According to a study published by the Centre for Research on Multinational Corporations, a nonprofit group funded in part by the Dutch Ministry of Foreign Affairs, companies (including movie studios) are using tax shelters to keep profits from the government.
The revolutionary part is that they used an entertainment company as their main example.
ViacomCBS is the multi-conglomerate that controls TV shows like Spongebob and movies like Mission: Impossible, Transformers, and Star Trek. These properties are loved around the globe and all are incredibly successful. They pull in a ton of money. In fact, about 24% of the company’s total revenue comes from content licensing outside North America.
That's why, since 2002, ViacomCBS worked loopholes with subsidiaries in Barbados, the Bahamas, Luxembourg, the Netherlands, and Britain to avoid paying $3.96 billion in U.S. corporate income tax.
You might be wondering how they do that—I was too, so I looked into the claims. The study alleges that ViacomCBS made fake companies in those territories, many with only one or with no employees. Then they spread that money around and pretended it didn't exist.
'Teenage Mutant Ninja Turtles'Credit: Nickelodeon
The New York Times spoke with Jeffery Kadet, an expert on international taxation, for a simpler example.
“If you take money or other property like licensing rights and move them from one subsidiary to another subsidiary, have you done anything that changes the group as a whole economically?" he told the New York Times. "The answer is that you haven’t. It’s like taking a dollar bill from your front left pocket and moving it to your right rear pocket. You still have the dollar.”
And, as the study says, "Companies that rely on intangible assets," like shows and movies, "can easily shift a large part of their global profits to tax havens, where most of their profits remain untaxed."
That's a pretty big manipulation, and it got people mad—including ViacomCBS.
They disputed the findings, saying in a statement that the study was “deeply flawed and misleading” and adding that it “demonstrates a fundamental misunderstanding of U.S. tax law.”
Viacom continued, “It is filled with mischaracterizations, material omissions, and numerous false claims. ViacomCBS fulfills its tax obligations in all 180-plus countries and the territories we operate, and all of our revenues—including those identified in this report—are fully taxed in relevant jurisdictions around the world, including the United States, as required by applicable law.”
This is all well and good, but the New York Times examination of the study said that ViacomCBS was actually being sued for this very strategy because they have been moving the rights of Teenage Mutant Ninja Turtles around.
We'll keep an eye on these studies and these stories as they develop.
