22 October 2015

Stupid IP Tricks

European tax authorities going after Starbucks for "Recipe" payments in order to artificially lower its tax payments in Europe:
If there are two edicts I try to follow whenever I'm writing, they are, first, write what is true and, second, avoid cliche at all costs. I bring that up only as a preface before saying the following: the UK is walking down an Orwellian path. It's nearly the cliche of cliches to say something like this, and yet it happens that the cliche is true. While there is most certainly a real thing known as a threat from Islamic terrorism, there is also such a thing as overreaction. What started as the British government's attempt to ban extremist thought from social media and television (under the notion that some thoughts are too dangerous to enjoy the freedom that other thoughts deserve) then devolved into the conscripting of teachers that were to be on the lookout for children that might become radicalized. To assist them with this, the government helpfully provided spy-software to use against students. Spy-software which itself was found to be exploitable in the most laughably easy of ways. This employed two of the most horrifying aspects of Orwell's Oceania: the concept of thought-crime and the employ of citizens to fearfully surveil one another.

And now it seems the UK is going even further, adopting Oceania's reputation for the swallowing up of citizens should they be found suspect of thought-crime by those watchful citizens. Specifically, the Family Division of the Judiciary has put out a memo declaring exactly how it will remove children from the homes of anyone it suspects might radicalize those children. Here's a snippet.

Recent months have seen increasing numbers of children cases coming before the Family Division and the Family Court where there are allegations or suspicions: that children, with their parents or on their own, are planning or attempting or being groomed with a view to travel to parts of Syria controlled by the so-called Islamic State; that children have been or are at risk of being radicalised; or that children have been or at are at risk of being involved in terrorist activities either in this country or abroad.

Only a local authority can start care proceedings (see section 31(1) of the Children Act 1989 – the police powers are set out in section 46). However, any person with a proper interest in the welfare of a child can start proceedings under the inherent jurisdiction or apply to make a child a ward of court.2 Usually, in cases falling within the description in paragraph 1 above, it will be the local authority which starts proceedings under the inherent jurisdiction or applies to make a child a ward of court, and the court would not expect the police (who have other priorities and responsibilities) to do so. There is, however, no reason why in a case where it seems to the police to be necessary to do so, the police should not start such proceedings for the purposes, for example, of making a child a ward of court, obtaining an injunction to prevent the child travelling abroad, obtaining a passport order, or obtaining a Tipstaff location or collection order. Given the complexities of these cases, I have decided that, for the time being at least, all cases falling within the description in paragraph 1 above are to be heard by High Court Judges of the Family Division.

In other words, the High Court Judges within the Family Division are now tasked with determining whether children will be made wards of the state based solely on suspicions of possible radicalization. Children torn from mothers and fathers in Muslim homes will be subject to the whims and inherently flawed watch of the larger citizenry. A citizenry, mind you, that has had its vigilance unduly ramped up by the government's past actions and requests. It's hard to imagine a better recipe for the unfair targeting of Muslim families than this. Unfortunately for all concerned, this same memo imagined just such a recipe, making things even worse.


Tax avoidance [Note: Tax avoidance uses legal, though frequently unethical, techniques to lower the tax burden. Tax evasion is a crime.] is a sore point in the United States, where the largest companies, including Apple, Amazon and many others, routinely try to minimize their bills. In Europe, the cases have hit a raw nerve in countries where citizens have been squeezed by years of austerity, and stoked friction among member states that are jockeying with one another for jobs and investment.


After asking Dutch tax authorities and Starbucks to provide details of their tax deals last year, the commission determined the company’s tax setup with the Netherlands had no realistic economic justification. The case zeroed in on Alki, the British-based entity at the center of Starbucks’ efforts to reduce its Dutch and European tax bills.

In 2001, Starbucks installed its European corporate headquarters and a massive new coffee roasting plant in Amsterdam after conferring with Dutch tax authorities. The setup proved beneficial: Starbucks created several Dutch partnerships that were not subject to the country’s corporate tax, including one named Emerald City, a nickname for Seattle.

Emerald City owned Alki, which was set up in London to house Starbucks’ intellectual property. The intellectual property included logos and the recipe for roasting coffee beans, which Starbucks subsidiaries pay Alki a royalty to license. Because of its structure, Alki was not subject to corporate tax in the Netherlands or Britain.


The recipe was basically the temperature for roasting beans, and appeared to be more like instructions than intellectual property. Yet counting it as such allowed Starbucks’ roasting unit to reallocate most of its profit to Alki in the form of royalties, the commission said, nearly wiping out the Dutch tax bill. No other Starbucks companies or roasters paid royalties for the same information, the commission said.
Crap like this happens, because we as a society have made a conscious decision to encourage rent of this sort behavior.

IP protections are there to incentivize creativity, and when we extend those incentives far beyond what is necessary for this, we create a cesspool of corruption and self-dealing.

It also one of the things that contributes to a less equal society, because the unearned proceeds create resources to lobby for even more rentier behavior.


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