This is one way to dodge a $4 billion tax bill

If you want to know how a media conglomerate avoids paying U.S. taxes, today is your lucky day: A new report called “Keep Watching: The Tax Avoidance Structures of ViacomCBS” explains it in fascinating detail.

The short version: ViacomCBS’s movies and TV shows, such as Mission: Impossible and SpongeBob, are protected by intellectual property rights (IPs), which are considered corporate assets. Moving IPs from one country to another is simply a matter of paperwork, so ViacomCBS simply shifts IPs to tax havens and licenses international rights from there. All of the ensuing revenues pour into that country, not the United States.

The report alleges that since 2002 ViacomCBS has avoided nearly $4 billion in U.S. corporate income tax, and about $1.2 billion in U.K. corporate income tax, and mostly not paid corporate taxes on revenues from its major franchises.

This seems to be legal, and partially a holdover from the fact that tax laws were written for assets that can be seen and touched (“tangible assets”), not concepts or intellectual creations that exist on paper or in a cloud (“intangible assets”).

The report was published by the Centre for Research on Multinational Corporations, a nonprofit that receives some funding from the Dutch government. The Netherlands has a vested interest in this topic: Since 2002 ViacomCBS has allegedly routed at least $32 billion in revenues to Dutch subsidiaries, most of which have no employees. The Netherlands only taxes 0.8% of the subsidiaries’ revenues from licensing international distribution rights. ViacomCBS also has subsidiaries in Barbados, Luxembourg, Britain, and the Bahamas. The report points out that ViacomCBS has transferred IPs from one subsidiary to another, creating a “sale,” and then reaped the tax benefits.

We’ve reached out to ViacomCBS for comment on the report. In a statement to the New York Times, ViacomCBS said that it “fulfills its tax obligations” in the 180-plus countries and territories in which it operates, and that the report is “deeply flawed and misleading” and “demonstrates a fundamental misunderstanding of U.S. tax law.”

Speaking of U.S. tax law: President Biden is aware of the situation. His administration is proposing a 15% global minimum tax rate, which is under consideration by the three dozen member countries of the Organization for Economic Cooperation and Development (OECD).