1 00:00:09,040 --> 00:00:12,920 Welcome to Reg and Ruby's Snax Haven, where 2 00:00:12,920 --> 00:00:16,270 people just come get enough of their burgers. 3 00:00:16,270 --> 00:00:18,010 What makes them unique, 4 00:00:18,010 --> 00:00:20,720 not their beef, their lettuce or their pickles 5 00:00:20,720 --> 00:00:23,080 it's, their secret source. 6 00:00:23,080 --> 00:00:25,980 The recipe for this source is Snax Haven's most 7 00:00:25,980 --> 00:00:28,610 precious possession. 8 00:00:28,610 --> 00:00:31,330 As Reg and Ruby start to open Snax Haven stores 9 00:00:31,330 --> 00:00:32,740 around the world, 10 00:00:32,740 --> 00:00:35,520 a clever consultant appears, who says she can 11 00:00:35,520 --> 00:00:39,340 substantially grow the company's global profits. 12 00:00:39,340 --> 00:00:43,040 What about charging foreign Snax Have branches a 13 00:00:43,040 --> 00:00:46,440 fee to use the secret source recipe 14 00:00:46,440 --> 00:00:49,010 all that's what makes the burgers 15 00:00:49,010 --> 00:00:51,140 so valuable. 16 00:00:51,140 --> 00:00:54,280 It's not great news for the foreign governments, 17 00:00:54,280 --> 00:00:57,830 this secret source fee means less money stays 18 00:00:57,830 --> 00:01:00,830 behind to contribute to services like healthcare 19 00:01:00,830 --> 00:01:02,690 and education, 20 00:01:02,690 --> 00:01:05,320 but the foreign profits will still be taxed in 21 00:01:05,320 --> 00:01:07,920 Snax Haven's home country where the secret 22 00:01:07,920 --> 00:01:10,580 source comes from right? 23 00:01:10,580 --> 00:01:12,390 Maybe not. 24 00:01:12,390 --> 00:01:15,660 The clever consultant tells Reg and Ruby to take a 25 00:01:15,660 --> 00:01:18,410 copy of the secret source recipe 26 00:01:18,410 --> 00:01:21,110 and fly it to a place where there's no tax on 27 00:01:21,110 --> 00:01:22,520 company profits. 28 00:01:22,520 --> 00:01:25,830 She will look after the rest. 29 00:01:25,830 --> 00:01:28,600 After that trip it's business as usual, but when 30 00:01:28,600 --> 00:01:30,760 tax time arrives authorities want to know where 31 00:01:30,760 --> 00:01:33,830 all the money from snacks havens thriving 32 00:01:33,830 --> 00:01:36,670 international business is gone. 33 00:01:36,670 --> 00:01:38,980 Reg and Ruby produce a document from the 34 00:01:38,980 --> 00:01:40,140 clever consultant 35 00:01:40,140 --> 00:01:43,830 to explain why their profits and their tax bill look 36 00:01:43,830 --> 00:01:45,550 so small. 37 00:01:45,550 --> 00:01:48,830 The foreign Snax Haven branches pay fees to use the 38 00:01:48,830 --> 00:01:53,120 secret source recipe, not the original recipe. 39 00:01:53,120 --> 00:01:56,990 The income from those fees is in a tax haven that 40 00:01:56,990 --> 00:01:59,430 is not here to be taxed. 41 00:01:59,430 --> 00:02:02,310 By shifting the intellectual property, the secret 42 00:02:02,310 --> 00:02:03,300 recipe 43 00:02:03,300 --> 00:02:04,770 to a tax haven, 44 00:02:04,770 --> 00:02:07,540 the clever consultant has dramatically reduced the 45 00:02:07,540 --> 00:02:10,310 taxable income on Snax Haven's foreign 46 00:02:10,310 --> 00:02:13,680 branches without increasing it's taxable 47 00:02:13,680 --> 00:02:14,840 income at home. 48 00:02:14,840 --> 00:02:19,280 Global profits for Reg and Ruby balloon. 49 00:02:19,280 --> 00:02:21,490 But the foreign countries are left with less tax 50 00:02:21,490 --> 00:02:23,590 money to build hospitals and schools 51 00:02:23,590 --> 00:02:26,460 And so long as the perfect stay in the tax haven 52 00:02:26,460 --> 00:02:28,780 hospitals and schools in Snax Haven's home 53 00:02:28,780 --> 00:02:32,360 home country also lose out. 54 00:02:32,360 --> 00:02:35,150 All over town the clever consultant is one step 55 00:02:35,150 --> 00:02:37,170 ahead of the authorities with similar 56 00:02:37,170 --> 00:02:39,790 intellectual property tax haven schemes for 57 00:02:39,790 --> 00:02:41,190 other companies. 58 00:02:41,190 --> 00:02:44,650 And it isn't just at the burger restaurants. 59 00:02:44,650 --> 00:02:47,590 What about the charge for using a company's logo 60 00:02:47,590 --> 00:02:50,190 or for the technology that drives a smartphone. 61 00:02:50,190 --> 00:02:51,050 Now 62 00:02:51,050 --> 00:02:53,800 the possibilities are endless 63 00:02:53,800 --> 00:02:55,890 the products stay the same, 64 00:02:55,890 --> 00:02:59,240 but while a businesses flourish and profits grow 65 00:02:59,240 --> 00:03:02,540 the government is left in a bit of a pickle.