ViacomCBS’s Paramount Pictures has reportedly used an elaborate strategy to avoid paying U.S. taxes on its entertainment properties. The mass media conglomerate formed through the merger of CBS and Viacom in 2019. The company’s primary properties include Paramount Pictures film and television studio, the CBS Entertainment Group, MTV, Nickelodeon, and the streaming services, Paramount+ and Pluto TV.
ViacomCBS also has an international division to manage the international versions of the owned networks. Some of the company’s most notable franchises include SpongeBob, Star Trek, and Mission: Impossible, all of which have not been subject to corporate taxes despite their massive revenue. In 2016, a former Viacom executive sued after being fired for calling out the company’s tax avoidance, specifically in response to a plan to attribute the revenue from Teenage Mutant Ninja Turtles to the Netherlands. Though both parties settled, ViacomCBS continues to conduct tax practices that take advantage of international systems.
According to a study conducted by the Centre for Research on Multinational Corporations (via New York Times) ViacomCBS has avoided paying U.S. taxes on its entertainment properties by licensing the international rights through use of tax shelters and subsidiaries in Barbados, the Bahamas, Luxembourg, the Netherlands and Britain. The report was conducted in response to the company’s use of Dutch subsidiaries to take in television revenue. However, in response to the report, ViacomCBS released a statement outlining the study as “deeply misleading” while emphasizing the necessity of the overseas locations for core business purposes.
Even before the 2019 merger, the two companies employed the tax system by moving foreign intellectual property rights outside the United States to take advantage of more favorable international rates. The key player in the scheme is the Netherlands, which allows some companies to pay just .8 percent of revenue from licensing international rights. It is no coincidence that ViacomCBS has employed multiple Dutch subsidiaries, though it also runs a full production studio with over 300 employees in the country. Still, the international revenue collected by Viacom for massive blockbusters such as Transformers largely avoided corporate income tax.
The benefits associated with taking advantage of the system are almost too accessible as a result of competition between countries attempting to give the best tax rates. Even further, the increased focus on streaming in the entertainment industry is making shady practices easier to get away with. As media becomes more accessible and less tangible, it becomes easier for companies to file paperwork that avoids unwanted taxes. This careful, yet intentional shifting of rights appears wholly legal, because nothing appears to actually change. Instead, the disparity in international tax rates creates an opening for companies such as ViacomCBS to create their own system that works best for them.
Source: New York Times
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