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The lawyers and the accountants hasten to inform the rest of us that this is a most arcane and difficult to understand distinction. And, it changes all the time. As a commercial lawyer, I recognize and value the importance of the fine print, but we still have to try and understand what is going on. I came across a nice piece of work explaining how Uber is stashing their billions away from the tax collector.

An Uber driver in his private car picks up a passenger. The fare is paid to the local subsidiary (they are in 80 countries) who rebates 80% to the driver. The other 20% is immediately transferred to Uber B.V. in the Netherlands, which keeps 1% as income there. The remaining 19% is immediately transferred to Uber International C.V., a Netherlands company headquartered in Bermuda. Conveniently, income landing in Bermuda is not taxed by either the Netherlands or the USA.

It gets better: of the 19%, only 1.45% goes back to the parent company: Uber Technologies, in San Francisco. Subject to correction by my more sophisticated financial friends, the numbers looked to me like this: assume revenue of $1 million. Uber’s share is $200,000. This is transferred to the Netherlands, which shows $2,000 as income there. The $198,000 remaining is transferred to Bermuda, where there are no taxes. Of this, $2,871 is transferred to the parent company in San Francisco, to be taxed by the USA.

Assuming a 35% corporate tax, the USA receives proceeds in the amount of $1,004.85 out of that.  Is it any wonder that Bernie Sanders, an avowed socialist, is doing so well in the polls?