By on June 9, 2012

For all intents and purposes, Porsche is part of Volkswagen. Except for one niggling detail: Officially, Porsche still owns Volkswagen, and not Volkswagen Porsche. See complicated graph. Volkswagen had planned to swallow Porsche whole, and to add it to Volkswagen’s large collection of brands, but there were some nasty details. The most worrisome detail is solved: The tax bill.

Buying Porsche would have been a taxable event to the tune of some $1.9 billion. This had bothered Volkswagen to no end, and its legal team looked for a way out. The way has been found, says Wirtschaftswoche. The out has its price: €118, or $148. That’s the price of one share of Volkswagen stock.

Under the new deal, Porsche SE receives €4.5 billion, and one Volkswagen share. If  a share changes hands, then it’s not a sale, but a tax-free restructuring. Schlau, nicht wahr?

The other problem is that hedge funds the world lover are suing Porsche for insider trading, and Volkswagen does not want to buy that risk. Instead, VW will buy the Porsche sports car business and will leave an empty shell behind. Tax-free.

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21 Comments on “How To Save $1.9 Billion In Taxes, The Volkswagen Way...”


  • avatar
    The Doctor

    It’s not really an empty shell if it’s got €4.5bn in it.

    I also think you’re using the wrong picture…

    http://img.photobucket.com/albums/v395/thedoctor/piechfeld.jpg

    • 0 avatar
      MrWhopee

      I agree! That’s how I always imagined Piech to be like…

    • 0 avatar
      mike978

      From the graph the Holding company still has 50.1% of Porsche AG – so is it that empty?

      • 0 avatar
        th009

        The transaction has Porsche Automobilholding SE handing 50.1% of Porsche AG to Volkswagen in exchange for €4.5B and one Volkswagen share.

        Effectively Porsche SE will become a holding company with just shares in Volkswagen and (some more) cash. All the automotive business will be within Volkswagen.

  • avatar
    blowfish

    world of creative accounting, in the end we’ll all get cheated!
    no need to look far, Sir Conrad Black only not long ago he was knighted then renounced away his canadian citizen, perhaps he need to commandeered a freighter to land canada again.

    the problem was all his creative accounting bought him few yrs of high living in Florida gated community. Sir Black would have more feelings & meanings if he’s going to sing Folsom prison again!

  • avatar
    forraymond

    Taxes buy civilization. I guess history will repeat itself, again.

    • 0 avatar
      The Doctor

      Have you ever done anything that minimised your tax exposure?

    • 0 avatar
      quoteunquote

      The majority of taxes don’t go towards “civilization” but rather towards wars (domestic — i.e., the drug war, etc — and foreign), subsidization of favored companies and industries, interest on the national debt, and so on and so forth… and they’re an all-around burden on most of society.

      Kudos to VW, that $1.9 billion will go towards much more productive things in the hands of its rightful owner (VW) than it will in the government’s hands.

      • 0 avatar
        Glen.H

        So, how many wars has Germany started in the last 60 years? And please don’t mistake your country’s fiscal irresponsibilty for what happens in other states.

      • 0 avatar
        quoteunquote

        @Glen.H: Good point, though Germany does spend a large portion of its tax revenue on “defense” spending. Regardless, I think my point still stands; the US is far from the only state that’s fiscally irresponsible, and war is far from the only thing governments — including Germany — can and do waste taxpayer money on.

      • 0 avatar
        redav

        quoteunquote, the largest chunk of the US budget is not defense, but entitlement programs:

        http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png

        Medicare/Medicaid and SS are both individually larger than defense.

        The US has used creative accounting to hide the expenses of Iraq & Afghanistan, so the defense total in the chart is not fully represented. However, the reality is that the taxes Americans pay predominantly go to either caring for or coddling the public, depending on your political slant.

        And to more specifically address military, when you don’t have one, lawlessness reigns. Having a military doesn’t mean it will promote civilization, but not having one certainly doesn’t help it. There is a reason that military is specifically included in the Constitution.

      • 0 avatar
        quoteunquote

        @redav: You are correct in that entitlement programs also make up a huge portion of the budget (they were included in my “and so on and so forth”), but “defense” spending still takes up at least 19% of the budget. That’s a massive chunk.

        Also: I actually do believe a military and a strong defense is necessary. But when I say defense I mean defense in the true sense of the word, not the government’s definition (which is much more like the definition of offense). If we had a truly defensive military, the defense budget wouldn’t need to be anywhere near as massive as it currently is.

        And this is not at all to say our military should/shouldn’t be exactly the same, but interestingly China’s military budget (the 2nd highest in the world) is about 1/6 of the US’s, yet they’ve got somewhere around twice the number of troops the US does. And I don’t think their troops are spread thin and stationed in over 150 countries like ours are either. I also highly doubt that China is on anybody’s list of “easiest countries to defeat militarily”…

      • 0 avatar
        Campisi

        “However, the reality is that the taxes Americans pay predominantly go to either caring for or coddling the public, depending on your political slant.”

        As it should be, in my mind. The purpose of government is to utilize the power of the people for the advancement of the public good, and the trifecta of Medicare/Medicaid/Social Security has been shown to work very well (when properly funded and overseen, just like anything else). America’s defense budget is undeniably swollen to a large degree. For every defense dollar that goes towards a measurable direct or indirect defense of the American people, there are many that are used for backroom deals, hidden subsidies and this-is-not-a-bailout programs, and political purposes.

        “… But interestingly China’s military budget (the 2nd highest in the world) is about 1/6 of the US’s, yet they’ve got somewhere around twice the number of troops the US does. And I don’t think their troops are spread thin and stationed in over 150 countries like ours are either. I also highly doubt that China is on anybody’s list of ‘easiest countries to defeat militarily’…”

        This is an excellent case in point. China sees roughly double the economic benefits of their military (wages being paid directly to people lower down the economic ladder in exchange for useful services, stimulating their economy from the bottom up) for far less money while being just as secure within their borders. I consider it an almost perverse inversion that the U.S. Coast Guard is the smallest and sparsely-funded American military branch.

      • 0 avatar
        mkirk

        “But interestingly China’s military budget (the 2nd highest in the world) is about 1/6 of the US’s, yet they’ve got somewhere around twice the number of troops the US does. And I don’t think their troops are spread thin and stationed in over 150 countries like ours are either. I also highly doubt that China is on anybody’s list of ‘easiest countries to defeat militarily’…”

        It is not the troopp strength that costs…It is expeditionary capability. Yes China has a lot more troops and yes, they would be very difficult to defeat on Chinese soil or probably in any nation bordering China. But could the Chinese sustain an invasion of say, a European nation? Not a chance.

        Having said that, I believe the US Army should be restructured more towards self defense over expeditionary capability. We are still however as an organization built by and large to fight the Soviets in Western Europe though the cold war ended 20 years ago. Being broke as a nation is changing this.

        Anyway, the Soviets had a lot more troops than us too. We have since the cold war always depended on a technological edge to level the playing field.

        Bottom line, I would not want to fight the Chinese in China, but they’d be equally crazy to pick a fight with us outside of China or any border nation.

      • 0 avatar
        mkirk

        And lets be real here, the United States as been subzidizing the defense budgets of European nations since the Marshall Plan. Yes, much of it was for our own benefit during the Cold war, but what kind of financial shape would those nations be in had they had to shoulder more of the burdon of keeping the Soviets from plugging the Fulda Gap with Red Army troops for 50 years.

        We have certainly been irrosponsible fisically, but the sheer size of our economy makes it a little more forgiving than some. We are closer to a tipping point than I’d like to be for sure but we are not Greece or Spain or Italy or (insert pretty much any European nation that doesn’t start with GER and end in MANY). What will the rest of Europe do when the Germans get sick of supporting there own Financial irresponsibility (Britain excluded as they seem to be fairly solid and uninterested in supporting the leeches).

  • avatar
    "scarey"

    Taxes=Civilization=Repression=Regression.

  • avatar

    I see it says Volkswagen on his collar.

  • avatar
    AJ

    Good for them. Ha ha!

  • avatar
    krhodes1

    So in the end, Porsche really DID end up with a (barely) controlling interest in VW – I thought they never quite made it that far. But let’s face it, BOTH companies were ultimately controlled by various factions of the same family, so this is all inter-family squabbling and nothing more. But it looks like they have some sharp accountants!

    Personally, I give them a big high-five for putting the screws to the various “masters of the universe” finantial wizard boys. Those lawsuits are a complete waste of time and energy.

  • avatar
    Type57SC

    Charles Widmore, you sneaky billionaire you. Trying to avoid taxes so you can get back to the island.

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