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How to Stop Turning U.S. Corporations into Tax Exiles

nytimes.com

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Re: How to Stop Turning U.S. Corporations into Tax Exiles

#31

Post by yc1010 »

lazyjones wrote: post #22
mschuster91 wrote: post #19

Earlier quoted context omitted.

> No, actually what you're saying is a pile of crap. In Germany, our constitution says in §14.2: "Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.", translated roughly to "Ownership creates duties. Its use shall be for common welfare." For me, looks like the failure is in the US constitution which does not focus on the common good.

> In Germany, our constitution says in §14.2: "Eigentum verpflichtet. You can tax the property of people without taxing corporations. The former can be done with reasonable effort and effectiveness because the location of someone and their home's can be determined. Taxing corporations has proven unreliable and ineffective because they're often just a mailbox in s tax haven and profits are moved to other entities easi…

> There's also no real need to tax them, as you can tax their owners.

Thats what happens in Ireland, corporation tax is lowish (12.5%) and theres not that many loopholes/concessions as in other EU states where companies can reduce their corporate tax to near nothing already

BUT personal taxes are a murder

Lets say you are a director of startup and the company has€100000 left after costs and taxes etc, lets say as director you want to pay yourself a salary of 100K for your hard work, you be lucky you be left with 50K after income tax, PAYE/PRSI insurance tax and "Universal Social Charge"

On the money that you have left you would have to pay for medical insurance (aint free here like UK), VAT of 23% on almost anything you buy (more for cars, less for food etc), new property and water taxes and so on

Keep in mind that Ireland gets blamed for alot of this goings on, but its just a step on path large corporations take to move money onto Carribean.

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#32

Post by lazyjones »

mschuster91 wrote: post #28
DominikR wrote: post #27

Earlier quoted context omitted.

Fully agree, if the state did not tax corporations they could work near maximum efficiency if correctly managed, while the state still could get his share whenever an owner extracts a part of the profits for private use.

> while the state still could get his share whenever an owner extracts a part of the profits for private use The problem is: this won't happen, as people by nature are too greedy. They will spend the minimum until someone finds a tax loophole and then in a rush all the money is gone and untaxable.

> The problem is: this won't happen, as people by nature are too greedy. They will spend the minimum until someone finds a tax loophole

Typical extracted profits are dividends. In my country, tax is due and payable by the corporation as soon as dividends are issued and unless you're a majority owner, you have no control over when dividends are paid (certainly true for Google, Apple, Microsoft etc. shareholders).

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#33

Post by wavefunction »

pzone wrote: post #23
princeb wrote: post #18

I am trying to think of companies that should rightfully repatriate cash back to the states, and companies that should not. Why is it that it is repulsive that Google or Apple chooses to keep their cash overseas, whereas it is fine for Budweiser to do so (ignoring magnitudes for a second)? Because AB Inbev is Belgian? This is a difficult example for me to think of, because the US is one of the interesting countries w…

If these tax laws incentivize productivity-destroying mergers then they are utterly moronic, immoral even. The Pfizer CEO said he wouldn't do it but for the tax savings. All these companies want to do is bring back their cash to the US and pay their US shareholders. It's fair and defensible for Pomme to want to bring cash to France to pay its French shareholders, and for Apfel to bring it to Germany to pay its German…

These companies are free to do so. They just need to pay their taxes.

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#34

Post by hguant »

mschuster91 wrote: post #19
pzone wrote: post #6

Earlier quoted context omitted.

No, actually what you're saying is a pile of crap. The only irresponsible ones in this situation are the members of Congress. The United States is not immune to economic forces, yet for years despite all the evidence to the contrary they've been in utter denial about this. All they have to do is pass a simple bill to make the US tax code work the same way as it does in every other god damn country in the world, then…

> No, actually what you're saying is a pile of crap. In Germany, our constitution says in §14.2: "Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.", translated roughly to "Ownership creates duties. Its use shall be for common welfare." For me, looks like the failure is in the US constitution which does not focus on the common good.

By that logic, the USSR and mid-Revolution France were the best of all societies, because their constitutions valued individual liberty AND the common good. Let's emulate them in all ways, shapes, and forms! /s

What a constitution says and how a country operates are two different things.

Also, and this is something I think we're all guilty of, you're comparing documents from two radically different eras. By German constitution I'm assuming you mean the Basic Law? There are lot of differences between the Englishman of 1789 and the Germans (as coerced by the French, English, and Americans) of 1949.

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#35

Post by Retric »

princeb wrote: post #18

I am trying to think of companies that should rightfully repatriate cash back to the states, and companies that should not. Why is it that it is repulsive that Google or Apple chooses to keep their cash overseas, whereas it is fine for Budweiser to do so (ignoring magnitudes for a second)? Because AB Inbev is Belgian? This is a difficult example for me to think of, because the US is one of the interesting countries w…

The problem is R&D. If you do R&D inside the U.S. then your US proffits look much lower, and your out of country proffits look much higher, but that's an accounting fiction.

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#36

Post by seanmcdirmid »

deciplex wrote: post #16
seanmcdirmid wrote: post #13

Earlier quoted context omitted.

Only if the math doesn't work out right (same for corporates also). There is a lot of ambiguity though...

Everything over the deduction (currently just shy of $100k) is taxed, minus a further deduction for tax paid to a foreign government on the earnings. Basically, you will pay the higher of US tax or local tax, on earnings over $100k. And you're right, most people don't pay. Really the bigger pain in the ass is that you even have to file . I've filed tax returns to the IRS for the last 10 years despite not paying a cen…

So there is ambiguity: what if your Chinese company sends you to the states on a biz trip? The Chinese and U.S. governments both feel like they have exclusive taxation rights, so you just pay tax to both (and no, even the taxes paid are not deductible).

Or what a of health insurance, if it counted as taxable income in your host country, is it taxable in the U.S. also? And then there are "expenses" that I have no clue about. Once you make more than $100k, you hit a lot of difference between the two systems that cause problems; you have to be very conservative in your interpretation of the ambiguity.

It is all a pain, and that's not even fun ting things like American stock grants abroad.

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#37

Post by king_of_nouns »

DominikR wrote: post #25
mschuster91 wrote: post #19

Earlier quoted context omitted.

> No, actually what you're saying is a pile of crap. In Germany, our constitution says in §14.2: "Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.", translated roughly to "Ownership creates duties. Its use shall be for common welfare." For me, looks like the failure is in the US constitution which does not focus on the common good.

How on earth can this be a law? This is such a broad and general statement that it could be used for whatever reasons to confiscate private property.

Sadly, laws aren't written like executable code. They're something vaguely resembling executable statements that require a lot of judgement by the person (trying to) interpret them to actually get to something that can finally be acted upon.

As such, law contains many places (usually preambles and stuff) that are there to just give context and aid the interpreter in filling in the gaps, when he centuries later tries to decide on what elected officials that formulated the law were hoping to achieve.

It's sort of like having "0" == 0 in PHP .. "How on earth can this be a programming language?" .. but ultimately its still here and gets the job done .. and in some niches its even borderline-useful .. because it's written by people that ultimately are imperfect and guided by lizard brains .. and the target audience are imperfect people too ..

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#38

Post by justincormack »

pzone wrote: post #23
princeb wrote: post #18

I am trying to think of companies that should rightfully repatriate cash back to the states, and companies that should not. Why is it that it is repulsive that Google or Apple chooses to keep their cash overseas, whereas it is fine for Budweiser to do so (ignoring magnitudes for a second)? Because AB Inbev is Belgian? This is a difficult example for me to think of, because the US is one of the interesting countries w…

If these tax laws incentivize productivity-destroying mergers then they are utterly moronic, immoral even. The Pfizer CEO said he wouldn't do it but for the tax savings. All these companies want to do is bring back their cash to the US and pay their US shareholders. It's fair and defensible for Pomme to want to bring cash to France to pay its French shareholders, and for Apfel to bring it to Germany to pay its German…

Actually though Apple's shareholders are in fact global. They could probably spin off a subsidiary in a tax haven like the UK and pay dividends through that.

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#39

Post by skrause »

DominikR wrote: post #25
mschuster91 wrote: post #19

Earlier quoted context omitted.

> No, actually what you're saying is a pile of crap. In Germany, our constitution says in §14.2: "Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.", translated roughly to "Ownership creates duties. Its use shall be for common welfare." For me, looks like the failure is in the US constitution which does not focus on the common good.

How on earth can this be a law? This is such a broad and general statement that it could be used for whatever reasons to confiscate private property.

It's a constitution. You create actual laws based on the general statements in the constitution and enforce those laws. It's up to the constitutional court to interpret the constitution and decide if the other laws follow it correctly.

Re: How to Stop Turning U.S. Corporations into Tax Exiles

#40

Post by throwawayukcyb »

pzone wrote: post #14
adventured wrote: post #7

Earlier quoted context omitted.

That's not how things actually work. If it was, every nation but one would lose all of their corporations to that one country with the lowest rate. The decline in the benefit of a lower corporate tax rate accelerates as you go lower. For example, going from 35% to 25% might reduce your corporate inversions by 75%. Going from 35% to 10% might reduce your inversions by 85%. The challenge is to find the level where you…

I agree with you in general but there is another thing you're missing: the double taxation discourages investing in new businesses in the United States. If a VC is looking at two very similar businesses selling internationally, with one seated in the US where their profits will be doubly taxed, and the other running in a different country where profits are not subject to this, then ceteris paribus, they should expect…

ceteris paribus

i.e. unicorns and rainbows. You're essentially just responding to every response to your posts with "yeah but more assumptions make it true!"

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