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The missing profits of nations

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Re: The missing profits of nations

#31

Post by ThrustVectoring »

leetcrew wrote: post #30
mattmanser wrote: post #21

Earlier quoted context omitted.

Without any explanation of why this is ideal, this just comes across as a way of rewarding the rich 'land holders' and forcing the tax burden on the poor. What the logic behind this 'ideal'?

i don't intend to argue GP's point for them, but it is important to be aware of the difference between paying a tax and actually bearing the burden of that tax. if (hypothetically) you increase some tax by 5% and all the companies raise their prices by 5%, you might end up with a situation where the companies "pay" the tax, but it entirely comes from the pockets of consumers. this is called tax incidence, and you can…

Agreed. This is one of the reasons why a land-value tax is so good, in my opinion. Pretty much all of the burden of the tax is placed on landlords - if they could raise rents, they'd have already done so, so the tax pretty much entirely comes from the unearned value generated by holding the right to use a piece of land.

Re: The missing profits of nations

#32

Post by solotronics »

kennxfl wrote: post #24
phkahler wrote: post #23

Earlier quoted context omitted.

>> Maybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal? We should do only one of those things. Every person should incorporate themselves and do what the big guys do.

Individuals cannot register their "intellectual property" to another jurisdiction other than the one they operate in right?

You can create an LLC pretty easily and transfer any of your IP to it.

Re: The missing profits of nations

#33

Post by woodpanel »

tcfunk wrote: post #18

Maybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal? I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in US taxes that same year. Is it because "making the use of tax havens illegal" is hard/impossible?

Playing devil's advocat here: Tax havens exist because

1) Nation states are their own sovereigns. Judging from that humans usually support things like the united nations and the law of nations, that will always include their sovereignity over their tax-design.

2) international flow of money is usually desired and thus encouraged. If you can afford to limit the flow to your country, fine. But less fortunate might be hard to convince to decline the benefits of it.

3) The more money you can spend on tax-lawyers, the more likely you are to be able to design your tax burden more efficiently around your needs (needs meaning your business objective + less taxes)

Also IMHO it's fair to say that the more complex a country's tax code, the higher the income-inequality in terms of access to tax-rate-optimum.

Re: The missing profits of nations

#34

Post by candiodari »

TAForObvReasons wrote: post #15
flexie wrote: post #3

And this is where the main issue is. Local newspapers, local advertising companies, global search companies that could have been; all of them are competing with Google on vastly unfair terms. Google is not paying tax. The others have to.

Same thing played out with Amazon. The embedded 7-9% sales tax advantage gave them a massive price advantage (even if the headline price is the same, the price the consumer pays is less) that retailers couldn't keep up with.

You forget the effects of the "full reinvestment" policy. Amazon barely paid any tax at all. Not on sales, not on storage space, not on profits, not on ...

(note: Jeff Bezos DID get enough money out of it to become the richest man on earth, but not through profit. Rather he got "capital gains on his shares", which is the same thing in practice, but a very different thing for the IRS. Oh, and since it's "paper profits only" (mostly) he hasn't paid tax on it either)

People think the internet businesses got successful because it's "just a better way to do business", but it gets a ~20% government subsidy. 30% if hailing from China (for instance, free shipping really is free from China, or I should say, paid by the US taxpayer mostly)

The reality is Amazon, and to a lesser extent Google, Apple Yahoo, Microsoft and Facebook are government-sponsored companies that have been given extreme preferential treatment for close to two decades now.

Without that 20% advantage, there is no way Amazon could compete with Walmart. Without that, the business model is absurd, even now.

Microsoft, selling software "locally" (ie. tax free in the Bahamas) but internationally, and even more so, Yahoo, Facebook, Google, ... selling services "locally" (in Delaware, Ireland and the Bahamas) is a homongous tax loophole.

(note: they don't sell to "you". They sell to, say, Microsoft Ireland for $final_price - 5%, then the "only profit" is that 5%, and that's all they pay tax on. For FB/Yahoo/Google/... it's even worse)

As an analysis of the cost structures of these companies will tell you : if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size. This seems absurd to many, but rewriting the financial statements of these companies taking normal tax structures into account will tell you this.

Re: The missing profits of nations

#35

Post by zipwitch »

tcfunk wrote: post #18

Maybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal? I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in US taxes that same year. Is it because "making the use of tax havens illegal" is hard/impossible?

That would eliminate a competitive advantage that large companies receive against their tiny bretheren.

Re: The missing profits of nations

#36

Post by grasshopperpurp »

dbatten wrote: post #20
tcfunk wrote: post #18

Maybe this is a silly question, but why don't we just lower the corporate tax rate significantly (maybe 10 or 15%), and make the use of tax havens illegal? I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in US taxes that same year. Is it because "making the use of tax havens illegal" is hard/impossible?

Yes, making the use of tax havens illegal is very hard. It's basically a giant game of whack-a-mole, where the corporations have more people with stronger incentives working to get around the tax laws than the government has trying to write new ones. Here's a fun explanation of the kinds of hoops corporations will jump through to dodge taxes: https://en.wikipedia.org/wiki/Double_Irish_arrangement

>where the corporations have more people with stronger incentives working to get around the tax laws than the government has trying to write new ones.

If the penalties were harsh enough, wouldn't it change this dynamic?

Re: The missing profits of nations

#37

Post by hinkley »

chriswarbo wrote: post #14
Hermel wrote: post #4

Large companies should be taxed where the value is created. And because that’s hard to measure, cost should be used instead. So if Google spends 60% of its budget in the US, 60% of its profits should also be attributed to the US. (Side note: the alternative of taxing profits where the revenue is generated does not make much sense as this would be equivalent to a sales tax.)

One trick used to push profits offshore is to use "transfer pricing": transactions are made with a subsidiary based in a tax haven (either part of the same legal entity, or a partner/shell company used to the same effect), with prices skewed so that the offshore company comes out with a huge profit. (Googling around, I found http://repository.essex.ac.uk/8098/ which seems to my untrained eye to give a reasonable over…

Doesn’t Hollywood pull stuff like this to cheat collaborators out of their percentage?

Certain cult classic movies that look like flops on paper. I always wonder if the money went down a subsidiary black hole to keep insiders happy.

Re: The missing profits of nations

#38

Post by hinkley »

kyrra wrote: post #7
Hermel wrote: post #4

Large companies should be taxed where the value is created. And because that’s hard to measure, cost should be used instead. So if Google spends 60% of its budget in the US, 60% of its profits should also be attributed to the US. (Side note: the alternative of taxing profits where the revenue is generated does not make much sense as this would be equivalent to a sales tax.)

All large multi-national corporations do this. For example, NYT did a piece about Apple doing it[0]. Wikipedia has a list of companies that used the Double Irish setup[1]. The double-irish has been closed (via regulation) and most companies will be moving off of it by 2020. [0] https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.... [1] https://en.wikipedia.org/wiki/Double_Irish_arrangement#US_mu...

> U.S. IP-heavy multinationals now employ a quarter of Ireland's private sector workforce,[28] pay 80% of Irish business tax,[29] pay 50% of Irish salary tax and VAT,[30] and create 57% of economic value-add.[28]

Doesn’t that mean Ireland is fucked in 2020?

Re: The missing profits of nations

#39

Post by dzink »

flexie wrote: post #3

And this is where the main issue is. Local newspapers, local advertising companies, global search companies that could have been; all of them are competing with Google on vastly unfair terms. Google is not paying tax. The others have to.

True, though small companies can be held as LLCs or taxed as SCorporations if they have less than 100 investors, and they wouldn't pay corporate taxes anyway. At that point taxes on gains trickle to the owners/partners and are taxed at personal tax rates. C-Corporations pay taxes twice (Corporate taxes, then taxes on distributions as salaries or dividends).

Re: The missing profits of nations

#40

Post by mlinksva »

Hermel wrote: post #4

Large companies should be taxed where the value is created. And because that’s hard to measure, cost should be used instead. So if Google spends 60% of its budget in the US, 60% of its profits should also be attributed to the US. (Side note: the alternative of taxing profits where the revenue is generated does not make much sense as this would be equivalent to a sales tax.)

> Large companies should be taxed where the value is created.

Tax land.

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