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The public has a right to know how companies that pay no taxes pull it off

larrysummers.com

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Re: The public has a right to know how companies that pay no taxes pull it off

#11

Post by gnicholas »

dmacedo wrote: post #3

I wonder how feasible it is for individuals (or groups of individuals?) in the US, to also incorporate themselves and, through the same or similar loopholes, also pay no tax... How would the IRS respond in those instances. Has that been tried? Is anyone aware of anything like that? Is the cost of such a scheme prohibitive for an individual vs. a large Corp? I'd be curious what the challenges and outcome of such an ex…

Former international tax lawyer here. This would not be possible because these benefits are largely based on international structures, and any non-US corporation owned by a few US-based individuals would be designated as a Controlled Foreign Corporation (CFC). This would prevent you from reaping the biggest benefits from a taxation perspective.

The reason that publicly-traded companies are not CFCs is that a CFC must have 50% of the vote or value of the company owned by US Shareholders. "US Shareholder" is defined as a US person that owns at least 10% of the company. So even if a conglomerate is almost entirely owned by US persons, it would not be a CFC unless the US persons that own it also meet the 10% threshold.

The reason for this cutoff is that the CFC rule is meant to prevent small groups of people who can actually exercise control over a foreign company from getting together and colluding to keep profits off-shore. But this is not a risk in the case of companies whose ownership is spread among many small shareholders. As a result, big companies are able to take advantage of complex international structures in ways that small groups of individuals cannot.

Re: The public has a right to know how companies that pay no taxes pull it off

#12

Post by MuffinFlavored »

ryanmarsh wrote: post #5
dmacedo wrote: post #3

I wonder how feasible it is for individuals (or groups of individuals?) in the US, to also incorporate themselves and, through the same or similar loopholes, also pay no tax... How would the IRS respond in those instances. Has that been tried? Is anyone aware of anything like that? Is the cost of such a scheme prohibitive for an individual vs. a large Corp? I'd be curious what the challenges and outcome of such an ex…

LOL this is primarily why many self employed people eventually incorporate. Tax reduction. You should try it some time.

I can’t figure out what to deduct that is more than the $12.2k single filer deductible. I have $500k/yr I’d love to pay less taxes on at the moment due to a booming side business + healthy salary. Can’t find any deductions worth my time and the CPA filing fees.

Re: The public has a right to know how companies that pay no taxes pull it off

#13

Post by gnicholas »

gscott wrote: post #7
dmacedo wrote: post #3

I wonder how feasible it is for individuals (or groups of individuals?) in the US, to also incorporate themselves and, through the same or similar loopholes, also pay no tax... How would the IRS respond in those instances. Has that been tried? Is anyone aware of anything like that? Is the cost of such a scheme prohibitive for an individual vs. a large Corp? I'd be curious what the challenges and outcome of such an ex…

People have tried and the problem is when you want to bring the money back to use it on something. Say you setup a licensing company on an island nation that use to then charge yourself $10,000 a month to license the software you wrote... that you transferred there. Now lets say you want to buy a house and you bring back a certain amount of money. That money is taxable and that is where people mess up they don't repo…

The first point of failure is that if you are a US taxpayer, then you are already taxed on your worldwide earnings, including the earnings of your wholly-owned foreign subsidiary. Even if you could borrow domestically against your foreign earnings in order to finance your lifestyle, you would have already been taxed on those foreign earnings, as an individual.

Re: The public has a right to know how companies that pay no taxes pull it off

#16

Post by vmception »

dmacedo wrote: post #3

I wonder how feasible it is for individuals (or groups of individuals?) in the US, to also incorporate themselves and, through the same or similar loopholes, also pay no tax... How would the IRS respond in those instances. Has that been tried? Is anyone aware of anything like that? Is the cost of such a scheme prohibitive for an individual vs. a large Corp? I'd be curious what the challenges and outcome of such an ex…

See that’s your first problem, you think everyone has an adversarial relationship with the IRS and that’s simply not true.

These structures often require a very collaborative relationship with the IRS with many things approved, elected or notified of in advance. The IRS only cares about compliance, not a hardline on actual revenue collection. The IRS has many doors for compliance.

Re: The public has a right to know how companies that pay no taxes pull it off

#17

Post by sooheon »

gnicholas wrote: post #11
dmacedo wrote: post #3

I wonder how feasible it is for individuals (or groups of individuals?) in the US, to also incorporate themselves and, through the same or similar loopholes, also pay no tax... How would the IRS respond in those instances. Has that been tried? Is anyone aware of anything like that? Is the cost of such a scheme prohibitive for an individual vs. a large Corp? I'd be curious what the challenges and outcome of such an ex…

Former international tax lawyer here. This would not be possible because these benefits are largely based on international structures, and any non-US corporation owned by a few US-based individuals would be designated as a Controlled Foreign Corporation (CFC). This would prevent you from reaping the biggest benefits from a taxation perspective. The reason that publicly-traded companies are not CFCs is that a CFC must…

So small groups of individuals can take advantage of this given they are international enough?

Re: The public has a right to know how companies that pay no taxes pull it off

#18

Post by an_opabinia »

Summers is right, of course releasing M3 would be a no-brainer.

Can we ever reconcile accounting and economics? With its excess cash reserves, if Apple paid tax, absolutely nothing about its business would change.

The more profound perspective is, who is really the tax collector then? Who is playing that economic role? Obviously these giant tax-evading companies. They are accumulating huge stockpiles of cash they cannot spend, a long-running surplus, they can't even effectively give it back to shareholders, and it's not because of tax policy. It's because they are the tax.

That's not controversial, some people call it simply rent seeking, but Summers should be going a few steps further: can we characterize the exact amount of non-tax compulsory payments (NTCPs) we are giving to Apple? Is there a policy process to convert the beneficiary of NTCPs from private ownership to the public, i.e. make it just a plain old tax?

Re: The public has a right to know how companies that pay no taxes pull it off

#19

Post by hansvm »

MuffinFlavored wrote: post #12
ryanmarsh wrote: post #5

Earlier quoted context omitted.

LOL this is primarily why many self employed people eventually incorporate. Tax reduction. You should try it some time.

I can’t figure out what to deduct that is more than the $12.2k single filer deductible. I have $500k/yr I’d love to pay less taxes on at the moment due to a booming side business + healthy salary. Can’t find any deductions worth my time and the CPA filing fees.

To be clear, you are already deducting any and all expenses related to your side business even if you're only filing as self-employed?

Re: The public has a right to know how companies that pay no taxes pull it off

#20

Post by Kbelicius »

aww_dang wrote: post #15

Imagine a world where instead of inventing new interpretations of the concept of 'rights', we respected private property rights.

"Lets not argue over the interpretation of the concept of rights, lets just accept my interpretation". Why didn't anybody think of it earlier!
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