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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

#191

Post by tpxl »

jlokier wrote: post #170
apexalpha wrote: post #160

Earlier quoted context omitted.

Or do like Europe is finally starting: just tax revenue. They can suppress their 'profit' whichever way they want, they can't suppress their revenue in a given country. The digital services tax is imposed at a rate of 3% on the gross revenues derived from digital activities of which French “users” are deemed to play a major role in value creation. The law not only affects digital companies but, more generally, digita…

> Or do like Europe is finally starting: just tax revenue. That rapidly turns into a disaster of consolidations and monopolies. You don't want that. Think about the difference between big company $BIG selling you the consumer a million Widgets for 10^9 currency units, versus 26 small companies $a..$z each selling to the next in a long supply chain which results in a million Widgets. In revenue taxation, big company $…

VAT is literally tax on revenue and it works fine. You tax the added value, so each company pays tax only on (sell_price - purchase_price).

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

#192

Post by indymike »

ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

"You're technically owned by an Irish company you invented to avoid taxes? Cool. The c-suite plus your accountants are going to prison for the next five years and we're seizing the X billion you actually owe plus a punitive fine."

Seems like this is a bit on the difficult to enforce side. Incidentally, profit is what is taxed, so the easy way to avoid tax is to simply not be profitable. Individuals pay tax on all of our income from interest and employment so this difference always feels somewhat unfair. The very laws that allow companies to avoid paying income tax are usually created as incentives: do this (HQ in Ireland), and in trade, you get to pay less in tax. The C suite and lawyers are usually guilty of meticulously obeying the law, which really makes the whole thing feel even more unfair. Reality is that the system is working as coded, but there are bugs in the code.

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

#193

Post by nickpp »

vishnugupta wrote: post #190
gnicholas wrote: post #32

Earlier quoted context omitted.

This is a case of economies of scale. A fairly wealthy person could save maybe $50,000 per year with the advice of the smartest tax lawyers and accountants in the world. But it would cost them $500,000 per year to pay for the structure to be created/updated. When I worked as a tax lawyer, we created structures and defended cases that saved our clients hundreds of millions of dollars. At this scale, paying for our ser…

> that saved our clients hundreds of millions of dollars. Could you elaborate, from your experience, what happened to these $$$? Do they sit in banks without being used or do they get get invested and recirculated in the economy? Also, given that just about every function of the US govt has been privatised, what would the US govt spend this money on? Spend it on defence (and channel the money back to private defense…

Money in banks ARE invested and circulated in the economy.

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

#194

Post by amelius »

ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

Yes, and then there are countries with secret tax discounts for large multinationals.

These tax discounts should really be subsidies, and open to the public to view.

Proper accounting is where fairness starts.

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

#195

Post by [deleted] »

ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

[deleted]

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

#196

Post by throwaway2245 »

jlokier wrote: post #161
habosa wrote: post #144

The lawyers who work at all of these firms who make large-scale international corporate tax avoidance possible should be ashamed of themselves. They are stealing from their fellow citizens. When big fraud scandals occur (Enron, Wirecard) the accountants and auditors are rightfully shamed by their industry. When we find out who paid $0 in corporate income tax the lawyers who made it happen and defended it seem to esca…

> They are stealing from their fellow citizens. Yeah, but stealing how much? Almost everyone I know or read about who runs a small business or is self-employed talks with their accountant about how run things in a "tax efficient" way, to pay the minimum tax within the rules while keeping reasonable about it. It would be foolish not to. You have to keep competitive. And the rules are, for the most part, based on fair…

>It would be foolish not to.

Hard disagree.

At typical self-employed scale, fiddling around with avoiding taxes is a waste of time (and money) which is a net loser against putting that energy into finding income. Are self-employed people really busy setting up as a business in Estonia or lobbying their national representatives?

If you're taxed on your profits, it's always better to double your profits than to avoid tax on your current profits.

This tax avoidance strategy only becomes important where there are no other efficiencies remaining to find: or, when you don't have other competitors to worry about.

It's a monopolist strategy. A tax reform that benefits you is also going to benefit your competitors - so it's not being done for competitive reasons.

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

#197

Post by dmurray »

tpxl wrote: post #191
jlokier wrote: post #170

Earlier quoted context omitted.

> Or do like Europe is finally starting: just tax revenue. That rapidly turns into a disaster of consolidations and monopolies. You don't want that. Think about the difference between big company $BIG selling you the consumer a million Widgets for 10^9 currency units, versus 26 small companies $a..$z each selling to the next in a long supply chain which results in a million Widgets. In revenue taxation, big company $…

VAT is literally tax on revenue and it works fine. You tax the added value, so each company pays tax only on (sell_price - purchase_price).

That's literally tax on profit.

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

#198

Post by bdcravens »

"But corporations should be required to publicly account for the gap between the income they report to the IRS and the income that they report to their shareholders."

I suspect this is a far greater issue than companies who pay $0; his proposal would apply to ALL with shareholders, and I (as a layperson) believe most companies have some gap there.

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

#199

Post by pa7x1 »

ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

This tax shenanigans happen because we have built an absurdly complex tax framework which can be gamed/abused with economies of scale. The solution is to streamline the tax framework as to make its implementation almost unavoidable.

Long-story short, my bet is:

- Sales tax (VAT)

- Inflation

- UBI

Sales tax is far less gameable as it's linked to concrete economic activity. It also has the benefit of tracking the added value produced by an economy (it has the right properties as a tax). It has a problem though, it's regressive, see last point. Every economic activity should be included (e.g. stocks should have a VAT; you sell stock you collect VAT, you buy stocks, you pay VAT). Some progressiveness may be included by using different VAT rates for different products, to be done judiciously.

Inflation is a fantastic tax, very hard to game as it's quite pervasive and taxes the accumulation of capital so it tends to be distributive, anti-regressive. Cash sitting idle does nothing for the economy so disincentivizing it makes sense. This doesn't mean that inflation has to be high (the usual moderately low and positive that economists aim for may be reasonable), just that inflation should be seen as the taxation mechanism for the accumulation of capital. And we shouldn't reduce it to a single number for the entire economy but understand how inflation is evolving in the different parts of the economy to make sure monetary and fiscal policy are hitting the targets.

UBI, fixes the regressiveness of VAT. UBI is not too different from having a lowest tax-free income bracket or even negative-tax income bracket if you prefer to look at it that way. UBI can also help hit the right inflation rates in consumer products which we have been having great trouble achieving through conventional central bank policies.

I think this mix is far less gameable, tracks better the size of the economy, places the right incentives and disincentives and will survive better the ongoing economic transformations (good luck taxing income when most of the economic output is produced by computers).

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

#200

Post by marcosdumay »

dmurray wrote: post #197
tpxl wrote: post #191

Earlier quoted context omitted.

VAT is literally tax on revenue and it works fine. You tax the added value, so each company pays tax only on (sell_price - purchase_price).

That's literally tax on profit.

Hum... I suggest you take a look on how taxes on profit work.

That's literally a tax on value added.

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