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…
I know this isn't exactly parallel to the digital service tax, but for the larger debate: The huge obvious revenue tax is VAT. On (almost) anything sold in France they get 20%, and it's very hard to dodge. It does not depend on where you claim your headquarters to be. All these arguments about which country gets to collect a few percent tax, of a few percent profit, are dwarfed by this much larger slice. Which every…
The public has a right to know how companies that pay no taxes pull it off
211–220 of 423 posts
Re: The public has a right to know how companies that pay no taxes pull it off
#212Earlier quoted context omitted.
> At this scale, paying for our services was a no-brainer. What? I don't think so. If money is the only thing they care about, sure. But is it? Should it be? And if breaking the spirit of the law is fine, shouldn't breaking the letter of the law be fine as well? As long as the risk is low enough..
> if breaking the spirit of the law is fine, shouldn't breaking the letter of the law be fine as well? There's no law against breaking the spirit of the law. Breaking the spirit of the law will only get you tried in the court of public opinion. Breaking the letter will also go to a court of justice.
In some states the judges are quasi-politicians with an implied mandate to rule how they think the people want them to rule. In others the judiciary is a system for evaluating the law and they see they consider it their mandate to enforce the law exactly as written, especially when it gives the legislature and the public the middle finger because that's the incentive for those groups to write and demand good law.
Re: The public has a right to know how companies that pay no taxes pull it off
#213I don’t fully understand why corporations are taxed in the first place. All the money the corporation takes in ultimately gets spent on operating expenses, or is profit that is then distributed to shareholders who then owe taxes on that income. If it’s annoying and counter intuitive that corporations are in some legal senses considered people, it is even more confusing that they pay taxes. This sets up a crazy situat…
This makes a lot of sense. There’s no way for the money to get out of the corporation without being taxed, we have all these R&D deductions to make many companies able to pay nothing, why not be direct about it? On the other hand, is the status quo ok? Are we getting something out of companies having to do these specific activities to deduct?
Not totally true. Interest free loan to the owner or his mother in law. Company buys a house / car / jet owner can use. Company buys consultancy services from the owners other company based in the Bahamas etc
Re: The public has a right to know how companies that pay no taxes pull it off
#214Earlier quoted context omitted.
The problem with (too much) simplification is that it removes political steering capability. For example, governments may want to promote having children (by reducing the tax load for people having children), or incentivize small businesses like shops, or domestic R&D spending...
They could do that by direct subsidies. That would be transparent. Or should transparency be required only of the corporations, but governments could get a pass?
Re: The public has a right to know how companies that pay no taxes pull it off
#215Earlier quoted context omitted.
>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 t…
You’re arguing against a straw man. OP wasn’t saying the self employed incorporate in Estonia. They said they are efficient with taxes. They even gave a specific example: business expenses. For example, I run a business in Canada, and know that food and drinks are only 50% deductible. Therefore, at a 50% marginal tax rate those items effectively cost business 50% more than, say, buying office supplies. And that infor…
Since the OP was making this direct comparison, and you seem to like fallacies, you can take it that I am calling their argument a slippery slope fallacy.
Re: The public has a right to know how companies that pay no taxes pull it off
#216Earlier 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…
This is why I've always been skeptical of high _income_ tax rates. First tax avoidance is at base a fixed cost. It's the price of a really tax lawyer (or at the extreme a couple of US Senators). If that fixed price is less then your tax bill only idiot pays the tax bill. The second reason is that I don't believe people view money fractionally - I think they look at it absolutely. For me am million dollars is a lot of…
Re: The public has a right to know how companies that pay no taxes pull it off
#217I 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…
Re: The public has a right to know how companies that pay no taxes pull it off
#218Earlier 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).
But it didn't look to me like that's what the GP comment meant. I assumed they meant tax on revenue taken by each company. No need to account for expenses...
I'd hoped that would be obvious from my comment, but if not I hope I've clarified that now.
ps. It looks like other commenters here are confused about this language, and arguing over the semantics of what "tax on revenue" means.
VAT doesn't solve all tax fairness problems unfortunately, which is a shame because it's a fairly well administered system, and good at catching fraud.
There are good reasons why VAT is not the only tax on businesses. One of those reasons is that immediate revenue and expenses are a poor model of many business accounts. Accountants use more sophisticated models (there are professional standards they have to adhere to), and despite their quirks and loopholes, these are generally better, fairer, more representative models of the state and value of a business and the money flowing through it, and as a result, for most "ordinary" businesses (i.e. not international corps gaming the system heavily), that ends up making taxation fairer.
Someone mentioned using a higher rate for higher revenue. That suggests an example where the better models which incorporate time and stored value results in fairer, more appropriate taxation. If you have a higher sustained revenue, year on year, it makes sense to use the higher rate if that's the policy. But if you make zero in year $X and twice your normal in year $X+1, then back to normal in years $X+2..., all just because you had a big customer pay late for the first year, fairness says you ought to end up paying the appropriate tax rate for your steady normal in the long run, not twice as much tax thanks to your late-paying customer!
The accountants' model handles that just fine, as it says you earned the money fair and square in year $X even though you didn't get paid that year. And that's generally better for limiting tax avoidance too, because it reduces the ways in which co-operating companies can game the system by timing their payments to each other to cheat. (VAT doesn't show this problem because it's a fixed percentage, but it occurs with progressive taxes, meaning variable percentage.)
Re: The public has a right to know how companies that pay no taxes pull it off
#219Earlier quoted context omitted.
So you don’t have any emotional opinions on the work of others that has real effect on your life? Physicists can be wrong. Economists can be wrong. At some point technical nonsense becomes “imperfect people choosing.” A fix might simply be change tax laws? Kind of like how the billionaires changed them to be less distributed. But you don’t have feelings enough about economics being purposely wielded at scale to manip…
Laws of physics are discovered by human experiment. Economics are defined by humans. They’re taught to each other by humans. It’s all wrapped in how we treat each other at scale. Separating the two is impossible except as a semantics game.
Try getting an admission like that out of an economist!
Re: The public has a right to know how companies that pay no taxes pull it off
#220I 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 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…