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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

#281

Post by rlaabs »

chewz wrote: post #130
harry8 wrote: post #109

Earlier quoted context omitted.

>this is why it makes sense that companies can walk a fine line on taxes, save tons of money, and you and I cannot. Nope, these are the reasons that cause the situation. This outcome does /not/ make sense nobody sane without a huge vested interest would design a system to achieve less tax paid when you earn more. It's entirely contrary to the intent and spirit of the tax code. This is not sensible. How to fix it? Tha…

> How to fix it? Make a tax code as simple as possible. So simple there is no room for interpretation.

I would highly recommended reading "A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax System." It compares tax systems around the world, unpacks common issues and suggests a fix (in short a "broad base low rate" strategy).

https://www.amazon.com/Fine-Mess-Global-Simpler-Efficient/dp...

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

#282

Post by linuxftw »

adeptus wrote: post #247

I am still confused as to why companies have to pay tax at all? If every single employee including owners already pay income tax, and IVA/GST/purchase taxes, property taxes, xyz additional personal taxes levied by respective governments, why then on top of all that make companies pay tax, doesn't that just detract from people wanting to start companies and/or seek countries with the least taxes/best loopholes? Discla…

In the US, some companies do not pay tax, the shareholders pay the tax on any income (S Corporations). Sole proprietors and partnerships are the same. C Corporations are like a legally distinct 'person', and what they pay in salaries, etc, are deductions.

It is 100% possible for a C corporation to pay no tax because it pays out all profits (income minus deductions) or operates at a loss.

Many large firms are hiring contractors to perform 'capex' work that qualifies for R&D Tax credits: https://www.cpajournal.com/2017/10/30/u-s-research-developme...

Tax laws drive some crazy incentives.

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

#283

Post by jlokier »

throwaway2245 wrote: post #215
graeme wrote: post #201

Earlier quoted context omitted.

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…

Legitimately expensing office supplies is scarcely considered "corporate tax avoidance" and not reasonable to call "stealing". 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.

I am the OP and I was not making this direct comparison.

I was pointing out that it's common for the small business to perform tax efficiency, which is extremely widespread and taught in small business courses. Most people running a small business or self-employed relate to it, and it's indeed a "set and forget" thing, mainly because you just do what the accountant tells you.

In that world, tax efficiency is largely seen as the right thing to do and sensible ("good").

And when you scale that up, the end result looks like international corporate tax avoidance ("bad").

That's not at all the same as saying the small business version is tax avoidance of the "bad" kind.

It's saying that one thing follows from another, not that they are the same thing.

And so we can't solve international corporate tax avoidance by a simple expedient of trying to "ban" or "shame" it, because there isn't any clear boundary at which sensible, approved, "good" tax efficiency turns into shameworthy "bad" avoidance.

And so, to solve it, we need to use a different method, and I advocated such a method.

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

#284

Post by themaninthedark »

gnicholas wrote: post #13
gscott wrote: post #7

Earlier quoted context omitted.

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.

You are taxed but the starting tax threshold is high, 150~200K if I recall correctly.

I worked in Japan for a while and had to file but never paid taxes.

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

#285

Post by sokoloff »

lotsofpulp wrote: post #105
berdario wrote: post #98

Earlier quoted context omitted.

"Once income and spending exceed this level, taxes must be paid. Unless… Unless that income comes from qualified dividends or long-term capital gains. In this case, a married couple can have $24,400 a year in income AND $78,750 in investment income, TAX-FREE" If you can get 78k$ yearly investment income from index funds, you already have a net worth of several million $, and you're thus already among the people that…

But according to that link, all you have to do is choose leisure over labor* *and have $5M+ in assets

Closer to $2M will do it with a low risk of portfolio failure, $2.5M will do it with almost no risk of failure.

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

#286

Post by whiddershins »

DebtDeflation wrote: post #182
whiddershins wrote: post #116

I 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…

>I don’t fully understand why corporations are taxed in the first place. Because as economically inefficient as a corporate income tax is, without it you would create an enormous incentive for individuals to incorporate, filter all their income through the corporation, have the corporation pay all their expenses as business expenses, purchase their assets for them as business assets, and compensate them in the form o…

But I can already do that using an LLC, which also doesn’t pay any tax.

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

#287

Post by ntsplnkv2 »

emteycz wrote: post #264
realityking wrote: post #260

Earlier quoted context omitted.

Take the case of me, a German citizen living in Germany, owning Apple stock. The German government taxes me on the capital gains - fair enough. But with your model the US government and the government of California would receive no taxes beyond those owed by the employees.

And why is it wrong? Either they sell and/or operate in the US - so US sales tax is paid and their US employees/owners pay their tax - or they do not, no reason to pay tax there.

The US doesn't have sales tax at the federal level.

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

#288

Post by LudwigNagasena »

robertlagrant wrote: post #241
robertlagrant wrote: post #203

Earlier quoted context omitted.

That's still a problem, if you think companies minimising their tax is a problem. The game shifts to creating the correct structure to qualify for tax credits.

I'm talking about the fact that this doesn't address the base problem.

Sure, I simply addressed this point

>It is more efficient to let people keep money than it is to take it from them and give it back

Direct subsidies in the form of tax credit don't incur any costs of moving money because no money are moved, but functionally it is almost the same.

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

#289

Post by anonunivgrad »

Icedcool wrote: post #252
adeptus wrote: post #247

I am still confused as to why companies have to pay tax at all? If every single employee including owners already pay income tax, and IVA/GST/purchase taxes, property taxes, xyz additional personal taxes levied by respective governments, why then on top of all that make companies pay tax, doesn't that just detract from people wanting to start companies and/or seek countries with the least taxes/best loopholes? Discla…

Because they act as a stand alone entity, and they may make and keep profit that doesn’t get dispersed to the employees.

A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses.

We tax corporate profits, not income. That takes out of the dividend stream, so we tax capital gains (the tax the investors pay on dividends/stock appreciation) correspondingly lower.

You could in theory get rid of the corporate tax and just tax capital gains at the same rate as income. It would fix a lot of problems. But you would upset a lot of people who don’t understand finance and taxation, like the people seeing red in this thread, who have some moral gripe with these corporations (who are mostly just doing what the law incentivized them to).

It would have one small effect though. Since the US taxes the worldwide income of its citizens and permanent residents, it would probably overtax them, making them pay the higher capital gains rate for profits made in countries that do retain the corporate tax. The most obvious ways to fix that would just reintroduce the problem of sorting out where the profit was “made”, which is where we are now. Ideally, you’d get all of the western countries to sign up to end this stupid corporate tax at the same time. That’s difficult because a few important countries have used low corporate tax rates as a way to attract business that would otherwise have no reason to be there.

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

#290

Post by sokoloff »

chii wrote: post #53
an_opabinia wrote: post #18

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 can…

> They are accumulating huge stockpiles of cash they cannot spend, they (the corps) can use this asset that they cannot repatriate as collateral for cheap loans.

I agree with your point (probably), but disagree with the restatement. They can repatriate it; it just does not make business sense to do so. (If they actually couldn't repatriate it, it wouldn't be effective to use as collateral.)
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