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

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

#291

Post by jlokier » Tue, Nov 03, 2020, 1:54 PM UTC

throwaway2245 wrote: post #196

jlokier wrote: post #161

Earlier quoted context omitted.

> 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 t…

>> 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)

To the nearest percentage approximation, 100% of self-employed and small businesses do exactly this at a basic level, and it's low effort. There's an entire support industry to keep it simple.

Tax efficiency, which is the polite name for avoiding taxes, which is perfectly legal and encouraged, is literally taught as one of the first things in small business courses, somewhere after book-keeping and giving the books to your accountant.

It means you ask your accountant what expenses to write down, they tell you, then later they look at your books and say "did you know if you do these other little things like this, altogether you can save another thousand?" and you go, wow, I didn't think of those, I guess you are worth the fee after all.

Roughly 100% of self-employed and small businesses do this, in any place where it's common to use an accountant.

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

#292

Post by lm28469 » Tue, Nov 03, 2020, 1:54 PM UTC

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…

> I am still confused as to why companies have to pay tax at all?

Because that's how we decided to build our societies. Money flows up very easily but doesn't flow down anywhere as fast, that's why we tax companies and people.

The sole purpose of a company is to make as much money as possible. Laws are there to make sure they do it safely (ie. don't send 12 years old kids to the mine, don't make employees work 7 days a week), make sure the system isn't abused (Amazon trucks use public infrastructures to deliver goods, why shouldn't they participate to the maintenance of said infrastructures ? &c.), and make sure the country benefits of having such companies operating within their borders.

Not sure about other countries but in France taxes are used to finance schools, universities, hospitals, justice courts, reduce the cost of doctor visits, train tickets, housing assistance, allowance for disabled people, active solidarity income, public education and a lot of other things.

I could find endless arguments to support why companies _should_ pay taxes but none to support the opposite, besides "I own a company and want to accumulate more money"

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

#293

Post by ipython » Tue, Nov 03, 2020, 1:56 PM UTC

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…

It gets very complicated at the high levels of tax compliance. I am part of a company who had paid a specialized company to set up a tax advantaged structure in a foreign country several years ago in order to avoid capital gains tax.

The tax treaty document between the US and this country was over 100 pages long. When it came time to actually take the tax advantages on a return, we decided to figure out what the risks were of being audited and potential penalties. We engaged several tax experts to give their opinion.

What ensued was eye opening. We received wildly different opinions depending on the expert. The entire case hinged upon how one line in that 100+ page document could be interpreted. At the end of the day you are subject to the mercy of the IRS. For a large corporation, you may be able to afford the litigation (or avoid it all together as you could proactively play to the court of public opinion).

For us, we decided to fire the tax consultant and pay the tax. It was - for us - a very large sum, several million dollars.

Ultimately the “laws” are less like a set of rules and more a set of malleable guidelines. People who say, “oh I can just take whatever loopholes I’ve been given” don’t understand the sheer complexity and ambiguity of the tax code.

While I’m disappointed that we “lost” that money (one could argue it wasn’t ours to begin with), and disappointed that others are morally flexible enough or big enough to get away with it, I am left with the feeling that we did the right thing for the country as a whole. I am sad that more companies and individuals don’t consider that in their moral calculation.

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

#294

Post by jimmydddd » Tue, Nov 03, 2020, 1:56 PM UTC

harry8 wrote: post #109

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…

>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…

It seems like the comment (from a former tax advisor) you are responding to is explaining that the high cost of gaming the system is cost effective for large companies, but not for individuals. In that respect, it "makes sense" that individuals cannot take advantage of these loopholes that companies use.

In contrast, you seem to be arguing a different point--that, to you, it "doesn't make sense" that the system is designed poorly.

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

#295

Post by anonunivgrad » Tue, Nov 03, 2020, 1:57 PM UTC

TheRealSteel wrote: post #271

emteycz wrote: post #261

Earlier quoted context omitted.

They don't make use of it in a way a person does. They use it to make more income, not for food, housing, fun, etc.

That sounds like more of a reason to tax them, not less.

You’re just quibbling about how much the total taxation should be. The point is that it doesn’t matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40%.

The government already tries to reduce double taxation. There is not supposed to be a penalty for incorporating vs. doing business as a sole proprietor or general partnership. That’s why the capital gains tax is lower than the income tax.

This is all about ease of administration and making creative accounting more difficult or impossible. If you’re looking at it through some moral lens, you don’t get it.

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

#296

Post by Mumps » Tue, Nov 03, 2020, 1:58 PM UTC

pa7x1 wrote: post #199

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…

> Inflation is a fantastic tax, ..., anti-regressive.

_Thomas Picketty has entered the chat_. History has shown that the rich are able to (easily) outpace inflation, while the poor (read: effectively ~95% of the planet) do not.

So I'm not too sure that is a desirable claim to make here.

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

#297

Post by C1sc0cat » Tue, Nov 03, 2020, 1:59 PM UTC

fyfy18 wrote: post #166

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…

As a US citizen it's somewhat tricky as you are taxed on your worldwide income, but the easiest way is probably to become a tax resident in a country with a low tax rate. Even in the UK, as a contractor/freelancer it's fairly simple to pay single digit percent effective taxes on incomes of £100k+. And that's without even delving into what could be considered a 'tax avoidance' scheme.

Not shure single digit effective is possible nowadays even outside IR35 - and HMRC has unliterally ruled that some professions are in side IR35 eg all it/developer contractors.

Actors, film / tv professionals and lawyers etc are for the large part still treated as "self employed"

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

#298

Post by wil421 » Tue, Nov 03, 2020, 2:00 PM UTC

ntsplnkv2 wrote: post #287

emteycz wrote: post #264

Earlier quoted context omitted.

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.

Just to add sales tax is a State/County/Municipal thing. I just voted on a 1% sales tax increase for my county, for infrastructure, cyber security, and other public stuff.

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

#299

Post by stdbrouw » Tue, Nov 03, 2020, 2:03 PM UTC

jagged-chisel wrote: post #178

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 $…

You adjust the tax curve to address this situation. More revenue, even higher tax rate.

And now you've solved one problem and have created a bunch of others. Welcome to tax design!

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

#300

Post by z3ncyberpunk » Tue, Nov 03, 2020, 2:04 PM UTC

jimmydddd wrote: post #294

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…

It seems like the comment (from a former tax advisor) you are responding to is explaining that the high cost of gaming the system is cost effective for large companies, but not for individuals. In that respect, it "makes sense" that individuals cannot take advantage of these loopholes that companies use. In contrast, you seem to be arguing a different point--that, to you, it "doesn't make sense" that the system is de…

Thanks MS paperclip.