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

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

#311

Post by PragmaticPulp »

anonunivgrad wrote: post #289
Icedcool wrote: post #252

Earlier quoted context omitted.

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…

> 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.

Companies certainly do keep cash balances. That cash balance directly adds to the company’s valuation. They’re not obligated to pay it out or spend it. The owners of the company can sell the company, including cash balance, as an asset.

Suggesting that a company’s cash balance somehow doesn’t count because it’s inside a company structure is disingenuous.

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

#312

Post by CWuestefeld »

Although avoiding taxes may be a sort of business "code smell" that makes us suspicious, there's no inherent reason to regard such behavior as evil.

The tax code, in all its thousands of pages, is designed (or at least it's supposed to be) to give incentive to certain behaviors that we'd like our businesses (and citizens) to follow. And the more they do this, the less taxes they'll be paying.

Thus, to a first approximation, paying very low taxes ought to be indicative of a payer who's doing all the things that our politicians and bureaucrats think they should be doing.

A few years ago I replaced all the windows in my house, along with a door and a garage door, with new, energy-efficient ones. This entitled me to a tax credit for that year, allowing me to pay a few thousand dollars less in taxes. I don't think that people should accuse me of being a bad citizen because my tax bill that year was unusually low. If anything, I'd think that the same environmental groups who lobbied for such measures in the tax code would all be shaking my hand for taking advantage of that in order to achieve the goal of lowered energy usage.

So yeah, maybe be suspicious of such businesses, but let's not just assume they're evil. That said, the idea that the public has a right to know what corporations are doing this is fully compatible with my claim, so we'd also know who's being a good corporate citizen.

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

#313

Post by pjc50 »

Mumps wrote: post #251
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 has been on my mind for quite a while: is there a way to set up saving structures like those of Big Corp to poor people - i.e. find a way for the people least able to pay tax to pay less of it. Would you mind chatting about your expertise here? Do you think there is any feasible way of generalizing these tax avoidance structures so that Joe and Jane can reap some of those sweet sweet loophole benefits as well?

There's usually a high fixed cost to them. The merely averagely rich have been taking advantage of them, but gradually the low-cost loopholes are closed, e.g. https://www.accountingweb.co.uk/any-answers/isle-of-man-tax-...

Mind you, most actually poor people have a low tax incidence in the first place due to progressive tax rates.

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

#314

Post by emteycz »

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.

That's something that could be easily changed.

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

#315

Post by walto2 »

CWuestefeld wrote: post #312

Although avoiding taxes may be a sort of business "code smell" that makes us suspicious, there's no inherent reason to regard such behavior as evil. The tax code, in all its thousands of pages, is designed (or at least it's supposed to be) to give incentive to certain behaviors that we'd like our businesses (and citizens) to follow. And the more they do this, the less taxes they'll be paying. Thus, to a first approxi…

Sadly though, capitalism has a way of turning everything into a perverse incentive.

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

#316

Post by pjc50 »

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…

Spend it on? How about COVID relief?

IIRC defense is about 20% of the US federal budget. About 40% of that (ie 8% of total federal spending) is paid to staff. In some ways it's the largest redistributive program.

The trade deficit is private, it's an accounting summary between private importers and exporters. Nothing to "pay off".

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

#317

Post by jcranmer »

dwighttk wrote: post #152
credit_guy wrote: post #137

Earlier quoted context omitted.

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?

It is more efficient to let people keep money than it is to take it from them and give it back. Even if the laws that allow the former would (/might) be simpler.

I believe you severely underestimate the complexity of actually administering a complex tax system.

Especially because the way a lot of deductions end up working in practice is that you withhold the money from people in the first place and cash it out in the end of the year when you calculate your actual tax burden.

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

#318

Post by x87678r »

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…

> 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 loophole, I would go to prison.

Your intuition is wrong. There are lots of small business people that expense everything and pay negligible tax if any.

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

#319

Post by nolroz »

CWuestefeld wrote: post #312

Although avoiding taxes may be a sort of business "code smell" that makes us suspicious, there's no inherent reason to regard such behavior as evil. The tax code, in all its thousands of pages, is designed (or at least it's supposed to be) to give incentive to certain behaviors that we'd like our businesses (and citizens) to follow. And the more they do this, the less taxes they'll be paying. Thus, to a first approxi…

I think this point outlines how important it is for the public to know how the taxes were reduced. If the methods create positive outcomes to society then it would seem a lot less shady.

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

#320

Post by omgJustTest »

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 would go to prison, because you didn't have a legal team to tie up the issue until the end of time. You can't save enough on your taxes to pay a team of lawyers.
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