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

#321

Post by MereInterest » Tue, Nov 03, 2020, 2:47 PM UTC

Spearchucker wrote: post #110

TheOtherHobbes wrote: post #91

Earlier quoted context omitted.

Really rich people do this with a complex network of shell organisations that's as opaque as possible. It's not just that a corporation owns their house, it's that another corporation owns that corporation, and a holding company in the Cayman Islands with a nominee director who lives in a postbox owns everything, except the IP rights which are in Panama - this year. And personal spending goes through a credit card se…

Somewhat oversimplified, you don't need a herd of corporations to do this - simply sell your house to a trust fund of which you or someone you trust is the primary beneficiary. In Jersey, Luxembourg or the like. You pay a lawyer who already does this for many funds to administer yours. You then either rent the house from the trust for a minimal amount, or the trust lets you stay there rent-free as a guest. This is al…

I was under the impression that living somewhere rent-free, or renting at under the market rate for a typical location, was still taxable income that needed to be declared.

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

#322

Post by leetcrew » Tue, Nov 03, 2020, 2:47 PM UTC

pjc50 wrote: post #313

Mumps wrote: post #251

Earlier quoted context omitted.

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.

sorry for the nitpick, but I don't think tax incidence [0] is the term you were looking for here. it's hard for poor people to take advantage of tax loopholes because they don't directly pay much tax after the standard deduction and (possibly) EITC. whether they bear the burden (ie, tax incidence) of taxes levied against other entities is controversial.

[0] https://en.wikipedia.org/wiki/Tax_incidence

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

#323

Post by mason55 » Tue, Nov 03, 2020, 2:49 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…

IMO you need to come up with a way to eliminate tax arbitrage. You see it causing issues between US States where there’s a race to the bottom to give tax breaks and as long as companies can go to places like Vanuatu there will be ways for them to avoid taxes.

Since you can’t control what other sovereign nations do all you can do is make laws restricting what companies that operate in tax havens can do in local jurisdictions. But they will of course lobby that you’re restricting freedom and hobbling your economy and take their HQs elsewhere.

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

#324

Post by ludston » Tue, Nov 03, 2020, 2:49 PM UTC

bsanr2 wrote: post #301

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 $…

Simply swing the antitrust hammer judiciously, in that case. I'm suddenly hit with the image of a child whining that having to do homework AND chores is too hard, and their parent telling them to suck it up. Besides, tax revenue doesn't just disappear into some govt hole, it gets redistributed as services and grants and the like. The loss in operating revenue is likely made up in increased business. Your low margin g…

Given that we are all using fiat currency, an interesting way to think about taxation is that the Government is destroying money through taxation, and creating money from via spending.

With this thinking, you can very much say that tax revenue does just disappear into some hole. The effect of taxation in this thinking is that it applies brakes upon the accumulation of wealth and causes existing wealth to be worth more (via deflation). This is counteracted by the inflation from created wealth via govt spending.

A weird alternative to taxation could be to print more and more money without taxing any of it. This would be functionally a flat tax on all existing wealth in that fiat currency via inflation.

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

#325

Post by [deleted] » Tue, Nov 03, 2020, 2:50 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.

[deleted]

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

#326

Post by Nasrudith » Tue, Nov 03, 2020, 2:54 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…

The laws /are/ being enforced. Business taxation is based upon profit and has deductible expenses essentially to help avoid what happened with US Steel and not investing in their infastructure and then the world passed them by. If they actually spent or redistributed the parked money domestically without going through the proper channels they would be in deep shit.

Similarly limits on capital travel hampers both foreign investment and international business expansion as it gets "routed around".

IP expense transfers are the third piece and whatever was tried to do away with would result in giving up what the US already wins big on.

It isn't a problem of enforcement. Every last piece is policy of the loophole is policy working by design.

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

#327

Post by marcosdumay » Tue, Nov 03, 2020, 2:57 PM UTC

srtjstjsj wrote: post #209

marcosdumay wrote: post #200

Earlier quoted context omitted.

Hum... I suggest you take a look on how taxes on profit work. That's literally a tax on value added.

The definition of "value added" is price minus costs, aka profit. https://www.investopedia.com/terms/v/valueadded.asp

"Purchase price" is not the same thing as costs and "revenue price - purchase price" is completely different from profits.

With a broad enough definition and inclusion of other, unrelated prices at that negative part, one can claim that in a time-frame of several years, both average to nearly the same. But that doesn't make them equal, and if you go read those tax-codes, you will discover the ones being discussed add to very different figures even on the long term.

I'll just add here another encouragement to go out and get an understanding of tax codes. Odds are they will be relevant for everybody that frequents here at some point on their lives, and odds are that if you don't know them, you'll only discover their relevance after the fact, when they have already caused you some problem.

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

#328

Post by andromeduck » Tue, Nov 03, 2020, 2:58 PM UTC

realityking wrote: post #260

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…

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.

I don't see a problem with that if the value is taxed where it is created, eg via VAT.

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

#329

Post by refurb » Tue, Nov 03, 2020, 2:58 PM UTC

mason55 wrote: post #323

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…

IMO you need to come up with a way to eliminate tax arbitrage. You see it causing issues between US States where there’s a race to the bottom to give tax breaks and as long as companies can go to places like Vanuatu there will be ways for them to avoid taxes. Since you can’t control what other sovereign nations do all you can do is make laws restricting what companies that operate in tax havens can do in local jurisd…

Why would eliminate tax arbitrage between states? I'd prefer to see states competing over taxes - it provides a great incentive for efficiency. And no, a company won't always choose the lower tax rate, there are other factors at play like: 1)where are the employees located, 2) will they even go to a state with lower business taxes, 3) what services do I get as a company from the state gov't, 4) what's the general business climate in the state.

I hate the derogatory use of "race to the bottom" since it's the reason why we have handheld computers in our pockets and 60 inch flat screen TVs that cost $300. Every company is "racing to the bottom" to provide as much value for the least cost as possible.

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

#330

Post by andromeduck » Tue, Nov 03, 2020, 3:00 PM UTC

alexmingoia wrote: post #157

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 believe an income tax should be the only tax, since it covers any and all economic transactions, and it's the only progressive tax. - There's only a single loophole: People who use their business to pay for personal expenses. They are easy to catch, and the simplicity of the tax scheme allows collectors to focus on this one loophole. - It's simple to collect: Ask all the banks for everyone's statement, and apply a…

Sale of labor should be treated as exactly that, a sale. There should be no special income tax rate.