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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

#331

Post by tdullien »

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…

For what it is worth: The OECD has made a lot of changes to their transfer pricing guidelines, and starting in 2018, individual countries have a lot of leeway in re-assigning profits to other jurisdictions. The effect is not fully felt yet because the new guidelines are not evenly applied, but a friend of mine (who spent most of the 2000s building aggressive tax structures for multinational pharma companies) has spent the last few years mostly unwinding the aggressive structures again, in reaction to the OECD changes.

If you are interested in the details of this, Google "OECD BEPS transfer pricing"; it is quite a fascinating topic.

On a side note: The same updated guidelines, when misapplied by an aggressive tax authority, can cause all sorts of headaches for fully-distributed, fully remote companies, and the extent how this can cause trouble is underappreciated by the startup scene.

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

#332

Post by crazypython »

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 a company is allowed to go in debt or bankrupt independently of its shareholders. If your LLC is in debt and defaults on that debt, the owners (you) won't go in debt.

There are better explanations, including that a corporation is a beast of the state etc.

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

#333

Post by leetcrew »

lordgrenville wrote: post #102
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…

Earlier this year I read the book The Chickenshit Club on the advice of someone on here. It has a lot of interesting information but I didn't agree with the author's summary, basically: "prosecutors are cowardly and don't fight cases that don't look easily winnable. They should be braver and go for the highest-profile cases to make a statement". This seems wrong to me because a) litigating a complex, lengthy case and…

I would argue almost the opposite. I don't see how it serves the public interest to limit the amount of resources people are allowed to use to defend themselves against the state. it's sort of like combating inequality by burning down the nicest houses. you've made everyone more equal, but no one is better off for it.

I think the imbalance is actually much worse in civil cases, which are disputes between people who ought to be peers. the fact that people have to give up their right to see an opponent in court because they can't afford counsel seems much worse than some rich people getting a better defense against the state.

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

#334

Post by Nasrudith »

0goel0 wrote: post #263
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 should read https://www.huffpost.com/highline/article/white-collar-crime... Some excerpts (it's a great, long piece. Read it all): "In 2017, researchers estimated that fraud by America’s largest corporations cost Americans up to $360 billion annually between 1996 and 2004. That’s roughly two decades’ worth of street crime every single year." "Even though auditing millionaires and billionaires is one of the most c…

First off tax avoidance isn't fraud even given such shenanigans. They really do have offshore corporate offices in those countries. If they tried faking paperwork and really kept it in a corporate bank account? Actual fraud.

There is a reason for that - said strict criminal liability is broken it just breaks single lives and horrifyingly can be ignored. But break an entire systems and that leads to instability.

Take a complex economy with byzatine rules - either you have selective enforcement and effectively a dictatorship with extra steps or it is applied mercilessly across the board. Given the added risk to investments unsurprisingly many would choose to get the hell out of there.

Really the answer should be to do away with strict liability bullcrap.

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

#335

Post by jlokier »

ludston wrote: post #324
bsanr2 wrote: post #301

Earlier quoted context omitted.

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 mor…

> With this thinking, you can very much say that tax revenue does just disappear into some hole.

It doesn't just disappear into the misty fog of the central bank though. It goes onto some government ledger.

This ledger has some considerable effect. It greatly constrains what the government can spend.

If the ledger meant nothing, you would not see government needing to borrow via issuing bonds when it needs to spend more. The cost to government of borrowing goes up and down according to circumstances, and is outside of government's direct control.

In other words, all the parts are related, partly by design, and this strongly affects the consequences of issuing (or destroying) currency at the central bank to the point where it's not really meaningful to think of taxation as destroying currency.

If the government did issue enough currency to go on a spending spree, before long not only would inflation harm other parts of the economy, it would also find that the prices of its spending spree went up, so it would have to issue more, and...

Ultimately no matter how much currency it issues, there's a strong drag in real terms on how many things the government can obtain from others and cause others to do via commerce.

That limit on its spending power makes the ledger balance something much stronger than a hole into which tax disappears.

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

#336

Post by sneak »

throw_m239339 wrote: post #186
sneak wrote: post #164

Earlier quoted context omitted.

A corporation is an abstraction that does not exist, so it cannot benefit from those things you listed. The human shareholders and human staff benefit (and profit) from those things, and there are already mechanisms in place to tax those human beings, either as shareholders or as staff with ordinary income.

Corporations can be criminally charged. They are not abstractions, they are associations of people. You need to rethink your arbitrary definition of "abstraction".

> Corporations can be criminally charged.

Are you sure about that? Corporations cannot act (they have no hands, and no brains), and thus they cannot break the law. It also is relatively difficult to throw a corporation in jail for a criminal violation.

Even a much more informal association of people, a "criminal conspiracy", cannot be criminally charged as a single abstracted entity: the individuals who performed that conspiracy must be charged.

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

#337

Post by refurb »

gnicholas wrote: post #79
wiz21c wrote: post #64

Earlier quoted context omitted.

Maybe it's a little too much to ask, but are why are you "not saying any of this is right or good". Part of my brain wishes that law would actually mean justice but somehow, if I trust only what I know, I cleary cannot judge, as you do, if finance engineering is good or bad. I'd like to know what prevents you to choose if it's good or right (as person who have worked inside the business) thx

I do have opinions about various tax provisions that I know well. But the topics I mentioned in my prior comment were not about a specific tax provision, or even tax policy generally. I was just stating the facts of life. It will always be the case that big companies will find it efficient to engage in certain revenue-producing activities that smaller companies/individuals will not. Just as I don't have feelings abou…

Lobbying is a bit different. Like most folks, the idea of 'lobbying' strikes me as wasteful/corrupt.

Are people aware what everyday lobbying is in it's most basic form? It's companies engaging their elected representatives on policy issues relevant to them.

So when the Obamacare bill was being written, the AMA (representing physicians) lobbied Congress to make sure their views were heard. Completely legitimate. Another example might be a crime bill where the ACLU lobbies Congress. Or the EFF lobbies Congress.

And the lobbying dollars that are spent aren't bundles of cash given to Congresspersons, it's dollar spent on lobby firms that have armies of experts who know how Congress works, who to talk to and how to craft an argument that resonates. That doesn't come cheap.

Now up to this point nothing illegal has happened. You could argue it's unfair that businesses (well, more accurately organizations) have better access to Congress than individual voters, but groups will always have more power than individuals (since they represent more voters). There is nothing to stop a group of voters from forming an organization to lobby Congress on a specific issue. Again, that's what the ACLU and EFF do.

It seems like most people see "the AMA spent $10M on lobbying last year" and picture lobbyists passing bags of cash to Congress. No, that's illegal and has been for a very long time.

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

#339

Post by anonunivgrad »

PragmaticPulp wrote: post #311
anonunivgrad wrote: post #289

Earlier quoted context omitted.

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. Suggesti…

>The owners of the company can sell the company, including cash balance, as an asset.

And just what do you think a cash balance does to the sale price of a company? Btw, that sale is a capital gain.

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

#340

Post by croon »

a3camero wrote: post #274
croon wrote: post #265

Earlier quoted context omitted.

Could you elaborate? Reading up on it it's not clear what you mean.

Companies buy a combination of goods and IP (patents and trademarks). The goods come from a developed country and the IP is licensed from a tax haven. The goods are sold at near cost with the markup being in the IP. The result is a supply of goods between countries that causes a significant diversion of the revenue to the tax haven. This is used by most big companies in tech, pharma, etc. The government can’t challen…

Sure, but this was a discussion about taxing revenue produced within a country. What you are describing is avoiding for example profit tax, is it not?

I'm still not seeing how it applies to the proposed example.

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