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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

#401

Post by PeterisP »

anonunivgrad wrote: post #295
TheRealSteel wrote: post #271

Earlier quoted context omitted.

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 ge…

It does 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% - because there's a substantial timing difference. You have to pay the corporate income tax this year; you can generally defer the capital gains tax for arbitrary amount of time with some structuring to avoid any taxable event; there's some overhead involved so it's not for small amounts of capital gain, and you need control over the corporate structure, you can't do it for capital gains on 0.001% or Apple; however, if you'd have 0% tax on company profits and capital gains at 40%, then all the billionaires would be paying essentially zero taxes.

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

#402

Post by throwaway34241 »

jlokier wrote: post #218
tpxl wrote: post #191

Earlier quoted context omitted.

VAT is literally tax on revenue and it works fine. You tax the added value, so each company pays tax only on (sell_price - purchase_price).

Yes, VAT is tax on revenue of the entire supply chain as a whole (not individual companies), so long as it is within a group of countries using VAT. But it didn't look to me like that's what the GP comment meant. I assumed they meant tax on revenue taken by each company. No need to account for expenses... I'd hoped that would be obvious from my comment, but if not I hope I've clarified that now. ps. It looks like oth…

I liked the the idea of taxing profits via taxing revenue (with a VAT) and deducting domestic expenses that was proposed a while back. I think it was called a border adjustment tax, and the idea was that the incidence of the tax was on the profits and it was apparently trade neutral because the currency values would adjust (which would cancel out foreign expenses being non-deductible).

It seemed like such a simple solution to the often complained about problem of multinationals shifting profits to tax havens, since it’s much easier to determine where revenue is from, but I almost never see it discussed when corporate taxes come up. I wonder if it will ever go anywhere.

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

#403

Post by beefield »

RhysU wrote: post #396
beefield wrote: post #310

Earlier quoted context omitted.

Fundamentally it is not any different. In the current model, either the company can afford to pay taxes by cash without issuing new stock, or then it does not and needs to issue new stock, thus diluting current ownership. In my model, either company can afford to buy back the stock from the auction thus keeping the company completely private, or then it does not, thus diluting current ownership. (I personally would e…

Would you accept the forced sale of 1% of your personal income-earning ability each year? You get to keep 100% of your 2021 salary iff you can outbid the highest bidder?

I see no reason to antromorphize limited liability companies.

(But just to note, currently I am forced to pay tens of percentage points of my total salary as taxes.)

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

#404

Post by croon »

disgruntledphd2 wrote: post #349
croon wrote: post #340

Earlier quoted context omitted.

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.

So, the reason that people want to tax revenue is to negate the benefits of transfer pricing. For instance, Google France makes 1bn euro in revenue, but purchases Google services from Google Ireland for 999mn, thus almost no profit and thus no tax. Google Ireland make 20bn but pay 19.99bn to Google Bermuda, which is the exclusive licensee of Google IP worldwide (even though the IP is almost exclusively produced in th…

Right, and I know you're not GP, but isn't that exactly what I said?

That they would pay French taxes on that €1bn, and the French wouldn't care what they did after that.

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

#405

Post by RhysU »

beefield wrote: post #403
RhysU wrote: post #396

Earlier quoted context omitted.

Would you accept the forced sale of 1% of your personal income-earning ability each year? You get to keep 100% of your 2021 salary iff you can outbid the highest bidder?

I see no reason to antromorphize limited liability companies. (But just to note, currently I am forced to pay tens of percentage points of my total salary as taxes.)

I do not understand why public ownership should be a prerequisite for anthropomorphic treatment of companies. A thing is a thing regardless of who owns it.

As for taxes, yes we all pay more. But we do not have our earning power attenuated each year because the government forces us to put ourselves on some incremental slave block.

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

#406

Post by LudwigNagasena »

robertlagrant wrote: post #358
LudwigNagasena wrote: post #288

Earlier quoted context omitted.

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.

The base problem being that tax law is gameable. That's what the article and comments are about.

My reply was inside a thread on direct subsidies. I still don’t understand what’s your problem.

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

#407

Post by jlokier »

salawat wrote: post #399
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 $…

The obvious solution to that is to make it more difficult to consolidate companies. Disallow at will M&A's,and also force anyone that still goes down that route and manages to succeed to justify their continued consolidated existence. In short the market/regulatory environment should support disaggregated business as a first class citizen, mergers and vertical integration as a very second-class construct. To the tune…

It's not an obvious solution, because in that regulatory environment people will avoid creating small companies in the first place.

They won't avoid it to get some minor edge.

They will avoid it because every company formation and financial advisor will point out that it's commercial suicide to start your own company in that environment, and that instead you should take your idea to an existing company which specialises in opening "nearly autonomous departments", for an instant 30% or so increases in post-tax income, or 30% edge over competition on prices, or 30% edge on salaries you can pay, for exactly the same kind of business. (30% representative of some countries not others... adjust for your locale).

The few real companies specialising in that would love your M&A and tax regulations, as they could take a few % of every small business' profits, and have some levers of control, effectively government mandated.

After that, the millions of small companies which already existed, who cannot consolidate due to your M&A restrictions, will gradually either go out of business due to competition, or find a way, though contracts, deeds etc, to transfer their activity into these "autonomous department" companies without actually merging. It's not uncommon to transfer some of a company's activity this way already, so that would just be scaling it up.

You can try restricting all of that, but it will be very difficult as you would have to do it restrict what sorts of things people can agree to in contracts in a very significant way, and in doing so, restrict what are currently effective business arrangements for some companies to make them less effective. That would be an enormous change to business culture, and I suspect even if you did restrict what can be agreed in private contract terms, alternative ways to transfer what gets done where would be found very quickly and easily.

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

#408

Post by silexia »

TheKarateKid wrote: post #372
jimmydddd wrote: post #294

Earlier quoted context omitted.

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…

I don't think so. I interpreted the comment the same way probably because the comment was replying to one disputing the morality of it, not the feasibility of it.

What would happen if we did away with the income tax, sales tax, estate tax, property tax, and all other taxes?

The government could simply finance itself by printing money / inflation. Let’s say the government total expenditures were 5% of GDP each year, then you would simply have 5% inflation.

This would solve all the problems we have with income inequality, worthless heirs of the wealthy hoarding riches, and of very complex and expensive IRS and CPA work.

Everyone would need to invest their money rather than stuff it under a mattress so they could keep it growing rather than allowing inflation to shrink it.

Thoughts?

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

#410

Post by neycoda »

gnicholas wrote: post #32
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 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's all great for business and terrible for the public interest.
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