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Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

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Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#141

Post by jjcon »

bradleyjg wrote: post #110
hnmullany wrote: post #52

Netflix recorded a worldwide income tax accounting expense of about 13.7% last year ($438M on $3.2B of Net Income). It also paid cash taxes of $292M (cash taxes differ from accounting taxes because of timing issues - just like revenue is not the same as cash-in). A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally bec…

> A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally become profitable, they're allowed to roll forward those losses (within limits) to offset their profits. Human beings cannot do the equivalent. Spend the entirety of your 20s making very little money because you are investing in growth and then make $800k as an ort…

I’m pretty sure you can use previous material capital losses to offset current gains.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#142

Post by varispeed »

refurb wrote: post #29

Carry loss forward....again? No! Exciting it something different. Looks like depreciation (those bastards!) and R&D tax credits. How devious! Maybe reporters should get an accounting primer before writing articles about taxes?

Why can't employee distribute their income through past years when they had worse times like corporations can, to lower their tax? Why can't employee use pre-tax income to pay for IP? Why can't employee get R&D tax credits? and so on...

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#143

Post by Naga »

bradleyjg wrote: post #110
hnmullany wrote: post #52

Netflix recorded a worldwide income tax accounting expense of about 13.7% last year ($438M on $3.2B of Net Income). It also paid cash taxes of $292M (cash taxes differ from accounting taxes because of timing issues - just like revenue is not the same as cash-in). A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally bec…

> A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally become profitable, they're allowed to roll forward those losses (within limits) to offset their profits. Human beings cannot do the equivalent. Spend the entirety of your 20s making very little money because you are investing in growth and then make $800k as an ort…

The purpose is to equalize the amount of tax that companies pay. Consider the following example: Assuming a tax rate of 30%, Company A has net income (profit) of $100 in year 1 and $100 in year two pays $60 in tax on a total profit of $200. Company B has a net loss of $100 in year 1 and net income of $300 ni year 2 has a total profit still of $200. Assuming loss carryforwards are allowed, Company B pays $60 in tax still. Without loss carryforwards, Company B ends up paying $90 in tax on the same amount of profit.

It leads to bad headlines when companies claim a bunch of loss carryforwards, but it actually is a fair practice. The other thing to keep in mind is that losses are only paid out in refunds when you actually pay tax. Company B does not earn $30 back from the government for losing money in year 1, it instead gets money back once it starts making profit.

Note that at least in Canada, these rules apply to all types of income, not just business income, although losses on employment income basically never happen.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#144

Post by sokoloff »

fractionalhare wrote: post #131
bradleyjg wrote: post #110

Earlier quoted context omitted.

> A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally become profitable, they're allowed to roll forward those losses (within limits) to offset their profits. Human beings cannot do the equivalent. Spend the entirety of your 20s making very little money because you are investing in growth and then make $800k as an ort…

That's not equivalent. An equivalent example would be a person who makes a large amount of money in their 20s, but spends the majority of it on things that could conceivably appreciate, such that their income artificially represents a loss. Then all of a sudden, whatever they spent money on becomes extremely profitable in their mid 30s. Someone doing that will normally do it within the confines of an LLC by conventio…

If you do that by investing, it does work the same way. You can roll forward capital losses indefinitely and offset them against future capital gains, something which investors in 2000 and 2008 became well-acquainted with.

The difference is few people start with financing that allows them to amass large investable sums without showing a cash income early in life. That’s because companies can raise VC and sell equity while we (rightly, of course) banned the equivalent practice for people.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#145

Post by matwood »

varispeed wrote: post #133
Erlich_Bachman wrote: post #10

Is that calculation really correct? Does it count tax for all the employees? Does it count all specialized tax for things like gas or VAT, for all the things Netflix buys in their operation? What about all the media that Netflix buys and produces? What about all the taxes levied there on salaries and other activities? The article also talks about "income" and not "revenue"...

> Does it count tax for all the employees? Why do you think it is okay for a corporation to appropriate the tax employees pay as theirs? Employee pays this tax, not the corporation.

They are probably referring to the fact that 1/2 the payroll tax is paid by the employer. The employee does not pay this tax, and it is directly paid by the employer for every employee.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#146

Post by JediPig »

throwaway2a02 wrote: post #47
varispeed wrote: post #12

This is crazy how economy is tilted in favour of these big corporations. If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your own small business you can pay even more and have very little left to reinvest. Then you have progressive tax that is preventing you from saving much - if you want to save for a deposit to buy a house, spend time on education and getting a better job, you'll g…

> tax progression will be removed, so that people will have a chance of levelling up Progressive taxation has the exact opposite function to what you're suggesting. It's a mechanism designed to reduce economic inequality and the poverty among the low income workers. Your comment sounds like a rationalization from a middle/upper income person. > it is not uncommon to pay over 40% of tax That figure is misleading, beca…

System is screwed, I am paying 40-50% effect tax rate combined. Housing is going up, food is going up, everything is inflating....

This must get fixed or we all screwed. We are at the end of this system. this system is designed to help the rich, the wealthy, not the man or woman working while in middle class... we are getting screwed.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#147

Post by cube00 »

jjcon wrote: post #141
bradleyjg wrote: post #110

Earlier quoted context omitted.

> A lot of growing companies have US taxes that are quite low because they lose money for a long time while they're investing in growth. When they finally become profitable, they're allowed to roll forward those losses (within limits) to offset their profits. Human beings cannot do the equivalent. Spend the entirety of your 20s making very little money because you are investing in growth and then make $800k as an ort…

I’m pretty sure you can use previous material capital losses to offset current gains.

You can but the problem is finding a lender to underwrite a mortgage when you're in your 20s in your part time collage job.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#149

Post by sokoloff »

bmj wrote: post #138
refurb wrote: post #114

Earlier quoted context omitted.

Student loans interest is deductible at lower incomes. You can deduct mortgage interest (investing in long term housing). You can defer taxes on income through a 401k. It’s not like individuals don’t have mechanisms to save on taxes.

This isn't really equivalent. The current maximum deduction for tuition is 4000$, and that gets phased out at incomes above ~150000$ if you are filing jointly. I have no idea what the limit on a corporation carrying forward losses is, but I'm sure the percentage is significantly greater. Yes, individuals can save on taxes, but can most of us get an effective tax rate of 1%? And, many of the common deductions (mortgag…

Why should there be a cap on carrying forward losses? There’s no cap on individuals carrying forward capital losses.

Re: Netflix Made Record Profits in 2020, Paid a Tax Rate of Less Than 1 Percent

#150

Post by _9rq6 »

mmd45 wrote: post #105

most of the replies here are yawning at offseting profit with expenses. my reading seems to indicate that ISOs can be used to effectively convert corp tax/ordinary income to capital gains. is this correct?

Yes, ISOs are for employees and very good ones.

US subsidiaries in India do not offer ISO stock and ask us to pay 30% per requisite tax on unfair market valuations

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