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US tech firms make eleventh-hour attempt to halt tax avoidance reforms

theguardian.com

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Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#11

Post by soup10 »

nodata wrote: post #3
dmk23 wrote: post #2

Let's call these "reforms" for what they are - a shameless and unjustified money grab by the government.

Can you explain your comment a little bit? From the way I understand it, this is a way to get large companies to pay the same amount of tax as smaller companies.

Small companies(S corps and LLCs) don't pay corporate taxes. C corps pay a wide variety of taxes depending on where they earn their profits, how aggressively they working to minimize tax burden, and how hard their industry lobbyists work.

Certainly some companies pay far more and far less than their fair share. I'd wager the tech companies who generally have little in the way of physical presence where they earn revenue, and have towns and cities competing for the chance to host their offices and data centers, probably pay very little relatively.

Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#13

Post by benpbenp »

Wealth is meant for people. All of a company's wealth is ultimately destined for somebody's pocket. Why can't we just tax it when it gets there, and abolish corporate taxes?

Naturally I'd assume in that case that dividends would be taxed at the same rate as earned income, and that both would have to rise somewhat at the higher brackets to cover the lost income. But given that is the case, I honestly don't see any downside. Can anyone help?

Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#14

Post by justincormack »

benpbenp wrote: post #13

Wealth is meant for people. All of a company's wealth is ultimately destined for somebody's pocket. Why can't we just tax it when it gets there, and abolish corporate taxes? Naturally I'd assume in that case that dividends would be taxed at the same rate as earned income, and that both would have to rise somewhat at the higher brackets to cover the lost income. But given that is the case, I honestly don't see any dow…

In theory that is true. But in practise a broader tax base, on income consumption and companies has some advantages. If we moved all taxes to income then the incentives for avoidance and evasion would become much higher. Companies can also not pay out for long periods eg Apple so there is a time aspect, and taxing shareholders when profits were made might not be popular.

Historically taxes were mostly about ease of collection. Putting everything on income would raise the big question of whether wealth not income taxes are fairer.

Right now the big win is massive simplification not changes in tax base.

Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#15

Post by justincormack »

Claudus wrote: post #12

Personally, I'd rather that Google keep as much of their money as possible and continue to spend it as they see fit. I believe that society benefits far more from a company like Google having and spending the money than any federal government.

OK but shrink the government first. Then you can cut taxes. And cut them for everyone not just companies who can afford a Dutch sandwich.

Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#16

Post by pedrocr »

benpbenp wrote: post #13

Wealth is meant for people. All of a company's wealth is ultimately destined for somebody's pocket. Why can't we just tax it when it gets there, and abolish corporate taxes? Naturally I'd assume in that case that dividends would be taxed at the same rate as earned income, and that both would have to rise somewhat at the higher brackets to cover the lost income. But given that is the case, I honestly don't see any dow…

That depends on how you account for it reaching someone's pocket. With the current rules someone on a salary will pay tax the moment they earn the money. Someone that owns a company will instead pay himself a small salary and keep the cash inside the company earning interest before tax. But if you were really willing to reform the way corporate/personal taxes are done you could potentially fix that too.

Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#18

Post by cperciva »

benpbenp wrote: post #13

Wealth is meant for people. All of a company's wealth is ultimately destined for somebody's pocket. Why can't we just tax it when it gets there, and abolish corporate taxes? Naturally I'd assume in that case that dividends would be taxed at the same rate as earned income, and that both would have to rise somewhat at the higher brackets to cover the lost income. But given that is the case, I honestly don't see any dow…

Naturally I'd assume in that case that dividends would be taxed at the same rate as earned income

What you want is an "integrated" tax system like Canada has, where individuals receive "dividend tax credits" which are approximately equal to the taxes paid by the corporation.

All of a company's wealth is ultimately destined for somebody's pocket. Why can't we just tax it when it gets there, and abolish corporate taxes?

Compounding investment returns. If I loan you $1000 at 5% interest, I have to report $50/year of interest income on my tax return. Since I pay approximately 40% income tax (federal + provincial), I have an after-tax return of 3% compounding annually. If you abolish corporate income taxes, then I could have my company loan you the $1000 and receive the interest; it would then compound at 5% per year, and I would only pay income tax when the money is paid out to me as a dividend. In effect, you would be turning corporations into tax shelters.

Now, this isn't absolutely insurmountable; in fact, Canada already has different tax rates for "active business income" vs. investment income, and theoretically you could have a 0% rate on "active business income" and a 40% corporate tax rate on investment income (which would then create non-taxable dividends when finally paid out to individuals). But you'd still have the complication that "retain profits" produces a different taxation result than "pay out profits as dividends, then raise more funding a few years later".

Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#19

Post by kelnos »

alan_cx wrote: post #4
nodata wrote: post #3

Earlier quoted context omitted.

Can you explain your comment a little bit? From the way I understand it, this is a way to get large companies to pay the same amount of tax as smaller companies.

To me it reads like the usual right wing rhetoric, and that any tax collection is some form of evil socialism. Not quite sure how these people expect their flag waving military, for example, to be funded without the big corporation paying their fair share, but there you go. Never understood why many Americans don't see paying tax as the ultimate act of patriotism, paying for the country they claim to love. They love…

I love my country in spite of what our government has done to it in recent decades. I do not support the majority of dollars the US government spends, but feel powerless to effect change.

I resent paying for foreign wars I don't agree with, for secretive government agencies that unnecessarily pry into our private lives, and for ridiculous departments like the DHS which are largely ineffective and throw money away.

I would love to pay more for public education and a public healthcare system. I would love to pay more for innovative, effective solutions to poverty and homelessness. I'm happy to pay for the maintenance of our roads and for services like police and fire departments and public libraries.

Unfortunately, there's no good way for me to express this preference. All viable political candidates at the national level want to spend money on too many things I do not want for the voting apparatus to be of any help here.

So I sit back and grudgingly pay my taxes, hoping that people of like mind but with more political acumen and drive than I have will be able to make sense of the mess eventually.

Re: US tech firms make eleventh-hour attempt to halt tax avoidance reforms

#20

Post by netcan »

Since this became such a public debate issue in Europe, I've actually more or less landed on the idea that maybe corporate taxes (taxing profits) are a lost battle. The only way to really combat it is for different countries to collude and perhaps sanction tax havens. Even then, I doubt they will be able to raise much tax.

Modern tax systems are diverse by design: sales tax/VAT. Excise/sin taxes, income taxes, CGT, employer taxes, etc. The mix is designed to reduce volatility. It's also designed to max out tax revenue while avoid damaging the economy by discouraging things like labour, savings, or other important activities too much. The effective maximum revenue for a country to collect in taxes appears to be somewhere in the 35%-45% of GDP range. After that diminishing returns on taxes kick in. Most euro countries are taxing (or rather spending) near that max. So, they can't afford to let corporate taxes.

Problem is that corporate tax is unavoidably problematic. Large multinationals can arrange their activities (not just their paperwork) depending on taxes. I doubt an single country want to create a tax the ensures large companies avoid setting up local subsidiaries within their borders. The end result is a different set of rules for the large and/or sophisticated that is more lenient than the rules on small companies.

Personally, I would rather see corporate tax abolished than see it applied in such a way that it discriminates against small companies.

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