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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

#121

Post by kokey »

jusssi wrote: post #61
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…

An alternative to attempting to tax companies, is to tax people. There is no company that would just exist to forever eat money away from the public. Eventually they intend to pay the profits to a real person (either in money, or other benefits). Taxing that dividend or salary transaction might be simple enough to just work. And you have a real person to put to jail when the taxes were avoided.

We already tax people and most of the noise about companies not paying tax basically ignores that because it makes a good headline. I'm of the opinion that taxes on corporations are a bit of a nonsense tax. If they sell goods or services, there's sales tax. If their employees and shareholders receive salaries and profits, they get income and dividend tax. When we see a headline of a company paying almost no taxes, they've usually paid more in sales taxes and their staff and shareholders will be paying more in taxes than corporation taxes can ever dream of bringing in. Taxes on profits is difficult, profits can be moved easily. Tax profits too much and companies simply won't make any profits. Sales tax is good since it goes to the actual market the product is sold into, it's the cost of having access to that market. Income/dividend taxes brings in the money where the employees and shareholders live and spend their money, so it's the cost of benefiting from the society they live in. We can quibble about loopholes and levels around those taxes because they make sense, but corporation taxes is never going to bring in enough money to warrant all the noise.

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

#122

Post by [deleted] »

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…

[deleted]

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

#123

Post by beefield »

jusssi wrote: post #111
beefield wrote: post #77

Earlier quoted context omitted.

Forever is a long time. In practice there are wealthy people willing to pass vast majority of their wealth through generations. Personally I don't think it is fair or likely healthy in the long term for the society to let vast majority of the income/wealth of wealthy and thus powerful people to go untaxed - even[1] if that income/wealth is not consumed. [1] Actually it should be "especially if it is not consumed". In…

> Personally I don't think it is fair or likely healthy in the long term for the society to let vast majority of the income/wealth of wealthy and thus powerful people to go untaxed But this is already happening even with the current system that attempts to tax company profits, isn't it? My point is that taxing the person instead of the company would enable taxing the wealthy. There are already quite severe restrictio…

If we transform the taxation so that the income/profit of people and corporations is no more taxed, but the tax revenue is still somehow fairly collected, I am all in. It is just that typically when people propose stopping taxing corporate profits, they offer nothing to replace the tax.

One of my pet ideas is to stop taxing income/profits of limited liability companies completely. Instead make the the companies issue a certain percentage of their stock to the tax authorities annually. For public companies, Tax authorities just sell the shares in exchange. For private ones, the shares would be auctioned publicly.

Outcomes: - No negative tax cashflows to companies. Ever. - No need for creative tax accounting. Only ones left to fool with accounting are the owners of the companies. - Strong incentive to simplify corporate structures. Any company owned by a company would add to tax burden of the ultimate owners.

(For private companies, it might be nice to allow them to ask to postpone the auctions for e.g. 5 years if they want to keep the control of the company but are short of cash to buy the stock from the auction)

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

#124

Post by Broken_Hippo »

yeahNo00 wrote: post #119
gnicholas wrote: post #79

Earlier quoted context omitted.

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…

So you don’t have any emotional opinions on the work of others that has real effect on your life? Physicists can be wrong. Economists can be wrong. At some point technical nonsense becomes “imperfect people choosing.” A fix might simply be change tax laws? Kind of like how the billionaires changed them to be less distributed. But you don’t have feelings enough about economics being purposely wielded at scale to manip…

I don't think the poster was saying any of this. They were simply stating that the post was informational and that they weren't offering any commentary on the situation, just giving facts.

I mean, sure a physicist can be wrong, but if they are giving facts as are currently accepted by the community or even as they know them, it isn't an emotional statement of whether they agree. It is just that: Facts as we know them, to the best of our ability and not giving the commentary with it.

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

#125

Post by csallen »

yeahNo00 wrote: post #119
gnicholas wrote: post #79

Earlier quoted context omitted.

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…

So you don’t have any emotional opinions on the work of others that has real effect on your life? Physicists can be wrong. Economists can be wrong. At some point technical nonsense becomes “imperfect people choosing.” A fix might simply be change tax laws? Kind of like how the billionaires changed them to be less distributed. But you don’t have feelings enough about economics being purposely wielded at scale to manip…

He said "laws of physics" not "physicists." You're deliberately misreading his point, which undermines whatever point you're trying to make.

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

#126

Post by rapht »

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…

Tax loopholes (and tax lawyers) exist only because there is sufficient complexity in the tax system/tax code.

This is because the tax system actually has 2 conflicting uses: (i) collect revenue for the gov't and (ii) create incentives/disincentives that are meant to push taxpayers in ways that are deemed beneficial, be it to the economy or to certain policy like environment, housing, etc.

If you drop (ii) you can end up with an extremely simple tax code as most of the tax code complexities deal with those incentives/disincentives.

So the question is: to what extent can you do away with (ii), or more generally with tax code complexity?

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

#128

Post by blueblisters »

redis_mlc wrote: post #9
gscott wrote: post #7

Earlier quoted context omitted.

People have tried and the problem is when you want to bring the money back to use it on something. Say you setup a licensing company on an island nation that use to then charge yourself $10,000 a month to license the software you wrote... that you transferred there. Now lets say you want to buy a house and you bring back a certain amount of money. That money is taxable and that is where people mess up they don't repo…

You're partly correct but here's an overview of what's really going on. The money is "brought back" (if it even left) into segregated accounts in the US. Most of that US off-shore money is in New York to avoid currency risks, etc. Then those accounts are used as collateral (if needed. I doubt if anybody says to Apple, "Where's your collateral?") for loans. Also, the biggest money havens in the world are 2 US states,…

> The money is "brought back" (if it even left) into segregated accounts in the US. Most of that US off-shore money is in New York to avoid currency risks, etc. Then those accounts are used as collateral (if needed. I doubt if anybody says to Apple, "Where's your collateral?") for loans.

This is super interesting. stupid question perhaps: does Apple have the reserves to move a small currency if they decide to convert their cash all at one go?

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

#129

Post by kortilla »

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…

> 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 loophole, I would go to prison. Why isn't the same standard applied to rich companies?

The same standards do apply, the loopholes just don’t really exist down at a normal individual income level.

Calling it a “loophole” is a bit of a misnomer as well since it’s just the regular law. Being a subsidiary of another company is extremely common and isolating particular resources into subsidiaries with exclusive licensing/usage agreements for liability/accounting/ownership/management purposes is extremely common.

> These tax shenanigans would stop if laws were enforced.

Again, the laws are enforced. Tax avoidance schemes operate within the bounds of the law. It sounds like you’re confusing with “tax evasion”, which is illegal and is enforced.

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

#130

Post by chewz »

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…

> How to fix it?

Make a tax code as simple as possible. So simple there is no room for interpretation.

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