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Trade Dollars with other startups. Book it as revenue

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Re: Trade Dollars with other startups. Book it as revenue

#161

Post by derriz »

stephen_cagle wrote: post #100
gaiagraphia wrote: post #43

Earlier quoted context omitted.

VAT is a joke of a tax. It's quite incredible why the government concerns itself with chasing people's accounts around. What a waste. If something can't be monitored with minimal effort, it only serves to enrich the legal/accountancy/hr/admin priest caste. The amount of labour wasted on moving numbers around numbers is staggering. edit: Between the government and businesses, VAT costs 5% in admin fees to raise. In a…

I've multiple times done a minor dive into why a VAT tax is seen as a reasonable tax? It... seems as regressive as a sales tax with even more layers of intervention? I've always eventually lost interest in trying to make sense of it, but they sure seem popular in Europe so there must be something to them? My current belief is that there should really just be a wealth tax on assets (Federal) and a land value tax on la…

VAT is the simplest of all taxes for businesses to deal with. VAT taxes business profits in a simple and completely unavoidable way before companies have a chance to throw their best accountants, lawyers and consultants at the task of minimizing corporation tax.

VAT is based on flows of cash so is trivial to calculate and to collect. Wealth taxes require valuation and are just too easy to minimize and are expensive to calculate, and difficult to extract. (E.g. I own shares in a family member’s small business via a loan I provided. What’s that shareholding worth for the purposes of a wealth tax?)

VAT acts also as a sales tax as well as a tax on “added value” - business profits - so replacing two separate tax regimes with a single trivial-to-calculate, difficult-to-avoid (requiring two parties to conspire together), easy-to-collect (cash-flow based) tax.

Without getting into the politics of taxation, it’s the best designed tax there outs.

Re: Trade Dollars with other startups. Book it as revenue

#162

Post by thih9 »

gamblor956 wrote: post #153
thih9 wrote: post #149

Earlier quoted context omitted.

Good luck explaining that to the IRS.

The IRS would be fine worth it if taxable income is unchanged. Businesses are taxed on their net income, not get gross.

You mean they are fine with the things they won’t notice? Perhaps that is true.

Re: Trade Dollars with other startups. Book it as revenue

#163

Post by jjav »

elil17 wrote: post #113
scarby2 wrote: post #88

Earlier quoted context omitted.

This isn't a good take. > If you do the work but undervalue it, it's likely tax fraud. A company can value it's services as it chooses. If the work is performed for $1 or $5000 the government doesn't get a say in that. > you do the work but overvalue it, it's likely investor fraud. Quite possibly. Assuming this was done with the intention of misrepresenting your revenue and gaining investment. >The vendor may have be…

> A company can value it's services as it chooses. If the work is performed for $1 or $5000 the government doesn't get a say in that. That's simply not true. You may get a certain amount of leeway, but it has to be reasonable.

> That's simply not true. You may get a certain amount of leeway, but it has to be reasonable.

Where have you seen this?

When I was doing consulting I could charge whatever rate I wanted. Usually around $200 but went up to $500 and down to $25 when doing a favor. Same type of work.

At the enterprise level this is even more common. Nothing has a fixed price and the same service can be sold at wildly different prices to different customers based on endless variables.

Re: Trade Dollars with other startups. Book it as revenue

#165

Post by stephen_cagle »

derriz wrote: post #161
stephen_cagle wrote: post #100

Earlier quoted context omitted.

I've multiple times done a minor dive into why a VAT tax is seen as a reasonable tax? It... seems as regressive as a sales tax with even more layers of intervention? I've always eventually lost interest in trying to make sense of it, but they sure seem popular in Europe so there must be something to them? My current belief is that there should really just be a wealth tax on assets (Federal) and a land value tax on la…

VAT is the simplest of all taxes for businesses to deal with. VAT taxes business profits in a simple and completely unavoidable way before companies have a chance to throw their best accountants, lawyers and consultants at the task of minimizing corporation tax. VAT is based on flows of cash so is trivial to calculate and to collect. Wealth taxes require valuation and are just too easy to minimize and are expensive t…

Hmm, I'd never thought about the fact that a VAT tax requires two sides of a party in order to defraud. That is kind of neat and a beneficial property of VAT taxes I had never considered.

Re: Trade Dollars with other startups. Book it as revenue

#166

Post by stephen_cagle »

Arodex wrote: post #141
stephen_cagle wrote: post #100

Earlier quoted context omitted.

I've multiple times done a minor dive into why a VAT tax is seen as a reasonable tax? It... seems as regressive as a sales tax with even more layers of intervention? I've always eventually lost interest in trying to make sense of it, but they sure seem popular in Europe so there must be something to them? My current belief is that there should really just be a wealth tax on assets (Federal) and a land value tax on la…

It is a progressive tax. It is purely neutral when considered as a sales tax (same percentage, whether you buy a cheap loaf of bread or a luxury gizmo), regressive as a share of income when you consider the poor expend more of their revenue into daily expenditures (whereas the rich put a greater proportion into savings), but back to neutral when you consider savings are meant to be used one day anyway, and slightly p…

I feel like I am saying regressive in the sense that it effects the poor more than the rich, full stop.

Being neutral relative to a sales tax is a confusing starting point. I consider a sales tax to be a truly bad tax, as it disproportionately effects the poor.

Re: Trade Dollars with other startups. Book it as revenue

#167

Post by stephen_cagle »

Flundstrom2 wrote: post #142
stephen_cagle wrote: post #100

Earlier quoted context omitted.

I've multiple times done a minor dive into why a VAT tax is seen as a reasonable tax? It... seems as regressive as a sales tax with even more layers of intervention? I've always eventually lost interest in trying to make sense of it, but they sure seem popular in Europe so there must be something to them? My current belief is that there should really just be a wealth tax on assets (Federal) and a land value tax on la…

There used to be a wealth tax and land value tax in Sweden (aka world champion of taxation), but they were abolished simply because being taxed yearly on an fixed asset doesn't mean you have the liquidity to pay the taxes from your income. They had also caused the some of the wealthiest people in the UK to be Swedes, IKEA being Swiss and Dutch, and a lot of other movements of capital to other countries. All in all, w…

Yeah, I hear you. And it is historically true.

But why can't we just say "2% over a billion, 1% over a million; 50% if you choose to move your assets out of the country". It does not seem that unreasonable to insist that you keep your monies in the country that lead to your wealth?

Re: Trade Dollars with other startups. Book it as revenue

#168

Post by gamblor956 »

cjbgkagh wrote: post #156
gamblor956 wrote: post #154

Earlier quoted context omitted.

Tax fraud is treated the same as other crimes and is subject to the same evidentiary threshold.

It depends on jurisdiction, the US is unusual, most countries they’ll reassess you and it’s on you to prove them wrong. I did have to look it up, I didn’t know that the US was different in this way. I did have the California tax authority make a mistake and take money directly out of my account and there didn’t appear to be a way to fight it. It wasn’t enough to be worth hiring a lawyer over so I let it go but it did…

I'm a tax lawyer...

CA FTB does not take money out of your account unless you have explicitly authorized it to do so and it definitely does not do so automatically. It only pulls specifically authorized amounts when specifically authorized to do so unless you have a garnishment order issued by a court. (I deal with the CA FTB on a daily basis.)

You're also wrong about most other countries as well, with the exception of France.

Re: Trade Dollars with other startups. Book it as revenue

#169

Post by gamblor956 »

thih9 wrote: post #162
gamblor956 wrote: post #153

Earlier quoted context omitted.

The IRS would be fine worth it if taxable income is unchanged. Businesses are taxed on their net income, not get gross.

You mean they are fine with the things they won’t notice? Perhaps that is true.

No, depending on your accounting method the transaction we're discussing may be disregarded, so the net economic position of the taxpayers is no different. As a result the IRS is generally indifferent...so long as you maintain that method of accounting for future similar transactions.

Re: Trade Dollars with other startups. Book it as revenue

#170

Post by singleshot_ »

bryanlarsen wrote: post #143
singleshot_ wrote: post #122

Earlier quoted context omitted.

Article 1 judges in US Tax Court?

And the judges are likely to be looking for good faith as much or more than technical accuracy in the valuation. So the IRS is not going to bring you in front of the tax judge unless they have evidence of bad faith. OTOH, most work is not "unique, innovative and visionary" and has a relatively transparent fair market value.

Typically how it works is you pay the taxes assessed, then you sue in Tax Court.
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