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Some Corporations Pay a Lot More Taxes Than Others

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Re: Some Corporations Pay a Lot More Taxes Than Others

#31

Post by benmmurphy »

quuquuquu wrote: post #6
m777z wrote: post #3

This is because some corporations make a lot more profit than others. "Amazon's corporate income tax bill is so small, though, because its corporate income (aka profit) is so small. Wal-Mart's pretax income since 2008 has totaled $209 billion, Amazon's less than $11 billion. So while Amazon's rise to fifth-biggest market cap in the world on the strength of such small earnings is a fascinating and perhaps disturbing p…

The author is acting like this wasn't an intended phenomenon. I don't understand the mental gymnastics required to NOT see this. Bezos decided, "we need to grow, and to grow we need equipment and real estate, so I'm going to spend the profits on those assets, since we will get more bang for our buck than just holding onto after-tax cash." A corporation doesn't just accidentally conduct business that way lol, for bett…

I didn't think you could spend revenue directly on assets without booking it as profits and paying tax on it. My understanding was you can discount part of the cost of an asset each year against revenue but not all at once.

Re: Some Corporations Pay a Lot More Taxes Than Others

#32

Post by justherefortart »

ams6110 wrote: post #23
danmaz74 wrote: post #18

Earlier quoted context omitted.

Yes, and what happens when those corporations keep hundreds of billions in profits in the bank for years - see eg Apple?

They paid income tax on the profits (at least the profits earned in the USA). Apple was the number one tax payer on the list by a wide margin. Are they supposed to be taxed on their bank balances also?

They ship a lot of those USA profits to Ireland because that's where they shipped all their "intellectual property". It's either ignorant or disingenuous to say that Apple paid the proper tax on their US income.

It's a wonderfully "liberal" scam they've got going.

Re: Some Corporations Pay a Lot More Taxes Than Others

#33

Post by twic »

rossriley wrote: post #11
zimablue wrote: post #8

Earlier quoted context omitted.

I think that what you're suggesting (based on a vague understanding of the UK tax system) is abolishing corporate taxes and taxing dividends as income? I'd be curious to hear someone who knows more accounting's view on this. I've always thought that the answer was to have wealth taxes, easier to avoid but surely what we should actually aim for.

Well the problem is that you just create a loophole. You can already avoid paying any corporation tax by taking money out of a company as salary. In the UK you have dividend tax credit so effectively when you take a dividend you get the tax back that has already been paid (as corporation tax). So both those reasonable ways of extracting money from a company allow you to not pay any additional tax above what income ta…

This doesn't seem insuperable. The rule could be that any dividend paid to anyone other than a UK taxpayer, or another UK company, is taxed at the top rate of income tax. That would make such a shunt pointless.

You could then extend the existing international double taxation agreements to cover these dividends. So, for example, if a dividend is paid to a Dutch taxpayer, it is not taxed at source, but as income. You might want to retain the current UK arrangement in this situation, though, so as to keep some of that tax revenue in the UK. You wouldn't extend these arrangements to tax havens.

Manoeuvres like the Double Irish or whatever would still get around this, and would still need to be attacked in the way they are (or at least should be) now.

You would need to extend the spirit of this rule to share repurchases, which might be tricky.

Re: Some Corporations Pay a Lot More Taxes Than Others

#34

Post by sethev »

creaghpatr wrote: post #9
sethev wrote: post #7

It's hard to imagine a tax that would be sensitive to this difference unless it was a tax on market cap, which would be very odd because shareholders are the owners. So it would be a tax on one entity for the value of assets owned by another.

Startup stock options, if you exercise before a liquidity event, are given a cap gains tax based on the de facto market cap.

Right - that's a completely different topic though. That's an individual paying taxes on a gain that they've realized. Not a company paying taxes based on other people's gains.

Re: Some Corporations Pay a Lot More Taxes Than Others

#35

Post by danmaz74 »

grandalf wrote: post #28
danmaz74 wrote: post #18

Earlier quoted context omitted.

Yes, and what happens when those corporations keep hundreds of billions in profits in the bank for years - see eg Apple?

If shareholders do not demand the money as a dividend and prefer instead to have it kept in the company's control, then so be it. Shareholders in Apple want Apple to be able to make big investments or acquisitions and are willing to let the money sit there rather than take it as a dividend. This would not be true for most firms.

"So be it", you say. In other words, average people will need to pay those taxes, instead of very rich people that don't even care about getting dividends. Seems fair to me.

Re: Some Corporations Pay a Lot More Taxes Than Others

#36

Post by danmaz74 »

ams6110 wrote: post #23
danmaz74 wrote: post #18

Earlier quoted context omitted.

Yes, and what happens when those corporations keep hundreds of billions in profits in the bank for years - see eg Apple?

They paid income tax on the profits (at least the profits earned in the USA). Apple was the number one tax payer on the list by a wide margin. Are they supposed to be taxed on their bank balances also?

They paid income tax on the profits generated in the USA, but not those generated eg in the EU.

Re: Some Corporations Pay a Lot More Taxes Than Others

#37

Post by joefourier »

zimablue wrote: post #8
grandalf wrote: post #2

This is why corporate taxes are a dumb idea. Firms should not keep one set of books for management accounting and another set that they use for tax purposes. When money is paid to an individual, tax it as income tax. Very simple. Don't give firms an incentive to act as tax shelters or tax avoiders. Think about all the legal fees that have been spent by the firms on that list to avoid and reduce corporate taxes. It's…

I think that what you're suggesting (based on a vague understanding of the UK tax system) is abolishing corporate taxes and taxing dividends as income? I'd be curious to hear someone who knows more accounting's view on this. I've always thought that the answer was to have wealth taxes, easier to avoid but surely what we should actually aim for.

Estonia takes an interesting approach - profits are only taxed when they are taken out as dividends. There is thus essentially no corporate tax, as companies can accumulate profit and not have it taxed until it is distributed to shareholders.

Re: Some Corporations Pay a Lot More Taxes Than Others

#38

Post by jib »

grandalf wrote: post #28
danmaz74 wrote: post #18

Earlier quoted context omitted.

Yes, and what happens when those corporations keep hundreds of billions in profits in the bank for years - see eg Apple?

If shareholders do not demand the money as a dividend and prefer instead to have it kept in the company's control, then so be it. Shareholders in Apple want Apple to be able to make big investments or acquisitions and are willing to let the money sit there rather than take it as a dividend. This would not be true for most firms.

It sure would be in Jib Inc, the company that will launch about 5 minutes after no corporate taxes and will handle all of my personal finances. :)

I'd pay myself a very basic salary, and if I needed emergency cash I could always borrow against my holdings in Jib Inc until I could adjust my salary appropriately.

That would let me defer paying tax indefinitely on anything that I don't need for day to day living, and I would be able to play the margins on a number of major expenses as well, with very little overhead work, since I dont need to worry about taxes for corporate income anymore.

Re: Some Corporations Pay a Lot More Taxes Than Others

#39

Post by gnicholas »

benmmurphy wrote: post #31
quuquuquu wrote: post #6

Earlier quoted context omitted.

The author is acting like this wasn't an intended phenomenon. I don't understand the mental gymnastics required to NOT see this. Bezos decided, "we need to grow, and to grow we need equipment and real estate, so I'm going to spend the profits on those assets, since we will get more bang for our buck than just holding onto after-tax cash." A corporation doesn't just accidentally conduct business that way lol, for bett…

I didn't think you could spend revenue directly on assets without booking it as profits and paying tax on it. My understanding was you can discount part of the cost of an asset each year against revenue but not all at once.

Depends on what you're spending on. If you're spending on capital equipment, it's depreciated and spread over many years. But if it's discounting your sales so that you have razor-thin profit margins, then you're just cutting your income which directly cuts your current-year taxes.

Re: Some Corporations Pay a Lot More Taxes Than Others

#40

Post by woah »

jib wrote: post #38
grandalf wrote: post #28

Earlier quoted context omitted.

If shareholders do not demand the money as a dividend and prefer instead to have it kept in the company's control, then so be it. Shareholders in Apple want Apple to be able to make big investments or acquisitions and are willing to let the money sit there rather than take it as a dividend. This would not be true for most firms.

It sure would be in Jib Inc, the company that will launch about 5 minutes after no corporate taxes and will handle all of my personal finances. :) I'd pay myself a very basic salary, and if I needed emergency cash I could always borrow against my holdings in Jib Inc until I could adjust my salary appropriately. That would let me defer paying tax indefinitely on anything that I don't need for day to day living, and I…

That's called "piercing the corporate veil" and nobody is going to fall for it.
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