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U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

nytimes.com

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Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#51

Post by calbear81 »

tmaly wrote: post #44
benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

Also, the US has one of the highest corporate tax rates in the world. If you can go to Ireland and pay something close to 10%, its a no brainier. The tax rates are pretty crazy in the US if you think about it. A single person small business just getting started still has to pay 33% of their profit even if their profit is $1,000 for the entire year.

I'm not a tax expert but this statement is true if you only look at the statutory corporate tax rate before deductions and tax credits are taken into account. Once those are done and you used a weighted average based on country size, then the US is not that much higher (http://www.forbes.com/sites/taxanalysts/2015/03/25/the-truth...).

I don't disagree that tax reform is necessary but taxes help pay for the infrastructure, safety, and public goods that we all tap into and take advantage of.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#52

Post by adventured »

tdaltonc wrote: post #31

Can someone explain the history of the US worldwide tax regime? Why is the US so out of step with the rest of the world on this?

Here:

http://blogs.wsj.com/washwire/2012/05/18/tax-history-why-u-s...

And [pdf file]:

http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=...

tldr; it's a century old patch-work remnant from the Civil War to WW1 era. The US Government at this point does not want to give it up, because it means giving up tax revenue (and thus has implications for how much they can spend), and there's nothing they hate more.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#54

Post by cr1895 »

sschueller wrote: post #13
benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

>As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport.

This is not quite so clear cut. Yes, as an American working and living abroad you've got the privelege of forever dealing with the IRS/FBAR, some banks who simply won't talk to you because you're American, and probably an expensive tax professional to sort it all out for you so you avoid the devastating penalties for screwing it up.

But, most people won't actually be paying anything to the US government. I'm strongly opposed to taxation by citizenship, but let's not give the impression that everyone who lives abroad is paying twice.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#55

Post by rayiner »

sschueller wrote: post #13
benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

> And the US double taxes their citizens living abroad the same way.

The tax code has provisions to avoid "double taxes" on foreign income. You file Form 1116 to claim credit for taxes you paid to a foreign country as an offset against your U.S. tax liability.[1] That tax credit is separate from the income exclusion, which excludes the first ~$100k of foreign income from U.S. taxation.

Generally, your total tax liability will be your foreign liability on the first $100k, plus the greater of your U.S. liability or your foreign liability on the remainder. I don't see the big injustice, honestly. It's very similar to how state income taxes work in the U.S. where people are citizens of one state but work in another.

[1] Corporations file Form 1118 to claim similar credits.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#56

Post by siberianbear »

colechristensen wrote: post #26
sschueller wrote: post #13

Earlier quoted context omitted.

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

The fist $100,000 income isn't taxed this way[1]. And it's not abhorrent. If you earned enough money to think it's advantageous to lose one of the most valuable passports in the world, you probably earned that money in large parts due to the support of the people and infrastructure of the United States. You don't get to drop your duties once you win big. [1] $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015

That's only true for "earned" income. Income from dividends, interest, capital gains, etc is still taxed from the first dollar just as if you were residing in the USA.

Furthermore, if you earn income as a freelancer, it's likely that you still have to pay self-employment tax.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#57

Post by [deleted] »

drcoopster wrote: post #41
kspaans wrote: post #24

Earlier quoted context omitted.

See my sibling reply, it's _not_ double-taxation. If a US citizen works in a foreign country and happens to pay higher income taxes than they would in the US (e.g. in Canada), the US won't charge them any extra.

But it is. If I earn $120k in let's say the Netherlands, I pay NL taxes on all of it and US taxes on about $20k of it. I'm getting double-taxed on the amount over $100k. (Nice round numbers might not be accurate, but the idea is still there.)

[deleted]

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#58

Post by Dylan16807 »

cr1895 wrote: post #40
colechristensen wrote: post #26

Earlier quoted context omitted.

The fist $100,000 income isn't taxed this way[1]. And it's not abhorrent. If you earned enough money to think it's advantageous to lose one of the most valuable passports in the world, you probably earned that money in large parts due to the support of the people and infrastructure of the United States. You don't get to drop your duties once you win big. [1] $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015

>you probably earned that money in large parts due to the support of the people and infrastructure of the United States Or, you know, not. It's ridiculous to suggest that if you earn money abroad, American people and infrastructure are largely responsible for your success. It's in Dutch, but feel free to translate: http://nos.nl/nieuwsuur/artikel/2044332-amerikaanse-belastin...

The claim was "probably". Anecdotes aren't very helpful here, only statistics. For example, I could say that if you're an American citizen you probably have brown eyes. A million counterexamples wouldn't make that wrong.

Edit: Why so many downvotes? I'm not saying he's right, just that cr1895 is arguing against a totally different claim.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#59

Post by theandrewbailey »

kspaans wrote: post #18
sschueller wrote: post #13

Earlier quoted context omitted.

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

That's not double-taxation if the US has a tax treaty with the other nation (which is does with most nations). You get tax credits for foreign income taxes paid such that you pay max(foreign_tax, us_tax).

(IANATA) If you get tax credits, wouldn't you pay us_tax-foreign_tax if us_tax>foreign_tax ?

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#60

Post by drzaiusapelord »

tmaly wrote: post #44
benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

Also, the US has one of the highest corporate tax rates in the world. If you can go to Ireland and pay something close to 10%, its a no brainier. The tax rates are pretty crazy in the US if you think about it. A single person small business just getting started still has to pay 33% of their profit even if their profit is $1,000 for the entire year.

Corporate tax in the US is like your personal income tax. The rate is kinda bullshit because you get so many deductions and exclusions.

The term you're looking for is "effective tax." For US corporations it was 12.6% according to the GAO in 2010:

http://money.cnn.com/2013/07/01/news/economy/corporate-tax-r...

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