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Facebook tax court trial begins over Ireland offshore deal

reuters.com

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Re: Facebook tax court trial begins over Ireland offshore deal

#61

Post by Sabinus »

asveikau wrote: post #44
TheSpiceIsLife wrote: post #26

Earlier quoted context omitted.

I understand what you’re trying to say here. And there’s an argument to be made in the other direction too: everyone should be doing everything they legally can, and where it makes financial sense to exert the effort, to avoid paying any more tax than they have to... because giving money and power to politicians is like giving whisky and car keys to teenage boys.

> And there’s an argument to be made in the other direction too: everyone should be doing everything they legally can, and where it makes financial sense to exert the effort, to avoid paying any more tax than they have to... I hear this a lot and I kind of disagree with the sentiment. I think it's rooted in petty selfishness. If you have enough money, as these companies surely do, good for you, ok. The attitude that…

Apparently some firms used to be like that. Benevolent societies rather than money making machines. Then globalisation happened and those companies were competed out of the market by aggressive multinationals or low wage countries.

Re: Facebook tax court trial begins over Ireland offshore deal

#62

Post by Sabinus »

seibelj wrote: post #15
bpodgursky wrote: post #12

Earlier quoted context omitted.

This is a 100% reasonable policy, but it's a really hard sell for people who don't understand how business income actually works, and how the money would be captured by far more functional taxes as dividend income or cap gains. I don't think your comment is going to do well on HN. Maybe leave INCREASE CAPITAL GAINS in all caps. Or, CAPTURE THE SAME MONEY AS DIVIDEND INCOME OR CAPITAL GAINS. Perhaps: IT IS THE SAME MO…

Many of my comments do poorly on HN, but I’ll keep writing them because alternative opinions to the hive mind are valuable. I may even convince a few people!

I liked the comment thread you started. Thanks for bringing your ideas here and defending them in a reasonable and rational manner.

Re: Facebook tax court trial begins over Ireland offshore deal

#63

Post by MarkMc »

ThrowAway14592 wrote: post #2

Is this actually illegal though? Or is it just clever exploitation of the rules? Tax avoidance is not the same as evasion.

It should be illegal. The company has a strong incentive to undervalue the asset, and 98% of the time IP assets are transferred to a related overseas party it is to minimize tax.

Countries would be better off if they simply did not allow IP assets to be transferred to a subsidiary in a different country. The IP stays in the country where it was created, or else sold on the open market.

Re: Facebook tax court trial begins over Ireland offshore deal

#64

Post by stkdump »

jdkee wrote: post #24
BurningFrog wrote: post #17

Earlier quoted context omitted.

You can make a good argument* that taxing corporations is weird anyway, since they're abstract legal concepts. Taxing the income real people get paid from the corporation would be the logical, and much simpler system. * You can of course also make a decent argument against this :)

Corporations have similar legal rights to corporeal persons. Freedom of speech, access to the legal system, etc. As a result of having similar rights, they should be taxed as corporeal persons. It is not rocket science to conclude that corporations in the U.S. should be taxed at the same effective tax rate as real persons.

Corporations just tax their profit. Persons have to tax all their income (with minimal exceptions). How is that fair?

Re: Facebook tax court trial begins over Ireland offshore deal

#65

Post by dnautics »

dodobirdlord wrote: post #57
jdkee wrote: post #24

Earlier quoted context omitted.

Corporations have similar legal rights to corporeal persons. Freedom of speech, access to the legal system, etc. As a result of having similar rights, they should be taxed as corporeal persons. It is not rocket science to conclude that corporations in the U.S. should be taxed at the same effective tax rate as real persons.

Corporations are just bundles of stuff that people own. They have legal personhood as a convenient legal fiction because it would be obnoxious if all of the owners had to get together to sign things, and they have rights because people don't lose any of their individual rights just because they happened to form a corporation together. But at the end of the day, bundles of stuff. Economists seem to be broadly in agree…

What about the inverse. What if individuals didn't pay an income tax but corporations did, kind of as a "user fee" for the privilege of having limited liability.

Re: Facebook tax court trial begins over Ireland offshore deal

#66

Post by dnautics »

manigandham wrote: post #42
coral-snake wrote: post #16

Earlier quoted context omitted.

How would you avoid companies-as-expense accounts? If I form "Coral-Snake & Co.", wouldn't I be able to pay 0% taxes by just directing all income/expenses into that shell? (Granted, I don't understand basically anything about tax law, so maybe this is already a well-defined problem with a well-defined solution.)

You can already show a $0 profit today and pay no income tax, but a business that generates income will always pay sales, payroll and other taxes anyway.

No, you'd have to show $0 income (ignoring for a moment the low 0% tax bracket). So, very much negative profit, unless you're not paying rent, fuel for your car, food, not to mention taxes like property taxes, sales taxes, etc.

Re: Facebook tax court trial begins over Ireland offshore deal

#67

Post by manigandham »

dnautics wrote: post #66
manigandham wrote: post #42

Earlier quoted context omitted.

You can already show a $0 profit today and pay no income tax, but a business that generates income will always pay sales, payroll and other taxes anyway.

No, you'd have to show $0 income (ignoring for a moment the low 0% tax bracket). So, very much negative profit, unless you're not paying rent, fuel for your car, food, not to mention taxes like property taxes, sales taxes, etc.

Corporate taxes in the US are based on business profits. $0 profit = $0 net income (gross income minus expenses) => $0 income tax.

There's no such thing as a negative profit. That's called a loss.

Re: Facebook tax court trial begins over Ireland offshore deal

#68

Post by pjc50 »

seibelj wrote: post #4

I truly wish that the corporate tax rate was 0. Not 25, not 15, but 0%. Then all of this ridiculous nonsense around crony capitalists lobbying for special tax breaks, “double Dutch Irish sandwiches”, and the insane discrepancies between big business and small business in regards to tax games would all go away. Just increase capital gains to match income tax and be done with all of this bullshit. Amazon pays an effect…

That allows the unlimited concentration of wealth which can then be used for political purposes.

Re: Facebook tax court trial begins over Ireland offshore deal

#69

Post by james1071 »

dodobirdlord wrote: post #57
jdkee wrote: post #24

Earlier quoted context omitted.

Corporations have similar legal rights to corporeal persons. Freedom of speech, access to the legal system, etc. As a result of having similar rights, they should be taxed as corporeal persons. It is not rocket science to conclude that corporations in the U.S. should be taxed at the same effective tax rate as real persons.

Corporations are just bundles of stuff that people own. They have legal personhood as a convenient legal fiction because it would be obnoxious if all of the owners had to get together to sign things, and they have rights because people don't lose any of their individual rights just because they happened to form a corporation together. But at the end of the day, bundles of stuff. Economists seem to be broadly in agree…

Maybe I am wrong on this, but I doubt that you have studied economics or have any idea what economists think.

The people that you are talking about are effectively lobbyists - policy entrepreneurs is the phrase, who appear in the media advocating for policies that benefit their clients.

Re: Facebook tax court trial begins over Ireland offshore deal

#70

Post by james1071 »

gimmeThaBeet wrote: post #55
cbanek wrote: post #7

Earlier quoted context omitted.

Well, I guess it depends on the interpretation of the rules. The point of contention seems to be the valuing of assets, which of course FB has incentive to not value highly: > The IRS argues that Facebook understated the value of the intellectual property it sold to an Irish subsidiary in 2010 while building out global operations, a move common among U.S. multinationals. Ireland has lower corporate tax rates than the…

IANAL, Retroactively going after the valuation of assets based on success years on is awkward at the least, and dangerous at the worst. FB is right, they were still pretty unproven in 2010. It took nearly 1.5 years after their IPO before they convinced people they could make money. I agree, it seems like they would be looking for evidence of undervaluing. But like, let's say you are discount potential cash flows. I d…

You don't need to be a lawyer to understand what this is all about and it certainly isn't hindsight, as you have suggested.

The reason why the IRS are challenging FB is that Apple's Irish tax arrangements became public and were very embarrassing to the US authorities, which were revealed not to be applying US law.

Now, to the matter of hindsight.

The essential point is that the transactions have to be a sham to work.

There is precisely no point in selling IP from a US subsidiary to one in Ireland at a fair price. That would just trigger an immediate taxable event in the US for no benefit whatsoever.

The transaction is by design intended to sell IP at a large undervalue and the game was to satisfy the US and Irish authorities, both of which were happy to play along.

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