611–620 of 817 posts
What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate. So, what? The tax rate of a country is now "artificial", because it will never be applied to all revenues from all companies, because th…
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That is a common misconception due to tax law changes in recent years. It used to be the case that a UK contractor paying themselves through this structure was significantly better off due to the large amount of dividend tax credits that were available. So let me outline how this works these days as I run up against this argument a lot. 1) Any income that comes into the UK Ltd company is taxed at the corporate tax ra…
Thanks for your very thorough reply! I will definitely run the numbers when I get back home. One thing I noticed from a first reading: You didn't include the expenses payments as income (intentionally or not), which is an extra £5000 a year that goes in to your personal bank account.
You do get reimbursed for those expenses if you make them via your own credit or debit card, otherwise if you use a company card for them you will never have that money touch your own bank account. I do agree that you benefit from being able to use "before tax" money to pay for some of your expenses.
The tricky thing about expenses is that not everything is allowed to be deducted as an expense. If for example you take your client out for a meal and a few drinks and you account for that as Business Entertaining, that amount is not eligible for tax relief and thus you cannot deduct that from your profits to reduce your company's taxable income. It will then get taxed at the company level.
What I am trying to show is that the argument that Freelancers in the UK "avoid" paying tax compared to permanent employees is not true anymore. Yes we do have the ability to plan our tax better. However there seems to be this idea from permanent employees that freelancers are paying only 10% income tax when that really is not the case. There is a slight benefit, and from the above example a little more than £1000. Obviously there are other options and scenarios with spouses being made directors of the company etc. But it is hardly reducing your tax to the 7% achieved by Apple.
One also takes a lot bigger risk since personal injury, illness and non-paying clients do have the ability to derail your earnings in a really big way. If you get the flu and are out for a week that hurts. Or heaven forbid you have an accident and are unable to work for a few months while recovering.
Most of the freelancers I know do it because of the freedom and flexibility they get out of it, not because there are substantial tax advantages.
I would be very interested to hear your thoughts after you have run the numbers yourself.
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They aren't, for the most part, doing anything illegal though. They are using the existing laws to their best advantage. The fix for this can't be trying to appeal to their morals. It would have to be something else that just limits the legal choices. Edit: If you disagree, are you saying that shaming them into not doing this solely on some moral compass is the right fix? Does that scale?
You're acting like laws are an unmoving fundamental property of the universe. In reality these very companies have reshaped the laws to their own advantage. Companies that lobby on tax policy demonstrably pay lower taxes; see e.g., https://sunlightfoundation.com/2012/04/16/lobby-more-pay-les...
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Monopolies are granted by governments Sometimes, sure. But far from exclusively. Monopolies arise naturally in unregulated markets. The free market has a natural solution to monopolies, it's called competition - startups. That’s like saying that natural selection is the solution to hereditary diseases. Not so comforting for those suffering now.
Do you have any examples of monopolies arise naturally in unregulated market?
As to how natural monopolies arise, Wikipedia has a good article: https://en.m.wikipedia.org/wiki/Natural_monopoly
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These companies evading taxes are responsible for increased hardship and suffering of a society as well, leeching off of the nations they exist in, and being able to outcompete the honest organizations and people in them. The damages are far greater than the tax avoided. "They are doing it too" isn't a valid excuse either.
They aren't, for the most part, doing anything illegal though. They are using the existing laws to their best advantage. The fix for this can't be trying to appeal to their morals. It would have to be something else that just limits the legal choices. Edit: If you disagree, are you saying that shaming them into not doing this solely on some moral compass is the right fix? Does that scale?
Shaming worked pushing dolphin safe fishing practices, for example.
Laws just codify society's morals. Sometimes by leading, mostly by lagging behind social norms.
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The fix can certainly involve appealing to morals and human responsibility. A company is, after all, just a group of people. This should be a very strong tactic considering how liberal Silicon Valley is. The major players preach constantly about progressive ideals, yet fail to do more than the minimum when push comes to shove. My business partner and I purposefully pay normal taxes, avoiding accountants' crazy tax re…
IANAL but it is my understanding that if those tax reduction schemes are legal many companies are legally bound by their stock holders to exploit them, or else be found negligent in their duties.
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The fix can certainly involve appealing to morals and human responsibility. A company is, after all, just a group of people. This should be a very strong tactic considering how liberal Silicon Valley is. The major players preach constantly about progressive ideals, yet fail to do more than the minimum when push comes to shove. My business partner and I purposefully pay normal taxes, avoiding accountants' crazy tax re…
Could shareholders sue if Apple “opted out” of their legal tax avoidance strategy? We are talking about some very material money here, not an executive bonus pool sized chunk of cash, but like national GDP sized money.
What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate. So, what? The tax rate of a country is now "artificial", because it will never be applied to all revenues from all companies, because th…
Apple aren't breaking any laws. They, and other of their size, can just ~bribe~ lobby politicians to make special little loopholes for them, loopholes you can't take advantage of, but you can't pay an army of accountants. But, honestly, I can't blame Apple too much here.
We are at a place of our history where giant, global corporations operate outside of any national/political boundary. They have offices everywhere, employees everywhere - it's a nightmare to figure out whom they should even pay taxes to, and how much.
I'm not even close to being Apple-level, but even lowly plebs like myself face similar issues.
I have two passports, but it's a major pain for me to live in place A for more than X months and pay taxes to country C which has an office in D but I'm technically an employee only in office G in region Z - even though it's all the same damn company - again - who gets to tax me? Both countries? One country? No country? Why can't I live in Spain and work for a US company that has European HQ without incredible hassles? And if I could - the US would still like their share of my pie in the form of taxes.
I think a lot of this stems from the simple truth that we are in a new kind of economy, where money and information can flow instantaneously, yet our laws are still bound to archaic nation-state concepts of "physical presence". Which made total sense pre 1950, not so much anymore.
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The fix can certainly involve appealing to morals and human responsibility. A company is, after all, just a group of people. This should be a very strong tactic considering how liberal Silicon Valley is. The major players preach constantly about progressive ideals, yet fail to do more than the minimum when push comes to shove. My business partner and I purposefully pay normal taxes, avoiding accountants' crazy tax re…
That is where you are wrong. A cannot be thought of as a "group of people". A company is a legal entity, which can do absolutely ANYTHING within the law. It, the corporation, will by default do everything in its power to maximize shareholder value and that is it. Beyond that, there's Corporate Social Responsibility, but of course that is downstream from the corporation's main objective, which is to maximize profits.…
Then some yahoo slipped in some legal precedent declaring corporations were legally natural persons, weaponizing the 14th amendment. And here we are today pretending that corporations are super persons, with more rights than actual people, but none of those profit sapping responsibilities.