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Global companies offshoring profits and not paying enough tax (in the eyes of many countries) was a hot topic at the last G20 summit in Brisbane. This isn't li

by jkahn 11y ago

Global companies offshoring profits and not paying enough tax (in the eyes of many countries) was a hot topic at the last G20 summit in Brisbane. This isn't limited to Facebook, as the article explains. The issue and background here is that when large companies operate globally, each country has its own local subsidiary, owned by the global entity. Money is made in each country by selling goods or services. How are the profits sent upstream to the parent company? By charging costs for goods; or license fees for services. As the company chooses their own costs and license fees, they can effectively control in which entity they make a profit and which they don't. This is also how companies shift profits to no- or low- tax jurisdictions. See: Apple and their large amounts of cash held outside of the USA. With increased globalisation, this is an issue for many countries. In Australia, for example (where I live), the roll out and success of Uber means that the taxi company tax base will erode. If Uber shifts profits overseas, the Australian Government gets less tax but still has to provide the same level (or greater) services. Uber's a better service, we want it to succeed, but tax is needed for necessary services. While companies continue to do this, the answer is information sharing between countries' tax offices and laws to ensure a certain amount of profits must stay on-shore, while not dis-incentivising multi-nationals from doing business in each country. As this already has political attention, I'd expect laws in most major countries to deal with this over the next 5 years. But Facebook are taking the piss here.

smt88 11y ago
> provide the same level (or greater) services I don't agree with that in all cases, and I particularly don't agree related to Uber. When I lived in NYC, I often called "311" to complain about taxi-driver misconduct. This was the only outlet, and you really only did it because you wanted to feel better. There were never any direct consequences that you knew of. If you consider the decreased cost of operating the 311 service, as well as lower taxi-related crime, less drunk driving, etc., I'd guess that a government would spend less when Uber had replaced all traditional taxi services. (You can also think of Uber as redistribution of wealth from wealthier to less wealthy, since riders will usually be wealthier than drivers. In that case, Uber makes tax revenue go up, since poorer people usually pay more in taxes.) Edit: Clarified some language, since no one seemed to have understood anything I said the first time.
- jkahn 11y ago
  That's not what I mean. I'm talking about what the tax money collected gets spent on by government - roads, healthcare, infrastructure, aged pensions. If industry X was paying $100mm tax, and industry Y disrupts and replaces that, while paying only $20mm tax, the government needs to find $80 million to replace that tax shortfall. Nothing to do with taxi related services...
  - smt88 11y ago
    And what I was saying is that industry Y might save the government money as well. The net effect might be that the government has more money. To continue using Uber as an example, not only do they potentially decrease the costs of operating the government (see my reasoning above), they're also still paying local employees. Those employees will spend their Uber revenue and pay taxes, just as taxi drivers would. Further, Uber makes it easier to move physical objects around in an economy. That should generally make the economy more efficient, which could also help to swing the balance in favor of a net positive effect. All I was saying from the beginning is that it's not always true that an international company replacing local companies is creating a net decrease in government income.
    - username223 11y ago
      > they're also still paying local employees. Those employees will spend their Uber revenue and pay taxes, just as taxi drivers would. This is drifting off-topic, but it's worth noting that Uber's short-term plan is to somewhat reduce the wages of people who drive taxis (or "share rides," as they call it), and greatly reduce the tax cities collect on that activity. Their long-term plan is robot cars with no paid drivers.
    - kuschku 11y ago
      Uber is in every way reducing tax income. Old model: The taxi company spends 100% of its income in the state, meaning the state collects 100% of the taxes of the costs. Uber model: Uber spends next to nothing in the state, so the state gets less. Uber still uses the same governmental resources, uber drivers earn less than the taxi drivers (less income, less taxes), and have less money to spend (economy shrinks, less taxes). Uber makes the economy less efficient, as more money ends up in the US than in local businesses.
sspiff 11y ago
> Global companies offshoring profits and not paying enough tax (in the eyes of many countries) Also in the eyes of many citizens of those countries, not just the government trying to make the budget fit.
- jkahn 11y ago
  Yes, agreed, which makes it much more likely that laws will get passed to collect this tax as it will probably have strong political and voter base support.
  - sspiff 11y ago
    The problem is that for many (smaller) countries, it's a race to the bottom. They want to attract companies that are huge compared to their "native" GDP or production capabilities, collect a little bit of tax from them, and maybe earn a whole lot more by creating (or maintaining) a financial services industry in their country. It's hard to stop those countries from doing so, in the current framework of international trade and business. I don't know if a treaty limiting this kind of stuff is in the cards for the near future. And if it is, I'm not sure it would be signed or ratified by financial safe haven countries like Luxemburg, the Seychelles, Monaco or Belize.
krotton 11y ago
Well, in hypothetical laissez-faire capitalism taxes would not be needed to provide infrastructure - Uber would just have to pay its fees for driving on private roads (etc.). This would drive prices up, but fairly divide the costs between the roads' users. Although I must admit I have no idea how things could look with purely digital companies like Facebook. I can think of local ISP-s charging the company for allowing access to the website, but that would probably become just an additional earning opportunity for them, without any noticeable positive influence on the local population.
- jkahn 11y ago
  That's theoretical, whereas government and corporations deal with realities. 100% capitalism isn't practical and is unfair (e.g, to the poor and sick). What is a fair way to divide costs for road usage: time of use, miles driven, emissions, cost of vehicle, ability to pay? It's not an easy answer, and many are practically unenforceable. Hence, tax. And for the record: I'm generally capitalist by economic viewpoint.
  - krotton 11y ago
    The way road usage costs are determined doesn't really matter - it's enforced by a mutually accepted contract. Yes, that's theoretical ;).
- pjc50 11y ago
  This arrangement collapses into monopoly very quickly. Facebook would bypass or buyout the local ISPs. (A world of purely voluntary contracts and no compulsory purchase would never have got past the development of the railway or telegraph, so the whole prospect is ludicrous)
  - afsina 11y ago
    Not really. Monopolies are mostly created by the state. Either with crony capitalism, intellectual property laws or directly state controlled production. Besides, Laissez-faire capitalism can create large scale infrastructure, why do you claim otherwise?
exDM69 11y ago
Apple is a particularly difficult case, because they control every link in the chain of supply from manufacturing to retail and pay less than 1% effective corporate tax from their profits. From every step of the supply chain. It is very difficult, if not impossible, to compete with Apple without having a similar end-to-end control of manufacturing to retail. If a company has to purchase their products from a manufacturer or sell their product to a 3rd party for retail, they are losing to Apple because that flow of money can't be hidden from the tax man. Europe is currently facing major financial issues and a significant portion of this is that money gets funneled away to the US (or offshore accounts of US corps) without the fair share of taxes of their profits left here.
- jkahn 11y ago
  It's certainly not a level playing field when competing against a multinational like Apple. It's also hard for countries to enforce competition rules (e.g. Anti-dumping)..
- guard-of-terra 11y ago
  Apple sells a huge number of physical devices - phones and tablets. They created a new market, and now governments are able to collect VAT and sometimes customs tariffs on all those smartphones. Why not let Apple have what's left?
  - coldtea 11y ago
    >Why not let Apple have what's left? Because other businesses also create products that collect VAT and still pay their taxes. Why should Apple be any different? To promote those that are big enough to avoid taxation to make them even bigger?
    - newjersey 11y ago
      Apple pays VAT and all the taxes it is legally obliged to pay. Don't blame Apple. They will pay the least amount they have to pay. Fix the loopholes.
raverbashing 11y ago
Well, how much Apple money stays outside of the US because it was paid there? Also, how much VAT and other taxes are charged in an iPhone sold in Europe Same for Facebook, their ads generate VAT. Their employees there pay income tax.
- lsaferite 11y ago
  As much as the minuscule corp tax bills infuriate me, my logical half laughs and says income tax is silly, just use sales tax. I know we'll never pass something along the lines of FairTax, but I daydream about it all the time. And yes, I've heard all the arguments against it and I still think it's a much better solution than taxing income.
  - tobltobs 11y ago
    A sale tax only system would be a nice gift for the wealthy.
    - plouc 11y ago
      Could you develop? I am genuinely curious.
      - raverbashing 11y ago
        That's easy to explain (although it might be tricky). The marginal value of money decreases as the absolute value increases. Getting a raise from $1k per month to $2k per month is more significant than from $2k to $3k Meaning that if you earn more, you'll usually save more. So now stuff is taxed at 50% (VAT or Sales tax), so everything will cost more, but it will be easier for the rich to afford it, because of no income tax, and harder for those with less income (their income tax was not high to begin with)
        wlievens 11y ago
        Give every citizen a yearly vat tax credit?
SixSigma 11y ago
You could call it "increased globalisation" but abusing transfer pricing was invented by the Vestey Brothers in the late 19th Century when they began importing beef from Argentina. They also invented the abuse of the offshore trust. The legislative arms race that evolved was the UK tax office trying to tax the Vesteys, who went on to be one of the UK's wealthiest dynasties. More info here: http://m.francisclark.co.uk/news-views/blog/the-vestey-brothers/ http://m.francisclark.co.uk/news-views/blog/the-vestey-broth... Plus ça change, plus c'est la même chose
tomelders 11y ago
Great summary, I'd like to add > while not dis-incentivising multi-nationals from doing business in each country I'd argue that the incentive to do business in several countries is the profit they're making in those countries. No company is going to walk away from a company because they're being charge x% of tax on the money they earn. They might say they will, but they may as well be saying this... "Because I don't want to pay you $1, I will reject the $5 this other person is going to give me."
- refurb 11y ago
  Return on investment weighs heavily on most business decisions. If I invest $X, by the end of the year I'll get $X*(1+return%). Since companies can't invest everywhere at the same time, they prioritize investments. A higher tax rate might mean investing in that country later, as there are other investments than have a higher immediate return. I could see a situation where an investment was profitable, but so marginally profitable due to the tax rate that the investment was delayed effectively forever.
  - im3w1l 11y ago
    But interest rates are low so if you see an opportunity to earn money, you can borrow to seize that opportunity. This assumes that when you scale up your organization, your costs scale up linearly. If it caused marginal wage to shoot through the roof, that could be a reason not to do it I guess.
    - refurb 11y ago
      Low interest rates solve the funds issue, but it's not the only limitation to scaling.
  - tomelders 11y ago
    The reality is - The UK has a relatively low corporation tax rate. In the UK they would still getting plenty of return on their investment if they paid corporation tax on the profits generated in the UK. These academic arguments about tax don't hold much sway with me. 18% is a perfectly reasonable rate of corporation tax. Paying that tax ensures the long term viability of the British economy from which Facebook will earn even more profits. Not paying it is just leaching the nutrients out of the environment. It's a scorched earth policy and HMRC should be merciless in their punishment of it. And I use the word punishment intentionally.
mrweasel 11y ago
>As the company chooses their own costs and license fees, they can effectively control in which entity they make a profit and which they don't. I've only seen one really effective way around that suggested, but it's not without it's drawbacks. If a country taxes each sale of a service or product, then it's no longer possible to funnel money out of the country. It effectively eliminates companies that operate in a country for years with a fake lose. The drawback is that it will potentially cost jobs and close business that could be profitable in the long term.
sneak 11y ago
Necessary services? “There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.” —Heinlein
funkyy 11y ago
Simple 1% revenue tax on companies with revenue of more than $15 million would fix the issue. No other taxes, just revenue one, no tax credits, no refunds. No hiding costs, no going offshore, no creative accounting. One tax on all revenues that will hit your account. This would also help to cut out all the middle man driving prices up and make the logistic chain quite small. Some countries want to experiment with this starting with foreign corporations, we will see.
- joesb 11y ago
  ์So every broker company who makes profit on 0.05% transaction fee is going bankrupt, and no more high-volume low-profit business.
  - funkyy 11y ago
    I assume you write this as a bad thing? Its better for economy if brokers would focus on long term trades. Also usually high-volume low-profit businesses are the ones that are arbitrating prices and often are just middle man. No need for that. There is a way around. Obviously there would be FEW businesses that would be affected and need to change the way they work, but this comes always with any tax changes. Anyways, I said all revenue that hits your account. Brokers usually don't keep their money in bank accounts, but in investment accounts, right? Until the money hit their actual bank account they would pay null on trades. So they would pay tax on all withdrawals and payouts to customers.
    - twoodfin 11y ago
      I assume you write this as a bad thing? I don't know about you, but I really like what Amazon provides to me, and am quite glad corporations like it aren't strangled by our tax code.
      - funkyy 11y ago
        If the whole chain of production and sales would be relieved from paying accountants and being charge stupid tax, then the overall prices would fall. You give me an example of Amazon. Would 3%* of overall cost added to the end product be higher than 3 companies sustaining their accounting teams going over taxes etc. + you required to pay sales tax? Revenue tax = no sales tax. Still think it would be more expensive? 1 very low tax to replace all the taxes from the producer to customer seems like much better option than being "not strangled" by current tax laws. *3% assuming there is producer, distributor/owner and Amazon in the chain.
phlo 11y ago
Stories like this make me question if corporate tax even makes sense. However well designed, a tax code with today's complexities is going to have holes. If a savings of even one per mill may mean millions, corporations are going to spend insane amounts of money to hire the best experts to use every last loophole. Why don't we cut down everything to a couple of manageable groups that can be tightened down? I think the following set of taxes should capture mostly everything: - Personal income including gifts, inheritances, capital gains, all on a set of progressive scales. This should include work benefits (like company cars) and probably include loans taken out. - Use of public resources (property tax, vehicle registration tax, RF use...), taxed based on the specific usage (e.g. vehicle weight, or even kilometers driven). - A consumption tax (VAT) could be added, although this doesn't seem necessary to me. Thinking about this for a couple of minutes, I don't see any obvious problems. Applicability of the personal income tax would be a crucial point, and care would need to be taken to avoid loopholes. Why aren't tax systems as simple as that?
- jos3000 11y ago
  The big problem with this is that, under a simple tax system, if a government wants to increase it's tax revenue it is extremely easy for voters to understand what is happening. Governments prefer to make complicated tax laws because they are easier to spin.
  - rootlocus 11y ago
    Security through obscurity? xD
  - mike_hearn 11y ago
    Governments make complicated tax laws because of constant attempts to make the tax system 'fair', where fairness is a pretty vague concept and can be interpreted many ways by different people and parties. There are lots of economic arguments for very simple tax systems that prioritise revenue collection over other things. But a lot of people would see them as "unfair" and therefore unjust.
  - vtlynch 11y ago

by jkahn 11y ago

smt88 11y ago

> provide the same level (or greater) services I don't agree with that in all cases, and I particularly don't agree related to Uber. When I lived in NYC, I often called "311" to complain about taxi-driver misconduct. This was the only outlet, and you really only did it because you wanted to feel better. There were never any direct consequences that you knew of. If you consider the decreased cost of operating the 311 service, as well as lower taxi-related crime, less drunk driving, etc., I'd guess that a government would spend less when Uber had replaced all traditional taxi services. (You can also think of Uber as redistribution of wealth from wealthier to less wealthy, since riders will usually be wealthier than drivers. In that case, Uber makes tax revenue go up, since poorer people usually pay more in taxes.) Edit: Clarified some language, since no one seemed to have understood anything I said the first time.

jkahn 11y ago
That's not what I mean. I'm talking about what the tax money collected gets spent on by government - roads, healthcare, infrastructure, aged pensions. If industry X was paying $100mm tax, and industry Y disrupts and replaces that, while paying only $20mm tax, the government needs to find $80 million to replace that tax shortfall. Nothing to do with taxi related services...
- smt88 11y ago
  And what I was saying is that industry Y might save the government money as well. The net effect might be that the government has more money. To continue using Uber as an example, not only do they potentially decrease the costs of operating the government (see my reasoning above), they're also still paying local employees. Those employees will spend their Uber revenue and pay taxes, just as taxi drivers would. Further, Uber makes it easier to move physical objects around in an economy. That should generally make the economy more efficient, which could also help to swing the balance in favor of a net positive effect. All I was saying from the beginning is that it's not always true that an international company replacing local companies is creating a net decrease in government income.
  - username223 11y ago
    > they're also still paying local employees. Those employees will spend their Uber revenue and pay taxes, just as taxi drivers would. This is drifting off-topic, but it's worth noting that Uber's short-term plan is to somewhat reduce the wages of people who drive taxis (or "share rides," as they call it), and greatly reduce the tax cities collect on that activity. Their long-term plan is robot cars with no paid drivers.
  - kuschku 11y ago
    Uber is in every way reducing tax income. Old model: The taxi company spends 100% of its income in the state, meaning the state collects 100% of the taxes of the costs. Uber model: Uber spends next to nothing in the state, so the state gets less. Uber still uses the same governmental resources, uber drivers earn less than the taxi drivers (less income, less taxes), and have less money to spend (economy shrinks, less taxes). Uber makes the economy less efficient, as more money ends up in the US than in local businesses.

sspiff 11y ago

> Global companies offshoring profits and not paying enough tax (in the eyes of many countries) Also in the eyes of many citizens of those countries, not just the government trying to make the budget fit.

jkahn 11y ago
Yes, agreed, which makes it much more likely that laws will get passed to collect this tax as it will probably have strong political and voter base support.
- sspiff 11y ago
  The problem is that for many (smaller) countries, it's a race to the bottom. They want to attract companies that are huge compared to their "native" GDP or production capabilities, collect a little bit of tax from them, and maybe earn a whole lot more by creating (or maintaining) a financial services industry in their country. It's hard to stop those countries from doing so, in the current framework of international trade and business. I don't know if a treaty limiting this kind of stuff is in the cards for the near future. And if it is, I'm not sure it would be signed or ratified by financial safe haven countries like Luxemburg, the Seychelles, Monaco or Belize.

krotton 11y ago

Well, in hypothetical laissez-faire capitalism taxes would not be needed to provide infrastructure - Uber would just have to pay its fees for driving on private roads (etc.). This would drive prices up, but fairly divide the costs between the roads' users. Although I must admit I have no idea how things could look with purely digital companies like Facebook. I can think of local ISP-s charging the company for allowing access to the website, but that would probably become just an additional earning opportunity for them, without any noticeable positive influence on the local population.

jkahn 11y ago
That's theoretical, whereas government and corporations deal with realities. 100% capitalism isn't practical and is unfair (e.g, to the poor and sick). What is a fair way to divide costs for road usage: time of use, miles driven, emissions, cost of vehicle, ability to pay? It's not an easy answer, and many are practically unenforceable. Hence, tax. And for the record: I'm generally capitalist by economic viewpoint.
- krotton 11y ago
  The way road usage costs are determined doesn't really matter - it's enforced by a mutually accepted contract. Yes, that's theoretical ;).
pjc50 11y ago
This arrangement collapses into monopoly very quickly. Facebook would bypass or buyout the local ISPs. (A world of purely voluntary contracts and no compulsory purchase would never have got past the development of the railway or telegraph, so the whole prospect is ludicrous)
- afsina 11y ago
  Not really. Monopolies are mostly created by the state. Either with crony capitalism, intellectual property laws or directly state controlled production. Besides, Laissez-faire capitalism can create large scale infrastructure, why do you claim otherwise?

exDM69 11y ago

Apple is a particularly difficult case, because they control every link in the chain of supply from manufacturing to retail and pay less than 1% effective corporate tax from their profits. From every step of the supply chain. It is very difficult, if not impossible, to compete with Apple without having a similar end-to-end control of manufacturing to retail. If a company has to purchase their products from a manufacturer or sell their product to a 3rd party for retail, they are losing to Apple because that flow of money can't be hidden from the tax man. Europe is currently facing major financial issues and a significant portion of this is that money gets funneled away to the US (or offshore accounts of US corps) without the fair share of taxes of their profits left here.

jkahn 11y ago
It's certainly not a level playing field when competing against a multinational like Apple. It's also hard for countries to enforce competition rules (e.g. Anti-dumping)..
guard-of-terra 11y ago
Apple sells a huge number of physical devices - phones and tablets. They created a new market, and now governments are able to collect VAT and sometimes customs tariffs on all those smartphones. Why not let Apple have what's left?
- coldtea 11y ago
  >Why not let Apple have what's left? Because other businesses also create products that collect VAT and still pay their taxes. Why should Apple be any different? To promote those that are big enough to avoid taxation to make them even bigger?
  - newjersey 11y ago
    Apple pays VAT and all the taxes it is legally obliged to pay. Don't blame Apple. They will pay the least amount they have to pay. Fix the loopholes.

raverbashing 11y ago

Well, how much Apple money stays outside of the US because it was paid there? Also, how much VAT and other taxes are charged in an iPhone sold in Europe Same for Facebook, their ads generate VAT. Their employees there pay income tax.

lsaferite 11y ago
As much as the minuscule corp tax bills infuriate me, my logical half laughs and says income tax is silly, just use sales tax. I know we'll never pass something along the lines of FairTax, but I daydream about it all the time. And yes, I've heard all the arguments against it and I still think it's a much better solution than taxing income.
- tobltobs 11y ago
  A sale tax only system would be a nice gift for the wealthy.
  - plouc 11y ago
    Could you develop? I am genuinely curious.
    - raverbashing 11y ago
      That's easy to explain (although it might be tricky). The marginal value of money decreases as the absolute value increases. Getting a raise from $1k per month to $2k per month is more significant than from $2k to $3k Meaning that if you earn more, you'll usually save more. So now stuff is taxed at 50% (VAT or Sales tax), so everything will cost more, but it will be easier for the rich to afford it, because of no income tax, and harder for those with less income (their income tax was not high to begin with)
      - wlievens 11y ago
        Give every citizen a yearly vat tax credit?

SixSigma 11y ago

You could call it "increased globalisation" but abusing transfer pricing was invented by the Vestey Brothers in the late 19th Century when they began importing beef from Argentina. They also invented the abuse of the offshore trust. The legislative arms race that evolved was the UK tax office trying to tax the Vesteys, who went on to be one of the UK's wealthiest dynasties. More info here: http://m.francisclark.co.uk/news-views/blog/the-vestey-brothers/ http://m.francisclark.co.uk/news-views/blog/the-vestey-broth... Plus ça change, plus c'est la même chose

tomelders 11y ago

Great summary, I'd like to add > while not dis-incentivising multi-nationals from doing business in each country I'd argue that the incentive to do business in several countries is the profit they're making in those countries. No company is going to walk away from a company because they're being charge x% of tax on the money they earn. They might say they will, but they may as well be saying this... "Because I don't want to pay you $1, I will reject the $5 this other person is going to give me."

refurb 11y ago
Return on investment weighs heavily on most business decisions. If I invest $X, by the end of the year I'll get $X*(1+return%). Since companies can't invest everywhere at the same time, they prioritize investments. A higher tax rate might mean investing in that country later, as there are other investments than have a higher immediate return. I could see a situation where an investment was profitable, but so marginally profitable due to the tax rate that the investment was delayed effectively forever.
- im3w1l 11y ago
  But interest rates are low so if you see an opportunity to earn money, you can borrow to seize that opportunity. This assumes that when you scale up your organization, your costs scale up linearly. If it caused marginal wage to shoot through the roof, that could be a reason not to do it I guess.
  - refurb 11y ago
    Low interest rates solve the funds issue, but it's not the only limitation to scaling.
- tomelders 11y ago
  The reality is - The UK has a relatively low corporation tax rate. In the UK they would still getting plenty of return on their investment if they paid corporation tax on the profits generated in the UK. These academic arguments about tax don't hold much sway with me. 18% is a perfectly reasonable rate of corporation tax. Paying that tax ensures the long term viability of the British economy from which Facebook will earn even more profits. Not paying it is just leaching the nutrients out of the environment. It's a scorched earth policy and HMRC should be merciless in their punishment of it. And I use the word punishment intentionally.

mrweasel 11y ago

>As the company chooses their own costs and license fees, they can effectively control in which entity they make a profit and which they don't. I've only seen one really effective way around that suggested, but it's not without it's drawbacks. If a country taxes each sale of a service or product, then it's no longer possible to funnel money out of the country. It effectively eliminates companies that operate in a country for years with a fake lose. The drawback is that it will potentially cost jobs and close business that could be profitable in the long term.

sneak 11y ago

Necessary services? “There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.” —Heinlein

funkyy 11y ago

Simple 1% revenue tax on companies with revenue of more than $15 million would fix the issue. No other taxes, just revenue one, no tax credits, no refunds. No hiding costs, no going offshore, no creative accounting. One tax on all revenues that will hit your account. This would also help to cut out all the middle man driving prices up and make the logistic chain quite small. Some countries want to experiment with this starting with foreign corporations, we will see.

joesb 11y ago
์So every broker company who makes profit on 0.05% transaction fee is going bankrupt, and no more high-volume low-profit business.
- funkyy 11y ago
  I assume you write this as a bad thing? Its better for economy if brokers would focus on long term trades. Also usually high-volume low-profit businesses are the ones that are arbitrating prices and often are just middle man. No need for that. There is a way around. Obviously there would be FEW businesses that would be affected and need to change the way they work, but this comes always with any tax changes. Anyways, I said all revenue that hits your account. Brokers usually don't keep their money in bank accounts, but in investment accounts, right? Until the money hit their actual bank account they would pay null on trades. So they would pay tax on all withdrawals and payouts to customers.
  - twoodfin 11y ago
    I assume you write this as a bad thing? I don't know about you, but I really like what Amazon provides to me, and am quite glad corporations like it aren't strangled by our tax code.
    - funkyy 11y ago
      If the whole chain of production and sales would be relieved from paying accountants and being charge stupid tax, then the overall prices would fall. You give me an example of Amazon. Would 3%* of overall cost added to the end product be higher than 3 companies sustaining their accounting teams going over taxes etc. + you required to pay sales tax? Revenue tax = no sales tax. Still think it would be more expensive? 1 very low tax to replace all the taxes from the producer to customer seems like much better option than being "not strangled" by current tax laws. *3% assuming there is producer, distributor/owner and Amazon in the chain.

phlo 11y ago

Stories like this make me question if corporate tax even makes sense. However well designed, a tax code with today's complexities is going to have holes. If a savings of even one per mill may mean millions, corporations are going to spend insane amounts of money to hire the best experts to use every last loophole. Why don't we cut down everything to a couple of manageable groups that can be tightened down? I think the following set of taxes should capture mostly everything: - Personal income including gifts, inheritances, capital gains, all on a set of progressive scales. This should include work benefits (like company cars) and probably include loans taken out. - Use of public resources (property tax, vehicle registration tax, RF use...), taxed based on the specific usage (e.g. vehicle weight, or even kilometers driven). - A consumption tax (VAT) could be added, although this doesn't seem necessary to me. Thinking about this for a couple of minutes, I don't see any obvious problems. Applicability of the personal income tax would be a crucial point, and care would need to be taken to avoid loopholes. Why aren't tax systems as simple as that?

jos3000 11y ago
The big problem with this is that, under a simple tax system, if a government wants to increase it's tax revenue it is extremely easy for voters to understand what is happening. Governments prefer to make complicated tax laws because they are easier to spin.
- rootlocus 11y ago
  Security through obscurity? xD
- mike_hearn 11y ago
  Governments make complicated tax laws because of constant attempts to make the tax system 'fair', where fairness is a pretty vague concept and can be interpreted many ways by different people and parties. There are lots of economic arguments for very simple tax systems that prioritise revenue collection over other things. But a lot of people would see them as "unfair" and therefore unjust.
- vtlynch 11y ago