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U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes
- themartorana 11y agoAbout time, nothing to see here?
- jessaustin 11y agoThere would be something to see, if we could come up with a "solution" to this problem that actually had a chance of working. So, no.
- RA_Fisher 11y agoCapital is mobile.
- AlgorithmicTime 11y agoNot as mobile as an airborne division.
- vinceguidry 11y agoIt's only as mobile as laws will allow it to be. Sure, it's a leaky bucket, but you don't need to patch all the leaks.
- malchow 11y agoCapital is fully mobile because people are fully mobile.
- fapjacks 11y agoEver try to take twenty thousand in cash through airport security? Here's a secret: Those millimeter wave body scanners are only incidentally for drugs and weapons.
- malchow 11y agoYeah -- you're right. I was making a different point involving how wealth is built. It takes creative capital. It isn't just money. So stick with an uncompetitive tax system, and eventually the brightest won't end up on your shores, and they'll live, create, and bank elsewhere.
- vinceguidry 11y agoGenerally when people say capital they're referring to large amounts of money, sufficient to fully-capitalize a business venture. Somewhere in the neighborhood of $10 million and up. A "capital-intensive" industry is one in which you need a lot more than this to enter the market. Also it's not exactly easy to emigrate. People may be mobile, but they're not liquid.
- rgbrenner 11y agoThis is clearly false. Every country has rules and limits about who can enter and what they can do while there; backed by the threat of imprisonment or deportation.
- deleted 11y ago[deleted]
- benjaminl 11y agoThis 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 income. But if a US company earns income in Germany it pays both German taxes and US taxes. This is not about avoiding tax on profit earned in the US, after the inversion companies continue to pay US taxes, they just don’t pay taxes on income earned outside of the US.
- peteretep 11y agoYou've over simplified and misunderstood. If a UK company bills a German company for goods, tax is paid wherever the profit is made, which would be in the UK. If a British company sends a consultant to a German company for a month, the tax is paid where the profit is made, which again is in the UK. If a UK has a German subsidiary, that's different.
- josefresco 11y agoAre countries with a territorial tax system hurt by businesses leaving in order to seek out a lower tax rate? That seems to be the argument the US government is making - although I haven't seen any data - anyone have a link?
- Someone1234 11y agoThey do. But it doesn't work even in the US's case. US companies will routinely "sell" their intellectual property to a subsidiary in e.g. Ireland and then license to back to the US company to avoid paying US taxes. There are some highly successful US companies who, per the books, make nearly $0/year profit within the US.
- wiredfool 11y agoThey should charge executives Irish income taxes if they pull that off. (While Ireland's corporate taxes are low, their personal taxes are ~59% over ~100k, and that _includes_ capital gains, and a lot of things that are tax advantaged in the states)
- deleted 11y ago[deleted]
- merpnderp 11y agoAnother attempt to close the loop holes in the US's byzantine corporate tax system doomed to failure. The Treasury Department says as much in the article. A flat corporate rate on income earned, in the US, minus income lost, in the US, equals taxable income, done and fair. If a corporation can't compete in the US without support of its international shell games, then it probably wasn't competitive enough to matter anyways.
- ghaff 11y agoFor that matter, there are good arguments to be made to simply eliminate corporate income taxes entirely. After all, any profits ultimately flow to individuals and their individual tax returns. Of course, good luck ever getting that passed politically.
- alanwatts 11y agoIn this global economy, as long as nation states exist and are inhabited/colonized by supranational corporations the tax loophole will always exist. That is the root of the problem: the incompatibility issues of the old nationalism with the new globalism.
- philiphodgen 11y agoFor those of you starting companies that may one day be worth a lot of money, there is a key insight to draw from this: it is better (from a tax point of view) to be a foreign company than a US company. This is especially true if you expect most of your future customers to be outside the US. In the long run this gives an operating advantage to foreign corporations -- again for tax efficiency only. In the intermediate time frame all governments change their laws all the time, and there are going to be changes in tax rules coming that will make cross-border SaaS sales painful for tax load and administrative burdens, for instance. Your choice is when to flip your business from US to foreign status. You can see the government attacking late-stage inversions because that is where the revenue and political brownie points are. This tells you that early-stage migrations are still possible and may be cost-effective for you. At some level, for small companies, practical considerations can be used to offset unfavorable tax rules. (Translation - amounts are small enough to not matter, or be swamped by normal expenses so that they don't matter). The US tax system is King Canute. Source: I am an international tax lawyer in my real life.
- concernedctzn 11y ago> The US tax system is King Canute. Interesting, I had never heard this phrase before. Are you referring to this? https://en.wikipedia.org/wiki/King_Canute_and_the_waves https://en.wikipedia.org/wiki/King_Canute_and_the_waves
- philiphodgen 11y agoYes that is what I meant. The pointless arrogance of the powerful is the lesson. This is expressed in various ways, from the HN chortling about ignorant legislators attempting to define pi = 3, to the extremely correct observation that the bond market holds far more power than any central bank. Politicians are mortal and fallible.
- mtviewdave 11y agoFor those of you starting companies now, probably the last thing you should be optimizing for is the amount of corporate tax your company will be paying after it becomes a unicorn.
- tdaltonc 11y agoCan 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?
- adventured 11y agoHere: http://blogs.wsj.com/washwire/2012/05/18/tax-history-why-u-s-pursues-citizens-overseas/ 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=1001&context=dlj 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.
- sliverstorm 11y agoIt's not clear why it would really need to change. People who have left the United States and will never return, chose to renounce their citizenship because of it. ... Ok, so?
- deleted 11y ago[deleted]
- imh 11y ago>Yet even by the Treasury Department’s own admission, the latest rules will not be enough to completely halt the flow of companies seeking to renounce their American citizenship, just as the two previous rule changes did not. Such a move would be possible only with an overhaul of the tax rules by Congress, which few believe will happen soon. I would have loved to have more info about that. What other loopholes didn't this fix? What are they proposing Congress do in this overhaul?
- arrty88 11y agoas long as politicians keep spending like they do, the US can't afford to lose any tax revenue
- ams6110 11y agoTrue but higher taxes do not always correlate to higher revenue, as the make (legal) tax avoidance more valuable.
- awt 11y agoThe solution is not to force us companies to pay tax with yet another layer of positive law, but not to tax them at all, anywhere, unless they wish to voluntarily pay taxes.
- burkaman 11y agoHow would that solve the problem?
- jonathankoren 11y agoIt solves the problem of illegal tax evasion, by making it legal. See? Problem solved!
- awt 11y agoExactly. Taxes are morally wrong.
- jonathankoren 11y agoNo. They're not. It's the way how we as a society pay for common things.
- awt 11y agoBut how do we agree to pay for them?
- awt 11y agocompanies would no longer need to leave the US to remain profitable.
- zavi 11y agoAbout time the greedy corporations pay their fair share. #FeelTheBern
- dang 11y agoPlease don't do this here. Not because of your particular view, but because garden-variety politics are off topic on HN.
- X86BSD 11y agoTo quote Peter Schiff on this "Tax avoidance isn't the problem. It's a solution to the problem. The problem is taxes!"