11 ms·

A Corporate Tax Dodge Gets Harder

49 points by hvo 11y ago

ksdale 11y ago
"while tax laws have failed to keep pace with tax-avoidance strategies made possible by a complex mix of corporate offshore accounts and global capital flows" It would be more accurate to say that tax laws have failed to keep pace with tax avoidance strategies made possible by tax laws. MNCs don't operate in a vacuum. Every decision they make is informed by laws that were written by Congress and can be rewritten by Congress just as easily. I'm very sympathetic to arguments that tax rates should be higher, but this quote places the blame on corporations, like "tax-avoidance strategies" exist independent of tax law.
- abawany 11y ago
  Extremely naive question (not asking rhetorically - I really want to know): what is the point of taxing corporations? Some thoughts on why I ask: * given that they must disburse their income eventually in the form of dividends, salaries, payments to vendors, etc. this adds pointless complexity to the tax code * if one eliminated corporate taxation, one could also eliminate the special (lower) tax rate on dividends and a whole rat's nest of loopholes * it might help deflate the (IMO) dangerous idea of corporate personhood
  - jandrese 11y ago
    > Given that they must disburse their income eventually in the form of dividends, salaries, payments to vendors, etc. Apple is just sitting on $300 billion (with a b!) dollars currently, and they are just one company. If anything we should be taxing those war chests higher because sequestering that much money is bad for the economy as a whole. Also, eliminating the corporate income tax would open up a gigantic loophole in tax law. People could simply incorporate into a single person corporation, then make sure the corporation makes all of their money and just happens to provide services that help the person (like buying food and shelter).
    - abawany 11y ago
      That is a fair point. I guess since one can't count on a corporation to spend a significant portion of its income every year, the corporate tax provides a mechanism to pull some money out of their income instead of waiting for their expenses to trickle down to the economy.
    - whatok 11y ago
      Apple or any other company is going to sit on that much cash if they don't have anything productive to do with it. I don't know how you would come up with a non-arbitrary threshold for taxing "war chests" and punishing companies (in the form of increased taxes) seems very perverse for what could be the most rational decision for a company to make. If the US had a sane repatriation system and rates were not so low, Apple would have used overseas cash instead of issuing debt for recent buybacks and dividends. They will also likely use some of the cash to eventually buy back debt if it makes sense for them to repatriate.
      - ksdale 11y ago
        There actually are laws that impose much higher tax rates on cash in "holding companies" but convincing the government that you might need that much cash is pretty easy.
    - bpodgursky 11y ago
      > Also, eliminating the corporate income tax would open up a gigantic loophole in tax law. People could simply incorporate into a single person corporation, then make sure the corporation makes all of their money and just happens to provide services that help the person (like buying food and shelter). Given that corporate income tax is basically completely ineffective right now, I don't know why you think this would possibly be any harder to enforce against. > If anything we should be taxing those war chests higher because sequestering that much money is bad for the economy as a whole. If you eliminated the corporate income tax, this money would instantly be some combination of (a) disbursed in dividends (b) brought back into the US and spent on expansions or acquisitions or (c) spent on stock buybacks, which would then be captured as capital gains tax. There's no need to make this more complicated.
  - Goronmon 11y ago
    given that they must disburse their income eventually Must they?
    - abawany 11y ago
      EDIT: snipped confusing comment mixing expenses with income - by disbursements, I meant dividends. They don't all disburse all of their income every year, it is true. I guess it is a pretty strong reason to tax their incomes perhaps, i.e. to get a share of their income instead of waiting for the trickle down?
      - kspaans 11y ago
        Idea: everyone gets free meals at work (not a taxable benefit!), use of company cars, generous travel budgets (not a taxable benefit!), etc. So suddenly your compensation has increased quite a bit, but your personal income tax bill is the same. Now instead of the IRS chasing tax-inverters and shell corporations, now they have to go through every worker's books to try and guess what kind of benefits are taxable or not. (OK sure, the corporation will still pay goods and services taxes on those benefits it provides for its employees... hopefully.) That's one possible argument against not taxing corporations. It could be even more expensive to enforce taxable benefits rules if there were no corporation taxes. I think I read somewhere that C-level managers in South Korean corporations have _very_ modest salaries but get many benefits like these that aren't (currently) taxable.
        jandrese 11y ago
        Eh, if a company is abusing the tax code to provide a ton of perks for its employees I would have a harder time complaining about it, at least when compared to the company abusing the tax code to keep billions of dollars locked up in vaults overseas doing nothing.
        walshemj 11y ago
        so switch to the simpler paye system as used in the UK employers have to say how much benefit in kind they give to emploeeys every year in the p60 form makes taxing it simple
  - nxzero 11y ago
    Most obvious reason is that corporations are taxed to fund the government. Beyond that, if they weren't tax, you could just build a massive corporation, never take any cash out, and use it to make smaller businesses more profitable.
  - lutorm 11y ago
    What is the point of taxing an individual, given that they must also disburse their income eventually?
  - Pitarou 11y ago
    Surprisingly, corporation tax prevents tax offshoring! It's easy for a stockholder to avoid income tax by placing his stocks in a holding company registered overseas. By moving closer to the money's source -- i.e. corporate profits -- Uncle Sam has a better chance of getting his share. Things didn't work out that way, of course, but the idea was a good one.
  - jandrese 11y ago
    Another thought, if you eliminated corporate income tax, then those payments to vendors wouldn't be subject to tax either. The B2B market would be basically untaxed. This is a huge win for the 1%, but would really suck for regular people who would have to take over their tax burden.
    - abawany 11y ago
      That's an interesting point. I wasn't thinking of the elimination of sales tax - would that cover it?
  - ubernostrum 11y ago
    what is the point of taxing corporations? Well, then just tax the income of the employees and shareholders! But what is the point of taxing income? After all, they have to spend that money sooner or later to buy things. So instead just have a sales tax! And away we go: you can chase down a bunch of rabbit holes of "why tax this when sooner later people have to do that, you could just tax that instead!" and end up with cycles of taxing corporate profits, taxing incomes, taxing sales, taxing land... The real issue is that the only reliable way we know of to maintain civilization is to have some sort of government. Whether you want it to be ultra-minimal or not actually makes no difference, since even a "contract and property-rights enforcement and nothing else" minimal government still needs some money to run, and can't just rely on random charitable donations. So it will sooner or later have to capture some percentage of the value generated by its presence in order to fund itself, and that means tax. But the instant you tax one thing, people find a way to avoid it and do some other thing instead. So you tax the other thing, and then the thing they go to after that, and sooner or later you have to have at least a nominal tax on everything just to cover all the bases and make it impossible to (legally) completely avoid taxation. Which in turn means the question is not "why do we tax this", but "what is the correct balance of how much to tax this vs. how much to tax that vs. how much to tax that other thing, in order to achieve the revenue necessary to support the government we've decided to have".
    - yummyfajitas 11y ago
      But what is the point of taxing income? After all, they have to spend that money sooner or later to buy things. So instead just have a sales tax! Economists agree that a VAT is, indeed, the most efficient form of taxation (besides pigouvian taxes and maybe a land value tax). The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society rather than in proportion to the value they create. If you tax corporations you can hide this fact from voters. "Don't blame we the politicians, blame the evil corporations for raising prices!"
      - sokoloff 11y ago
        > The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society Really? I buy perhaps 2x what the average American and maybe 4x what the poorest Americans who are not on government support buy. I'm pretty sure that I get more than that ratio of benefit from a stable society. Warren Buffett gets some massive multiple of the benefit than I get, but I doubt he pays more than 10x in sales tax what pay.
  - marrs 11y ago
    I've always presumed that the point is to encourage the company to spend money and get cash recirculating through the economy, which of course you can further tax through the VAT system, PAYE system, etc.
- joering2 11y ago
  It would be more accurate to say that tax laws have NOT failed, because mostly designed by lobbyist, they had loopholes built in by design. Easiest examples are lobbyist from TurboTax team making sure taxes are complicated so you actually pay for TT services. https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing https://www.propublica.org/article/how-the-maker-of-turbotax...
- briandear 11y ago
  Tax rates should be higher? Higher tax rates are what incentivize avoidance. Look at Apple $200 billion in offshore cash. The US wants to tax that at 35%. Lower the rate to 10% and the government collects $20 billion. Keep it at 35% and the government collects zero. If the world taxes consumption instead of income, tax avoidance would disappear. I am tired of people who didn't earn the money thinking that the government has a right to it. Government is too big, taxes are too high, entitlements are ridiculous. When did it become the role of government to provide pensions and health care? Why shouldn't that be solely private sector? Should the government give us food and clothing as well? It's ridiculous. Helping the truly poor is one thing, but becoming a cradle-to-grave nanny goes against the very concept of freedom. Americans work from Jan 1 to April 24 just to pay for government. We spend more on taxes than food, clothing and housing -- combined. And people want higher taxes? How about controlling spending first, then we can talk about a credit limit increase.
  - fomojola 11y ago
    Moderately curious: do you really believe that there is a tax rate greater than 0% that would prevent corporate tax avoidance? I mean, at 10% why wouldn't someone just make the argument that it should be 5% instead?
    - benjohnson 11y ago
      For me as a very small business owner the threshold is at about 15%.
- makomk 11y ago
  It's not that simple. Corporation tax is levied based on profits, and for good reason - taxing corporations based on pure income would penalize low-margin, non-vertically-integrated businesses for no good reason. But there's all kinds of tricks that multinational businesses can play with their expenses to make it seem like they haven't made a profit in the US and it's difficult to outlaw and disentangle all of them.
  - hippich 11y ago
    No one really responded on why corporation should be taxed on profits at all. In the end if profits are distributed, these will be taxes as ordinary or capital income anyway. And "stashing" is not a problem, if anything, "stashing" makes everybody a bit richer, since chunk of money is essentially temporarily destroyed.
- cloudjacker 11y ago
  look up IRS APA tl;dr most tax avoidance schemes get the blessing of the IRS (and the other foreign tax authorities) before they are attempted. It also costs money. lol.
- Shivetya 11y ago
  No, the US has not kept pace with the rest of the world with regards to setting reasonable tax rates and how profits made it other markets are treated. That is why companies move to incorporate elsewhere and laws be damned many will do so. The US is in danger because other economies are growing in s size and it won't be long before being based elsewhere just makes sense not only because of taxation but because of local sales. Instead we have vindictive politicians who wonder why they are reviled many times over. Here's a hint, what they are willing to do to punish a company is a clear indication they respect nothing and no one and will and do use the law to punish those they don't like
Gratsby 11y ago
Protecting tax revenue is not an answer. Accountants can move faster than lawmakers, and lawmakers may or may not prioritize this kind of a thing at any point in time. The solution is to encourage and foster economic growth. The outliers like Apple with large cash reserves being held offshore should be dealt with individually. (Not calling them out, it's just that they are well known for it) You don't penalize them for being smart with their money, you simply incentivize them to use the money in-country. The news this election cycle seems to be a flurry of anti-1%/anti-corporate propoganda. There seems to be a feeling of take-take-take from these entities that took-took-took from us. That mindset simply does not work long term. Without real economic growth tax revenue is a finite and dwindling resource.
- darawk 11y ago
  Two things: Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. Secondly, accountants can only move faster than the law if there are loopholes - if you close those loopholes it does in fact get harder and harder for them to move around them, and it does in fact bring in more tax revenue. If it didn't, they wouldn't lobby against it. All that being said, the corporate income tax doesn't make a whole lot of sense in the first place and we should probably get rid of it and replace it with a more economically sound revenue stream. However, as long as the law is on the books, it ought to be enforced, and even moreso ought to be enforced fairly for large corporations and small.
  - matt_wulfeck 11y ago
    > Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. They are following the law though. It's the law that allows this. If you create more laws that disencentive the behavior people will just find more loopholes. spirit of the law is meaningless here. Generally we don't consider anything illegal unless it is actually illegal. Are you following the spirit of the tax law when you itemize your deductions and get a nice tax break?
    - 11y ago
matt_wulfeck 11y ago
If you want to make the tax law more robust then we must make it simpler. Every new law just creates a new vector for loopholes. Anyone that has filled out something more complicated than a 1040ez knows that the current state of things is very broken and the complication is a serious advantage to wealthy corporations with tax lawyers. Make it simple and accessible. Stop carving out special exceptions into every nook and cranny. And for God's sake stop creating more laws that further complicate it.
- danieltillett 11y ago
  Complication is a feature not a bug. You can't solve this until you solve the reason why the complication occurred in the first place (politicians need for cash). Any simplification of the tax law will just slide back to the current mess as each lobby group buys the loopholes they want. If you want to fix the tax system you need to fix the political system's need for cash. One of the more interesting things about this US election season is that the population is starting to get this. I think the US Supreme Court were rather clever ruling that injecting unlimited cash into the political system was Ok as it has accelerated this process of voter education.
white-flame 11y ago
People shop around to get the best deal, especially on large or ongoing expenses. Corporations shop around to get the best incorporation deal, which includes taxes, knobs on taxes, import/export regulations, legal climate, etc. If X shops around and finds a legal means of getting what they need cheaper, they go for it, whether X is a person or a company. Both at the personal and corporate level, the more financially well-off you are, the wider your shopping reach is. For somebody making $30k/year, a couple of percent difference in exchange for upheaving your life isn't going to be worth it. But for some entity making $300M/year, a couple of percent is a lot of money, and it's worth seeing what they can do to shave those points off their taxes. People with a lot of money also have much more mobility to move to a lower tax area of their choosing, and still travel where they want. So in the comparison to shopping around, you really can't fault this type of corporate action, until they actually go illegal. You need to deal with the incentive structure these people & companies are looking at from their perspective if you want their money to stay in your jurisdiction.
- yummyfajitas 11y ago
  The moral of this story is to incorporate in Singapore or Estonia. Since the US won't let you leave it's better never to enter.
  - dmurray 11y ago
    At what level does this make sense for the HN case of two college grads founding a startup in California? No US lawyer specialising in paperwork for small businesses would tell you "never mind Delaware, you should go offshore!" So what are the short term benefits of being incorporated in the US?
    - white-flame 11y ago
      While there are benefits of eager investors, stable (enough) infrastructure, low personal tax rates, etc in the US, in this context it's more that the costs of being in the US are pretty negligible when you're small. There's fixed overheads and lots of additional unfamiliarities in figuring out offshore and multinational business that don't make sense when you're a small startup focusing on developing your product and sales chain. Once you get large, though, the tax differences can start becoming the size of entire departmental budgets.
known 11y ago
The significant problems we have cannot be solved at the same level of thinking with which we created them. 1. Impose tax on corporate revenues, not profits 2. Regulate market capitalization of corporations
- eru 11y ago
  > 1. Impose tax on corporate revenues, not profits Problem with that is that it encourages needless integration. If you tax revenues, a company and its supplier will basically pay twice as much tax as when they merge. Or do you have a clever idea to solve this? (Value Added Tax's structure does solve this problem to some extent.)

49 points by hvo 11y ago

"while tax laws have failed to keep pace with tax-avoidance strategies made possible by a complex mix of corporate offshore accounts and global capital flows" It would be more accurate to say that tax laws have failed to keep pace with tax avoidance strategies made possible by tax laws. MNCs don't operate in a vacuum. Every decision they make is informed by laws that were written by Congress and can be rewritten by Congress just as easily. I'm very sympathetic to arguments that tax rates should be higher, but this quote places the blame on corporations, like "tax-avoidance strategies" exist independent of tax law.

abawany 11y ago
Extremely naive question (not asking rhetorically - I really want to know): what is the point of taxing corporations? Some thoughts on why I ask: * given that they must disburse their income eventually in the form of dividends, salaries, payments to vendors, etc. this adds pointless complexity to the tax code * if one eliminated corporate taxation, one could also eliminate the special (lower) tax rate on dividends and a whole rat's nest of loopholes * it might help deflate the (IMO) dangerous idea of corporate personhood
- jandrese 11y ago
  > Given that they must disburse their income eventually in the form of dividends, salaries, payments to vendors, etc. Apple is just sitting on $300 billion (with a b!) dollars currently, and they are just one company. If anything we should be taxing those war chests higher because sequestering that much money is bad for the economy as a whole. Also, eliminating the corporate income tax would open up a gigantic loophole in tax law. People could simply incorporate into a single person corporation, then make sure the corporation makes all of their money and just happens to provide services that help the person (like buying food and shelter).
  - abawany 11y ago
    That is a fair point. I guess since one can't count on a corporation to spend a significant portion of its income every year, the corporate tax provides a mechanism to pull some money out of their income instead of waiting for their expenses to trickle down to the economy.
  - whatok 11y ago
    Apple or any other company is going to sit on that much cash if they don't have anything productive to do with it. I don't know how you would come up with a non-arbitrary threshold for taxing "war chests" and punishing companies (in the form of increased taxes) seems very perverse for what could be the most rational decision for a company to make. If the US had a sane repatriation system and rates were not so low, Apple would have used overseas cash instead of issuing debt for recent buybacks and dividends. They will also likely use some of the cash to eventually buy back debt if it makes sense for them to repatriate.
    - ksdale 11y ago
      There actually are laws that impose much higher tax rates on cash in "holding companies" but convincing the government that you might need that much cash is pretty easy.
  - bpodgursky 11y ago
    > Also, eliminating the corporate income tax would open up a gigantic loophole in tax law. People could simply incorporate into a single person corporation, then make sure the corporation makes all of their money and just happens to provide services that help the person (like buying food and shelter). Given that corporate income tax is basically completely ineffective right now, I don't know why you think this would possibly be any harder to enforce against. > If anything we should be taxing those war chests higher because sequestering that much money is bad for the economy as a whole. If you eliminated the corporate income tax, this money would instantly be some combination of (a) disbursed in dividends (b) brought back into the US and spent on expansions or acquisitions or (c) spent on stock buybacks, which would then be captured as capital gains tax. There's no need to make this more complicated.
- Goronmon 11y ago
  given that they must disburse their income eventually Must they?
  - abawany 11y ago
    EDIT: snipped confusing comment mixing expenses with income - by disbursements, I meant dividends. They don't all disburse all of their income every year, it is true. I guess it is a pretty strong reason to tax their incomes perhaps, i.e. to get a share of their income instead of waiting for the trickle down?
    - kspaans 11y ago
      Idea: everyone gets free meals at work (not a taxable benefit!), use of company cars, generous travel budgets (not a taxable benefit!), etc. So suddenly your compensation has increased quite a bit, but your personal income tax bill is the same. Now instead of the IRS chasing tax-inverters and shell corporations, now they have to go through every worker's books to try and guess what kind of benefits are taxable or not. (OK sure, the corporation will still pay goods and services taxes on those benefits it provides for its employees... hopefully.) That's one possible argument against not taxing corporations. It could be even more expensive to enforce taxable benefits rules if there were no corporation taxes. I think I read somewhere that C-level managers in South Korean corporations have _very_ modest salaries but get many benefits like these that aren't (currently) taxable.
      - jandrese 11y ago
        Eh, if a company is abusing the tax code to provide a ton of perks for its employees I would have a harder time complaining about it, at least when compared to the company abusing the tax code to keep billions of dollars locked up in vaults overseas doing nothing.
      - walshemj 11y ago
        so switch to the simpler paye system as used in the UK employers have to say how much benefit in kind they give to emploeeys every year in the p60 form makes taxing it simple
- nxzero 11y ago
  Most obvious reason is that corporations are taxed to fund the government. Beyond that, if they weren't tax, you could just build a massive corporation, never take any cash out, and use it to make smaller businesses more profitable.
- lutorm 11y ago
  What is the point of taxing an individual, given that they must also disburse their income eventually?
- Pitarou 11y ago
  Surprisingly, corporation tax prevents tax offshoring! It's easy for a stockholder to avoid income tax by placing his stocks in a holding company registered overseas. By moving closer to the money's source -- i.e. corporate profits -- Uncle Sam has a better chance of getting his share. Things didn't work out that way, of course, but the idea was a good one.
- jandrese 11y ago
  Another thought, if you eliminated corporate income tax, then those payments to vendors wouldn't be subject to tax either. The B2B market would be basically untaxed. This is a huge win for the 1%, but would really suck for regular people who would have to take over their tax burden.
  - abawany 11y ago
    That's an interesting point. I wasn't thinking of the elimination of sales tax - would that cover it?
- ubernostrum 11y ago
  what is the point of taxing corporations? Well, then just tax the income of the employees and shareholders! But what is the point of taxing income? After all, they have to spend that money sooner or later to buy things. So instead just have a sales tax! And away we go: you can chase down a bunch of rabbit holes of "why tax this when sooner later people have to do that, you could just tax that instead!" and end up with cycles of taxing corporate profits, taxing incomes, taxing sales, taxing land... The real issue is that the only reliable way we know of to maintain civilization is to have some sort of government. Whether you want it to be ultra-minimal or not actually makes no difference, since even a "contract and property-rights enforcement and nothing else" minimal government still needs some money to run, and can't just rely on random charitable donations. So it will sooner or later have to capture some percentage of the value generated by its presence in order to fund itself, and that means tax. But the instant you tax one thing, people find a way to avoid it and do some other thing instead. So you tax the other thing, and then the thing they go to after that, and sooner or later you have to have at least a nominal tax on everything just to cover all the bases and make it impossible to (legally) completely avoid taxation. Which in turn means the question is not "why do we tax this", but "what is the correct balance of how much to tax this vs. how much to tax that vs. how much to tax that other thing, in order to achieve the revenue necessary to support the government we've decided to have".
  - yummyfajitas 11y ago
    But what is the point of taxing income? After all, they have to spend that money sooner or later to buy things. So instead just have a sales tax! Economists agree that a VAT is, indeed, the most efficient form of taxation (besides pigouvian taxes and maybe a land value tax). The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society rather than in proportion to the value they create. If you tax corporations you can hide this fact from voters. "Don't blame we the politicians, blame the evil corporations for raising prices!"
    - sokoloff 11y ago
      > The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society Really? I buy perhaps 2x what the average American and maybe 4x what the poorest Americans who are not on government support buy. I'm pretty sure that I get more than that ratio of benefit from a stable society. Warren Buffett gets some massive multiple of the benefit than I get, but I doubt he pays more than 10x in sales tax what pay.
- marrs 11y ago
  I've always presumed that the point is to encourage the company to spend money and get cash recirculating through the economy, which of course you can further tax through the VAT system, PAYE system, etc.
joering2 11y ago
It would be more accurate to say that tax laws have NOT failed, because mostly designed by lobbyist, they had loopholes built in by design. Easiest examples are lobbyist from TurboTax team making sure taxes are complicated so you actually pay for TT services. https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing https://www.propublica.org/article/how-the-maker-of-turbotax...
briandear 11y ago
Tax rates should be higher? Higher tax rates are what incentivize avoidance. Look at Apple $200 billion in offshore cash. The US wants to tax that at 35%. Lower the rate to 10% and the government collects $20 billion. Keep it at 35% and the government collects zero. If the world taxes consumption instead of income, tax avoidance would disappear. I am tired of people who didn't earn the money thinking that the government has a right to it. Government is too big, taxes are too high, entitlements are ridiculous. When did it become the role of government to provide pensions and health care? Why shouldn't that be solely private sector? Should the government give us food and clothing as well? It's ridiculous. Helping the truly poor is one thing, but becoming a cradle-to-grave nanny goes against the very concept of freedom. Americans work from Jan 1 to April 24 just to pay for government. We spend more on taxes than food, clothing and housing -- combined. And people want higher taxes? How about controlling spending first, then we can talk about a credit limit increase.
- fomojola 11y ago
  Moderately curious: do you really believe that there is a tax rate greater than 0% that would prevent corporate tax avoidance? I mean, at 10% why wouldn't someone just make the argument that it should be 5% instead?
  - benjohnson 11y ago
    For me as a very small business owner the threshold is at about 15%.
makomk 11y ago
It's not that simple. Corporation tax is levied based on profits, and for good reason - taxing corporations based on pure income would penalize low-margin, non-vertically-integrated businesses for no good reason. But there's all kinds of tricks that multinational businesses can play with their expenses to make it seem like they haven't made a profit in the US and it's difficult to outlaw and disentangle all of them.
- hippich 11y ago
  No one really responded on why corporation should be taxed on profits at all. In the end if profits are distributed, these will be taxes as ordinary or capital income anyway. And "stashing" is not a problem, if anything, "stashing" makes everybody a bit richer, since chunk of money is essentially temporarily destroyed.
cloudjacker 11y ago
look up IRS APA tl;dr most tax avoidance schemes get the blessing of the IRS (and the other foreign tax authorities) before they are attempted. It also costs money. lol.
Shivetya 11y ago
No, the US has not kept pace with the rest of the world with regards to setting reasonable tax rates and how profits made it other markets are treated. That is why companies move to incorporate elsewhere and laws be damned many will do so. The US is in danger because other economies are growing in s size and it won't be long before being based elsewhere just makes sense not only because of taxation but because of local sales. Instead we have vindictive politicians who wonder why they are reviled many times over. Here's a hint, what they are willing to do to punish a company is a clear indication they respect nothing and no one and will and do use the law to punish those they don't like

Gratsby 11y ago

Protecting tax revenue is not an answer. Accountants can move faster than lawmakers, and lawmakers may or may not prioritize this kind of a thing at any point in time. The solution is to encourage and foster economic growth. The outliers like Apple with large cash reserves being held offshore should be dealt with individually. (Not calling them out, it's just that they are well known for it) You don't penalize them for being smart with their money, you simply incentivize them to use the money in-country. The news this election cycle seems to be a flurry of anti-1%/anti-corporate propoganda. There seems to be a feeling of take-take-take from these entities that took-took-took from us. That mindset simply does not work long term. Without real economic growth tax revenue is a finite and dwindling resource.

darawk 11y ago
Two things: Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. Secondly, accountants can only move faster than the law if there are loopholes - if you close those loopholes it does in fact get harder and harder for them to move around them, and it does in fact bring in more tax revenue. If it didn't, they wouldn't lobby against it. All that being said, the corporate income tax doesn't make a whole lot of sense in the first place and we should probably get rid of it and replace it with a more economically sound revenue stream. However, as long as the law is on the books, it ought to be enforced, and even moreso ought to be enforced fairly for large corporations and small.
- matt_wulfeck 11y ago
  > Making companies pay their legally required tax bill is not 'taking'. It's just making them follow the spirit of the law. They are following the law though. It's the law that allows this. If you create more laws that disencentive the behavior people will just find more loopholes. spirit of the law is meaningless here. Generally we don't consider anything illegal unless it is actually illegal. Are you following the spirit of the tax law when you itemize your deductions and get a nice tax break?
  - 11y ago

matt_wulfeck 11y ago

If you want to make the tax law more robust then we must make it simpler. Every new law just creates a new vector for loopholes. Anyone that has filled out something more complicated than a 1040ez knows that the current state of things is very broken and the complication is a serious advantage to wealthy corporations with tax lawyers. Make it simple and accessible. Stop carving out special exceptions into every nook and cranny. And for God's sake stop creating more laws that further complicate it.

danieltillett 11y ago
Complication is a feature not a bug. You can't solve this until you solve the reason why the complication occurred in the first place (politicians need for cash). Any simplification of the tax law will just slide back to the current mess as each lobby group buys the loopholes they want. If you want to fix the tax system you need to fix the political system's need for cash. One of the more interesting things about this US election season is that the population is starting to get this. I think the US Supreme Court were rather clever ruling that injecting unlimited cash into the political system was Ok as it has accelerated this process of voter education.

white-flame 11y ago

People shop around to get the best deal, especially on large or ongoing expenses. Corporations shop around to get the best incorporation deal, which includes taxes, knobs on taxes, import/export regulations, legal climate, etc. If X shops around and finds a legal means of getting what they need cheaper, they go for it, whether X is a person or a company. Both at the personal and corporate level, the more financially well-off you are, the wider your shopping reach is. For somebody making $30k/year, a couple of percent difference in exchange for upheaving your life isn't going to be worth it. But for some entity making $300M/year, a couple of percent is a lot of money, and it's worth seeing what they can do to shave those points off their taxes. People with a lot of money also have much more mobility to move to a lower tax area of their choosing, and still travel where they want. So in the comparison to shopping around, you really can't fault this type of corporate action, until they actually go illegal. You need to deal with the incentive structure these people & companies are looking at from their perspective if you want their money to stay in your jurisdiction.

yummyfajitas 11y ago
The moral of this story is to incorporate in Singapore or Estonia. Since the US won't let you leave it's better never to enter.
- dmurray 11y ago
  At what level does this make sense for the HN case of two college grads founding a startup in California? No US lawyer specialising in paperwork for small businesses would tell you "never mind Delaware, you should go offshore!" So what are the short term benefits of being incorporated in the US?
  - white-flame 11y ago
    While there are benefits of eager investors, stable (enough) infrastructure, low personal tax rates, etc in the US, in this context it's more that the costs of being in the US are pretty negligible when you're small. There's fixed overheads and lots of additional unfamiliarities in figuring out offshore and multinational business that don't make sense when you're a small startup focusing on developing your product and sales chain. Once you get large, though, the tax differences can start becoming the size of entire departmental budgets.

known 11y ago

The significant problems we have cannot be solved at the same level of thinking with which we created them. 1. Impose tax on corporate revenues, not profits 2. Regulate market capitalization of corporations

eru 11y ago
> 1. Impose tax on corporate revenues, not profits Problem with that is that it encourages needless integration. If you tax revenues, a company and its supplier will basically pay twice as much tax as when they merge. Or do you have a clever idea to solve this? (Value Added Tax's structure does solve this problem to some extent.)