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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 t

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.
devishard 11y ago
> So in the comparison to shopping around, you really can't fault this type of corporate action, until they actually go illegal. Watch me. There are many times when people have incentives to take actions that harm those around them, and yet somehow a lot of us manage to act ethically. There are plenty of behaviors that are legal but unethical. I could, for example, cheat on my significant other. There are some strong biological incentives to do so. But nobody would say, "you can't fault him for cheating on his SO until he actually goes illegal". Laws exist to disincentivize the extremes of unethical behavior. When you consider that the rich have an inordinate influence over what laws are passed, it becomes clear that often behaviors which are unethical enough to be illegal remain legal because the rich benefit from them. The people exposed by the Panama Papers knew they weren't behaving ethically, otherwise they wouldn't have gone to such lengths to hide their actions. I have no qualms about faulting them for their actions. In business, "I was just following incentives" is the new "I was just following orders". They're teaching this to business students in college, that the only responsibility a company has is to its shareholders. Any person or corporation with this ideology is effectively a sociopath, and society should treat such corporations the same way we treat known sociopaths. I agree with you that we should disincentivize this kind of tax evasion, but any disincentive that assumes that there is no fault for following incentives will simply plug one leak: the rich and corporations will simply find another way to be avoid contributing to society. If you really believe that incentives are the problem then we need to create a real disincentive: jail time for persons and seizure of assets for corporations.
- white-flame 11y ago
  Finding a deal on taxes is a completely different realm than surreptitiously dumping toxic waste, or whatever else "harm those around them" and "just following orders" tends to imply. The reductio ad absurdum doesn't really mesh here. I agree with the sociopathic judgment of people using such excuses to be predators against society. But we're simply talking about Place A offering a better financial package than Place B. Tax codes are insanely complex, and there's a bajillion ways to look at them and apply them. Tax breaks are typically done for the government to incentivize people & businesses to engage in behavior, and tax hikes are typically done to dissuade behavior, without specifically outlawing things. The sum total of these is a big mess in which if a few percent matters to you, you can research and optimize. Given how the tax code comes into being, that is exactly the spirit of the law. > the rich and corporations will simply find another way to be avoid contributing to society This is a moot and frankly prejudiced point. People & organizations with more wealth & power have greater flexibility and mobility, regardless of the system they're in.

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.

devishard 11y ago

> So in the comparison to shopping around, you really can't fault this type of corporate action, until they actually go illegal. Watch me. There are many times when people have incentives to take actions that harm those around them, and yet somehow a lot of us manage to act ethically. There are plenty of behaviors that are legal but unethical. I could, for example, cheat on my significant other. There are some strong biological incentives to do so. But nobody would say, "you can't fault him for cheating on his SO until he actually goes illegal". Laws exist to disincentivize the extremes of unethical behavior. When you consider that the rich have an inordinate influence over what laws are passed, it becomes clear that often behaviors which are unethical enough to be illegal remain legal because the rich benefit from them. The people exposed by the Panama Papers knew they weren't behaving ethically, otherwise they wouldn't have gone to such lengths to hide their actions. I have no qualms about faulting them for their actions. In business, "I was just following incentives" is the new "I was just following orders". They're teaching this to business students in college, that the only responsibility a company has is to its shareholders. Any person or corporation with this ideology is effectively a sociopath, and society should treat such corporations the same way we treat known sociopaths. I agree with you that we should disincentivize this kind of tax evasion, but any disincentive that assumes that there is no fault for following incentives will simply plug one leak: the rich and corporations will simply find another way to be avoid contributing to society. If you really believe that incentives are the problem then we need to create a real disincentive: jail time for persons and seizure of assets for corporations.

white-flame 11y ago
Finding a deal on taxes is a completely different realm than surreptitiously dumping toxic waste, or whatever else "harm those around them" and "just following orders" tends to imply. The reductio ad absurdum doesn't really mesh here. I agree with the sociopathic judgment of people using such excuses to be predators against society. But we're simply talking about Place A offering a better financial package than Place B. Tax codes are insanely complex, and there's a bajillion ways to look at them and apply them. Tax breaks are typically done for the government to incentivize people & businesses to engage in behavior, and tax hikes are typically done to dissuade behavior, without specifically outlawing things. The sum total of these is a big mess in which if a few percent matters to you, you can research and optimize. Given how the tax code comes into being, that is exactly the spirit of the law. > the rich and corporations will simply find another way to be avoid contributing to society This is a moot and frankly prejudiced point. People & organizations with more wealth & power have greater flexibility and mobility, regardless of the system they're in.