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I think this article helps illuminate the issue and provides more context: http://www.wsj.com/articles/facebook-gets-tax-notice-over-transfer-of-assets-overseas
by erdevs 10y ago
I think this article helps illuminate the issue and provides more context: http://www.wsj.com/articles/facebook-gets-tax-notice-over-transfer-of-assets-overseas-1469750400 http://www.wsj.com/articles/facebook-gets-tax-notice-over-tr...
Curious what others think about this. All for tax optimization in whatever ways the rules allow, but this rule seems silly. Transferring intangibles like IP to a "headquarters" in a low-tax territory in order to avoid domestic taxes doesn't seem right. On a first principles basis, what seems fair is to pay sales/vat taxes on revenue in whatever territory it's generated in and to pay income taxes at whatever the domestic rate is in the country you're actually headquartered in. It's silly that FB is clearly headquartered here (along with many other US-based companies that utilize this loophole) but tries to claim these substantial IPs are housed elsewhere. Alternatively, I could see a system wherein your net income is taxed proportionally in each territory where you actually have expenses. So, if 80% of your expenses (payroll, etc) are generated in the US, you'd pay US corporate income tax on 80% of your net income, and the remaining 20% could be taxed ratably in each jurisdiction where you have associated expenses.
In any case, yet another example of an overly complicated and clearly suboptimal, subjective system that ultimately costs billions in overhead and legal fights to adequately resolve.
- eru 10y agoWouldn't the change of rule you are suggesting just lead to Facebook moving HQ to Singapore?
- erdevs 10y agoI mean, if they actually did move their HQ (ie majority of costs, execs, etc) to Singapore, then sure. And that'd be totally fair. What maybe doesn't seem fair (haven't thought about it deeply enough to say for sure) is pretending your HQ is where you really just have a satellite while the core of your IP creation, expenses, exec decision making etc is in the US. It's like you're getting the benefits of being in the US (whatever you think they are), but not paying the full price for those benefits. What I hate about rules like this is that it basically forces you to follow them. You have a fiduciary duty to shareholders as an officer and/or director, and so you have hard time justifying not using a technique like this.
- jessaustin 10y agoThat would be amusing; would Eduardo meet them at the airport?
- fovc 10y agoThat's a common strategy, but not quite so simple to pull off. One approach is through M&A: https://en.m.wikipedia.org/wiki/Tax_inversion https://en.m.wikipedia.org/wiki/Tax_inversion
- somenomadicguy 10y agoTwitter made this same threat with San Francisco when it extorted us for corporate welfare. In reality we should have a tax system which rewards job creation and creates very stiff penalties for trying to sneak out of paying for the infrastructure which makes their profits possible.
- eru 10y agoJust stop taxing labour and capital, and tax land. Land can't move overseas.
- ThrustVectoring 10y ago>I could see a system wherein your net income is taxed proportionally in each territory where you actually have expenses. More straightforwardly, you could proportionally tax the territory itself. Preferably through some kind of land-value tax. This neatly avoids needing to dissect companies for revenue that can easily be booked in whatever jurisdiction they want it. Instead, just look at the boundary points where Facebook interacts with America: paying for the right to use American land and citizens.