6 ms·

Tax avoidance is mostly happening because tax rates are seen as too high by the rich. Paying 40% tax on $50,000 is different to paying 40% tax on $10m. Past a c

Tax avoidance is mostly happening because tax rates are seen as too high by the rich. Paying 40% tax on $50,000 is different to paying 40% tax on $10m. Past a certain point, setting up an avoidance mechanic (if one exists for the investment you want to make) will be cheaper than actually paying the default tax rate. Avoidance can never be stopped, because it's mostly structuring transactions in legally allowed but clever ways and you can't stop that (or you would block normal, legal transactions as well). Say I have $10m I want to invest in an international company. If I do it in the most obvious way, by capitalising an entity, I might get a 30% return on my money after 3 years after paying all taxes. Alternatively, I can structure it in a different way, and make 50% in 3 years, because I end up paying less tax. The difference is an extra $2m on $10m. If the amount to set up a structure/attorney fees/possibly litigation fees < "normal" tax to pay -> avoid. The only real solution is to lower rates across the board by getting rid of most deductions. If you remove the incentive to avoid, it'll be less worthwhile to avoid, and most people will stop doing it. How much people would put in an effort to avoid taxes, if the actual tax rate was, say 10%?

dpark 10y ago
> Paying 40% tax on $50,000 is different to paying 40% tax on $10m. You're right. It's way different to charge 40% on $50k, because the person making 50k probably can't make ends meet if you charge them 40% tax. The person making $10MM has no such trouble.
- deleted 10y ago
  [deleted]
- charlesdm 10y ago
  I'm not saying it's right, I'm just saying how it is and that it's a problem that is very hard to fix. For wealthy people, tax is just another expense to push as close to zero as possible.
  - dpark 10y ago
    I completely agree that it's a hard problem. I don't think there's a fix that involves lowering the tax burden on the wealthy, though. You can dump more taxes on the middle class and effectively reduce the level of avoidance but I don't think that's a net gain for society. I think it would actually be a huge loss.
    - toomuchtodo 10y ago
      So sad you're downvoted. The solution is ruthless enforcement of the tax code, with extreme punitive fines for evasion.
      - charlesdm 10y ago
        > The solution is ruthless enforcement of the tax code, with extreme punitive fines for evasion. Evasion has always been illegal, avoidance is structuring a transaction in a way so that it ends up being taxed at a lower rate, but in a legal way. Ruthless enforcement is already happening today in most western european countries.
        toomuchtodo 10y ago
        > Ruthless enforcement is already happening today in most western european countries. Oh please. It took 6 years for the EU to penalize Ireland for the double irish/dutch sandwich avoidance mechanism. https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement https://www.bloomberg.com/news/articles/2016-08-30/apple-ireland-ruling-heralds-twilight-of-easy-european-tax-deals https://www.bloomberg.com/news/articles/2016-08-30/apple-ire...
        charlesdm 10y ago
        Well.. countries are allowed to set their own tax laws. That’s part of what makes a country. Fiscal sovereignty right there. Ireland (obviously) purposely created their tax framework so it would allow for this kind of behaviour. The world is battling for the tax dollars of wealthy people and their corporations. The EU ruling is just an initial opinion of the EU commission. It’ll have to go through the ECJ first. Countries are starving for tax income and have very clear conflicts of interests: they want to 1) tax their normal residents as much as possible, but at the same time 2) hand out low tax “freebies” to non residents (or HNWIs) so they will book some of their taxable profits in their jurisdictions. This needs to stop (globally) before you can effectively combat avoidance. But I doubt it’s ever going to happen.
- gozur88 10y ago
  You have no idea what that person's situation is from their income. I know retired people with a lot of money who pay hardly any income taxes because they don't have much income. I also know people who could make a million this year and not be out of debt.
  - dpark 10y ago
    If you're earning 10MM/year and unable to make ends meet, you're terrible with money and it's your fault. Maybe you can construct a far-fetched scenario in which this could reasonably be the case, but in the real world virtually anyone making 10MM/year is extremely wealthy or extremely incompetent. If you're making 30k/year, you are just barely making enough to support a family on your income. Yes it's possible to be wealthy and low income, but it's uncommon and generally indicative of retirement or something similar.
    - gozur88 10y ago
      >If you're earning 10MM/year and unable to make ends meet, you're terrible with money and it's your fault. Maybe, but not necessarily. What if I spent twenty years putting myself in the position to make $10m in one year? >If you're making 30k/year, you are just barely making enough to support a family on your income. Yes it's possible to be wealthy and low income, but it's uncommon and generally indicative of retirement or something similar. Well, yeah, but so what? My point was you're making a lot of assumptions based on income alone.
      - dpark 10y ago
        If you spend 20 years setting yourself to make $10MM one year and you still can't make ends meet then you are clearly incompetent. I don't understand what your point is with this whole argument. Yes, there are always exceptions. They aren't very interesting but the very nature of being exceptions, especially since tax laws are written for the general case. The number of multi millionaires in your exceptional case is also much smaller than you probably think. It's vanishingly difficult to earn no money when you have millions in assets.
- fegu 10y ago
  (Why is 1000 a k for kilo, but a million is MM, not M for mega?)
  - dpark 10y ago
    M=Mille. It's used in financial jargon. A mille is also 1000. I never use a single 'M' by itself when talking about money because it's ambiguous. Mega or mille? If you see MM, it's not ambiguous.
kartan 10y ago
> If you remove the incentive to avoid, it'll be less worthwhile to avoid Taxes are needed to pay for hospitals, teachers, firefighters... what happens if the amount that the 1% think is fine doesn't cover for that expenses? They have so much money that they can afford private version of that services. But what is in that model for the rest of citizens? This is a problem between short term benefit for a few against long term losses for everyone. It is not possible to have a modern society with low rates of death by sickness and low levels of violence and crime if we can't afford to have in place none less improve all the current safeguards.
- charlesdm 10y ago
  I don't know the answer to that.. maybe we need to be more efficient with the resources we use/allocate, or maybe we need to try and figure out how to make due with the tax income we have? Governments all over the world are constantly overspending. That's the nature of the beast. Give them X and they will spend X + 10. I wouldn't actually be surprised that we can make due with current (or even) lower overall tax income if we decide to allocate it properly. Wealthy people can move relatively easily if they want to. If someone is worth $50m, he's really getting very little value from the system. Heavy shoulders should bear a heavier burden, I agree, but how far should that go? Maybe the maximum amount of tax should somehow be capped. Past a certain point, some people just get fed up with paying insane amounts of taxes. Proportionally (income wise) middle and lower income people are paying more in taxes then, but they are also getting more back in comparison to the guy who is worth $25-50m.
  - chii 10y ago
    The rich benefit from a society where he can conduct profitable business. I think he benefits more than he cares to admit, because a more heavily taxed middle class is going to spend less, and that is going to affect his bottom line, one way or another.
  - Spooky23 10y ago
    > If someone is worth $50m, he's really getting very little value from the system. He's getting everything from the system. Law, the courts, the ability to live in relative freedom without walled compounds and guards, etc. When revolution comes, those $20-50M guys will be the ones on the wall.

dpark 10y ago

> Paying 40% tax on $50,000 is different to paying 40% tax on $10m. You're right. It's way different to charge 40% on $50k, because the person making 50k probably can't make ends meet if you charge them 40% tax. The person making $10MM has no such trouble.

deleted 10y ago
[deleted]
charlesdm 10y ago
I'm not saying it's right, I'm just saying how it is and that it's a problem that is very hard to fix. For wealthy people, tax is just another expense to push as close to zero as possible.
- dpark 10y ago
  I completely agree that it's a hard problem. I don't think there's a fix that involves lowering the tax burden on the wealthy, though. You can dump more taxes on the middle class and effectively reduce the level of avoidance but I don't think that's a net gain for society. I think it would actually be a huge loss.
  - toomuchtodo 10y ago
    So sad you're downvoted. The solution is ruthless enforcement of the tax code, with extreme punitive fines for evasion.
    - charlesdm 10y ago
      > The solution is ruthless enforcement of the tax code, with extreme punitive fines for evasion. Evasion has always been illegal, avoidance is structuring a transaction in a way so that it ends up being taxed at a lower rate, but in a legal way. Ruthless enforcement is already happening today in most western european countries.
      - toomuchtodo 10y ago
        > Ruthless enforcement is already happening today in most western european countries. Oh please. It took 6 years for the EU to penalize Ireland for the double irish/dutch sandwich avoidance mechanism. https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement https://www.bloomberg.com/news/articles/2016-08-30/apple-ireland-ruling-heralds-twilight-of-easy-european-tax-deals https://www.bloomberg.com/news/articles/2016-08-30/apple-ire...
        charlesdm 10y ago
        Well.. countries are allowed to set their own tax laws. That’s part of what makes a country. Fiscal sovereignty right there. Ireland (obviously) purposely created their tax framework so it would allow for this kind of behaviour. The world is battling for the tax dollars of wealthy people and their corporations. The EU ruling is just an initial opinion of the EU commission. It’ll have to go through the ECJ first. Countries are starving for tax income and have very clear conflicts of interests: they want to 1) tax their normal residents as much as possible, but at the same time 2) hand out low tax “freebies” to non residents (or HNWIs) so they will book some of their taxable profits in their jurisdictions. This needs to stop (globally) before you can effectively combat avoidance. But I doubt it’s ever going to happen.
gozur88 10y ago
You have no idea what that person's situation is from their income. I know retired people with a lot of money who pay hardly any income taxes because they don't have much income. I also know people who could make a million this year and not be out of debt.
- dpark 10y ago
  If you're earning 10MM/year and unable to make ends meet, you're terrible with money and it's your fault. Maybe you can construct a far-fetched scenario in which this could reasonably be the case, but in the real world virtually anyone making 10MM/year is extremely wealthy or extremely incompetent. If you're making 30k/year, you are just barely making enough to support a family on your income. Yes it's possible to be wealthy and low income, but it's uncommon and generally indicative of retirement or something similar.
  - gozur88 10y ago
    >If you're earning 10MM/year and unable to make ends meet, you're terrible with money and it's your fault. Maybe, but not necessarily. What if I spent twenty years putting myself in the position to make $10m in one year? >If you're making 30k/year, you are just barely making enough to support a family on your income. Yes it's possible to be wealthy and low income, but it's uncommon and generally indicative of retirement or something similar. Well, yeah, but so what? My point was you're making a lot of assumptions based on income alone.
    - dpark 10y ago
      If you spend 20 years setting yourself to make $10MM one year and you still can't make ends meet then you are clearly incompetent. I don't understand what your point is with this whole argument. Yes, there are always exceptions. They aren't very interesting but the very nature of being exceptions, especially since tax laws are written for the general case. The number of multi millionaires in your exceptional case is also much smaller than you probably think. It's vanishingly difficult to earn no money when you have millions in assets.
fegu 10y ago
(Why is 1000 a k for kilo, but a million is MM, not M for mega?)
- dpark 10y ago
  M=Mille. It's used in financial jargon. A mille is also 1000. I never use a single 'M' by itself when talking about money because it's ambiguous. Mega or mille? If you see MM, it's not ambiguous.

kartan 10y ago

> If you remove the incentive to avoid, it'll be less worthwhile to avoid Taxes are needed to pay for hospitals, teachers, firefighters... what happens if the amount that the 1% think is fine doesn't cover for that expenses? They have so much money that they can afford private version of that services. But what is in that model for the rest of citizens? This is a problem between short term benefit for a few against long term losses for everyone. It is not possible to have a modern society with low rates of death by sickness and low levels of violence and crime if we can't afford to have in place none less improve all the current safeguards.

charlesdm 10y ago
I don't know the answer to that.. maybe we need to be more efficient with the resources we use/allocate, or maybe we need to try and figure out how to make due with the tax income we have? Governments all over the world are constantly overspending. That's the nature of the beast. Give them X and they will spend X + 10. I wouldn't actually be surprised that we can make due with current (or even) lower overall tax income if we decide to allocate it properly. Wealthy people can move relatively easily if they want to. If someone is worth $50m, he's really getting very little value from the system. Heavy shoulders should bear a heavier burden, I agree, but how far should that go? Maybe the maximum amount of tax should somehow be capped. Past a certain point, some people just get fed up with paying insane amounts of taxes. Proportionally (income wise) middle and lower income people are paying more in taxes then, but they are also getting more back in comparison to the guy who is worth $25-50m.
- chii 10y ago
  The rich benefit from a society where he can conduct profitable business. I think he benefits more than he cares to admit, because a more heavily taxed middle class is going to spend less, and that is going to affect his bottom line, one way or another.
- Spooky23 10y ago
  > If someone is worth $50m, he's really getting very little value from the system. He's getting everything from the system. Law, the courts, the ability to live in relative freedom without walled compounds and guards, etc. When revolution comes, those $20-50M guys will be the ones on the wall.