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ITS NOT A LOOPHOLE. This isn't some oversight. The tax law was written that way with intent! People don't want companies to pay tax on revenue. And Amazon m

ITS NOT A LOOPHOLE. This isn't some oversight. The tax law was written that way with intent! People don't want companies to pay tax on revenue. And Amazon makes very little profit! No company on earth spends $100 so they can save $40 on their tax bill. It is nonsensical.

runesoerensen 9y ago
> No company on earth spends $100 so they can save $40 on their tax bill. It is nonsensical. How is that nonsensical? Seems like lots of companies expend/transfer/invest rather than being taxed on their profits? Edit: Replaced "to avoid" with "rather than".
- rukittenme 9y ago
  Yes but they're not spending $100 to "dodge taxes". They're spending the money on positive NPV projects. You're mistaking an effect for a cause. Companies invest and expand and they pay less taxes as an effect. But in the future, they'll have to pay taxes on those revenue generating facilities they invested in. And if those investments go belly up then the company will LOSE more money than it ever gained by "dodging taxes".
  - runesoerensen 9y ago
    > Yes but they're not spending $100 to "dodge taxes". They're spending the money on positive NPV projects. You're mistaking an effect for a cause. I don't think I am. The NPV projects are more likely to be positive if the alternative is to pay income tax on the profits, right? I don't necessarily mean to say they're doing it to avoid/dodge paying taxes (and I've edited my earlier response with a less loaded term), but taxes surely play a role in how they manage capital. > Companies invest and expand and they pay less taxes as an effect. Companies that are not paying income taxes do not pay less income taxes if they invest or expand.
  - heavenlyblue 9y ago
    I don't see why Amazon is the only company privileged to grow. The only reason they are capable of operating right now (as in - on their low margins) is the sheer size they had reached by this time - and they are going nowhere but towards becoming the sole monopoly in the sector. That is - all of the power and a relatively low amount of taxes; given to their investors. Here's another bummer: why are citizens forced to pay for the social security that is provided by the government to Amazon? For example police, roads and the airports that are the key parts of the infrastructure that are making Amazon work? You could make a point that they are not making cash for the investors today. But the investors are making a fortune by having enough power to affect our living. I don't see why this should be in private hands and not a part of governmental institution in this case as they do not pay taxes for the same reasons. On the other hand - it would be interesting to see Amazon becoming that hugely low-margin business that is only allowed to stay afloat by keeping their monopoly on the market but also keeping the prices low because otherwise there would be another competitor soon enough.
    - rukittenme 9y ago
      > Here's another bummer: why are citizens forced to pay for the social security that is provided by the government to Amazon? For example police, roads and the airports that are the key parts of the infrastructure that are making Amazon work? There is so much wrong with this statement. Amazon pays usage fees for everything you suggest. Roads? Amazon pays a tax on gasoline which pays for the roads. As do all citizens and businesses. The tax is a usage tax in that Amazon pays more if it uses more than you and I (which it does). Police? Amazon pays property taxes which funds local governments. Airports? Federal and local authorities levy usage taxes for air traffic control, security, and other airport functions. Next time you book a budget flight, look at the line item break down. I've had flights where the taxes were greater than the fare itself (CLT -> ORL). Amazon (and all businesses) bear the burden of collecting sales taxes. It doesn't magically go to the government. Amazon has to construct systems to collect, manage, and send sales taxes to their respective local governments. The government receives these taxes with no effort on their part. Bottom line... Citizens and companies pay usage taxes to maintain infrastructure. > I don't see why Amazon is the only company privileged to grow. The only reason they are capable of operating right now (as in - on their low margins) is the sheer size they had reached by this time - and they are going nowhere but towards becoming the sole monopoly in the sector. They're not, many companies could and many companies do invest heavily in themselves. You're on HN, you should notice these strategies being used by every startup. Side note: Amazon is not a monopoly power. They have many competitors across a lot of market segments.
- valuearb 9y ago
  You don't understand how companies manage their tax obligations. It's not like that. For example, look at how Apple manages it's international tax burden. For example, it's international profits are generated by international subsidiaries, which are different companies that Apple owns the stock of. Their profits are taxed in the country they are based in. They have two choices: 1) What's left can be paid to the parent company, Apple USA, which would require paying about 42% of those remaining profits to the U.S. and California governments. 2) What's left can be invested in an Irish subsidiary, and the bank interest those funds earn will be taxed at a special low rate by Ireland because they'd rather have that money invested in their economy then invested elsewhere. Eventually when the U.S. decides to lower the rate on repatriated profits, Apple will move the Irish deposits back to the U.S., pay about 20% of them in federal and state taxes, and most of the rest out as dividends to Apple Shareholders, who will pay something like 20%+ state income tax rate on the remainder. So no loopholes, just following the letter of the law and making decisions to not do things that would trigger massive tax penalties. And if you wonder if Apple should be forced to pay U.S. income taxes it's entire world wide income, like some crazy people have proposed, think of the consequences. Apple's effective corporate tax rate would be roughly 50% a year, and the effective tax on dividend distributions would be around 70%, even if you were a little old lady living on social security that had your meager life savings in Apple stock. Meanwhile Samsung's rate would whatever South Korea chose to allow it, likely far far less. And it's international profits might be taxed even lower. So Samsung would have more after tax profits to reinvest in it's businesses and over time that would be a huge advantage over Apple, just like every international company would have over U.S. companies. At that point, why would Apple remain in the U.S? Why not move the HQ to Ireland, and make Apple USA a subsidiary of it? Why would any super profitable US company not move, to literally any other country? Lastly, the real point is that corporations should never pay income tax. Their profits are either reinvested in the business, which means creating more jobs, increasing productivity (which raises wages) and making more and better stuff. Or they are invested in other investments, bank deposits etc, which are loaned out to do pretty much the exact same thing. Or they are paid out to shareholders, who then have to pay taxes again on the dividends in a flat, non-progressive system. We want investment into companies. We need investment into companies. Without it, no company can grow or develop. If 50-70% of the profits from your investment are lost to taxes, you are going to be far less likely to invest in a U.S. company. If 100% of the profits are paid to you so you can pay your own personal tax rate on them, you are going to be much more likely to invest in a U.S. company. So I say dump the corporate income tax, dump the special dividend rate, and let investors pay taxes on dividends at fair rates in our progressive rate tax system.

runesoerensen 9y ago

> No company on earth spends $100 so they can save $40 on their tax bill. It is nonsensical. How is that nonsensical? Seems like lots of companies expend/transfer/invest rather than being taxed on their profits? Edit: Replaced "to avoid" with "rather than".

rukittenme 9y ago
Yes but they're not spending $100 to "dodge taxes". They're spending the money on positive NPV projects. You're mistaking an effect for a cause. Companies invest and expand and they pay less taxes as an effect. But in the future, they'll have to pay taxes on those revenue generating facilities they invested in. And if those investments go belly up then the company will LOSE more money than it ever gained by "dodging taxes".
- runesoerensen 9y ago
  > Yes but they're not spending $100 to "dodge taxes". They're spending the money on positive NPV projects. You're mistaking an effect for a cause. I don't think I am. The NPV projects are more likely to be positive if the alternative is to pay income tax on the profits, right? I don't necessarily mean to say they're doing it to avoid/dodge paying taxes (and I've edited my earlier response with a less loaded term), but taxes surely play a role in how they manage capital. > Companies invest and expand and they pay less taxes as an effect. Companies that are not paying income taxes do not pay less income taxes if they invest or expand.
- heavenlyblue 9y ago
  I don't see why Amazon is the only company privileged to grow. The only reason they are capable of operating right now (as in - on their low margins) is the sheer size they had reached by this time - and they are going nowhere but towards becoming the sole monopoly in the sector. That is - all of the power and a relatively low amount of taxes; given to their investors. Here's another bummer: why are citizens forced to pay for the social security that is provided by the government to Amazon? For example police, roads and the airports that are the key parts of the infrastructure that are making Amazon work? You could make a point that they are not making cash for the investors today. But the investors are making a fortune by having enough power to affect our living. I don't see why this should be in private hands and not a part of governmental institution in this case as they do not pay taxes for the same reasons. On the other hand - it would be interesting to see Amazon becoming that hugely low-margin business that is only allowed to stay afloat by keeping their monopoly on the market but also keeping the prices low because otherwise there would be another competitor soon enough.
  - rukittenme 9y ago
    > Here's another bummer: why are citizens forced to pay for the social security that is provided by the government to Amazon? For example police, roads and the airports that are the key parts of the infrastructure that are making Amazon work? There is so much wrong with this statement. Amazon pays usage fees for everything you suggest. Roads? Amazon pays a tax on gasoline which pays for the roads. As do all citizens and businesses. The tax is a usage tax in that Amazon pays more if it uses more than you and I (which it does). Police? Amazon pays property taxes which funds local governments. Airports? Federal and local authorities levy usage taxes for air traffic control, security, and other airport functions. Next time you book a budget flight, look at the line item break down. I've had flights where the taxes were greater than the fare itself (CLT -> ORL). Amazon (and all businesses) bear the burden of collecting sales taxes. It doesn't magically go to the government. Amazon has to construct systems to collect, manage, and send sales taxes to their respective local governments. The government receives these taxes with no effort on their part. Bottom line... Citizens and companies pay usage taxes to maintain infrastructure. > I don't see why Amazon is the only company privileged to grow. The only reason they are capable of operating right now (as in - on their low margins) is the sheer size they had reached by this time - and they are going nowhere but towards becoming the sole monopoly in the sector. They're not, many companies could and many companies do invest heavily in themselves. You're on HN, you should notice these strategies being used by every startup. Side note: Amazon is not a monopoly power. They have many competitors across a lot of market segments.
valuearb 9y ago
You don't understand how companies manage their tax obligations. It's not like that. For example, look at how Apple manages it's international tax burden. For example, it's international profits are generated by international subsidiaries, which are different companies that Apple owns the stock of. Their profits are taxed in the country they are based in. They have two choices: 1) What's left can be paid to the parent company, Apple USA, which would require paying about 42% of those remaining profits to the U.S. and California governments. 2) What's left can be invested in an Irish subsidiary, and the bank interest those funds earn will be taxed at a special low rate by Ireland because they'd rather have that money invested in their economy then invested elsewhere. Eventually when the U.S. decides to lower the rate on repatriated profits, Apple will move the Irish deposits back to the U.S., pay about 20% of them in federal and state taxes, and most of the rest out as dividends to Apple Shareholders, who will pay something like 20%+ state income tax rate on the remainder. So no loopholes, just following the letter of the law and making decisions to not do things that would trigger massive tax penalties. And if you wonder if Apple should be forced to pay U.S. income taxes it's entire world wide income, like some crazy people have proposed, think of the consequences. Apple's effective corporate tax rate would be roughly 50% a year, and the effective tax on dividend distributions would be around 70%, even if you were a little old lady living on social security that had your meager life savings in Apple stock. Meanwhile Samsung's rate would whatever South Korea chose to allow it, likely far far less. And it's international profits might be taxed even lower. So Samsung would have more after tax profits to reinvest in it's businesses and over time that would be a huge advantage over Apple, just like every international company would have over U.S. companies. At that point, why would Apple remain in the U.S? Why not move the HQ to Ireland, and make Apple USA a subsidiary of it? Why would any super profitable US company not move, to literally any other country? Lastly, the real point is that corporations should never pay income tax. Their profits are either reinvested in the business, which means creating more jobs, increasing productivity (which raises wages) and making more and better stuff. Or they are invested in other investments, bank deposits etc, which are loaned out to do pretty much the exact same thing. Or they are paid out to shareholders, who then have to pay taxes again on the dividends in a flat, non-progressive system. We want investment into companies. We need investment into companies. Without it, no company can grow or develop. If 50-70% of the profits from your investment are lost to taxes, you are going to be far less likely to invest in a U.S. company. If 100% of the profits are paid to you so you can pay your own personal tax rate on them, you are going to be much more likely to invest in a U.S. company. So I say dump the corporate income tax, dump the special dividend rate, and let investors pay taxes on dividends at fair rates in our progressive rate tax system.