7 ms·

I'm always skeptical when someone precedes "close the loophole" with the word "just", especially when the entity searching for loopholes has hundreds of billion

I'm always skeptical when someone precedes "close the loophole" with the word "just", especially when the entity searching for loopholes has hundreds of billions of dollars in cash. Closing loopholes is good, but they'll almost certainly find another one.

solotronics 9y ago
the company would likely relocate to bring business and money here, make the corporate tax rate very low (5%?) and have no writeoffs and no exemptions
glenstein 9y ago
I think once a loophole has been identified, it becomes a "just." But you are right that the trickier problem is with the more fundamental process of constantly searching for loopholes. If only we could "just" close that one, too.
- wpietri 9y ago
  Yup. It's to some extent an adversarial process. But that's part of why we have a legislature all the time, rather than just relying on laws written decades ago. A fine example is wire fraud. Existing fraud laws didn't really cover it, and innovative criminals made extensive use of the loopholes until wire fraud was criminalized. (For those interested, the Yellow Kid's autobiography is a fun read. [1]) Same thing with any sort of security hole, really. We'll always have on-line attackers, but that's not a reason to give up. It's a reason to keep plugging holes and improving state of the art. [1] https://www.amazon.com/Yellow-Kid-Weil-Autobiography-Americas/dp/1849350213 https://www.amazon.com/Yellow-Kid-Weil-Autobiography-America...
vidarh 9y ago
The thing, though, is that their main "loophole" currently consists of "play chicken with the government until someone passes a tax holiday". If you make it clear there will never be a tax holiday, but that you will instead keep adjusting the rules to go after earnings withheld abroad, at some point the rational choice for them will be to bite the bullet and repatriate the income. As it is, the most rational choice for them is to keep waiting for that amnesty/tax holiday unless they badly need the cash.
- snowwrestler 9y ago
  Apple is not waiting for anything. They store their money abroad, and they invest it abroad, in foreign manufacturing and foreign retail expansion and foreign R&D and foreign acquisitions. And when domestic investors complain, Apple takes on domestic debt (at very good terms) to fund stock buybacks and dividends. The idea that U.S. international tax policy is somehow hampering Apple is just not true. There's a big world out there outside U.S. borders. What it is hampering is U.S. domestic investment and job growth.
- DigitalJack 9y ago
  In this case it's not a loophole in American laws. It's a problem with European and Carribean laws. This money was earned abroad. Blame the Irish, and now whatever this Jersey Island place is. The EU made a move to close the loophole, apple found another. I suppose there are loopholes with them selling IP assets to subsidiaries. But that's a different loophole than the one with them floating money around different countries. That money wasn't earned in America, so why are you trying to "repatriate" it? The better term would be "appropriate" it as it was never here in the first place. Until it costs more for apple to pay interest on a loan (and/or penalties and fines) than they would pay in taxes, that money will never come here.
  - _0ffh 9y ago
    It's a British crown dependency, and afaik not the only tax haven under British rule. And it seems like there's no much the EU will be able to do about those.
    - charlesdm 9y ago
      Perhaps this might change after brexit though.
      - toyg 9y ago
        Yes, French and German authorities have made it known that they cannot wait for brexit to happen because it will relieve them of any need to play nice with the UK about shenanigans like these. At the same time, the Irish border problem puts the Republic of Ireland in a similar position of weakness, and they are enemy n.2 for honest tax authorities worldwide. Enemy 3 and 4 (Luxembourg and NL) have also been weakened by the disappearance of the “free trade alliance” that ran from Poland to Ireland, and when left isolated, they have been successfully bullied in the past anyway. This is one of the very few areas where brexit might actually end up a net positive for the world at large.
ImSkeptical 9y ago
We should just keep pursuing the tax loopholes as they are discovered, they should be closed. I also think we should be lowering tax rates in conjunction with this as our tax code becomes more effective.
- valuearb 9y ago
  No, We need to eliminate corporate income taxes. They are a tax on investment and job formation.
- ljf 9y ago
  How about: it would be good if we lowered taxes /except/ for companies that had been abusing loopholes... Though to be perfectly honest, I'd rather the state used the funds for the betterment of man, but then I'm a boring lefty
munk-a 9y ago
This reads a bit fatalist, why don't we close this particular loophole and deal with the next when it comes along. This may be a game of whack-a-mole but we're never going to have a sane tax code if we don't start killing some moles. If anyone is knowledgeable in accounting and wants to point out some future loopholes that may arise, sure we can get those as well but... don't let the perfect be the enemy of the good.
pbhjpbhj 9y ago
You can close all loopholes that rely on literal interpretation by changing the approach to interpretation of the law/tax code. You can reinforce it with minimum taxation based on revenue, which prevents you having to wade through treacle in the courts.
- jnordwick 9y ago
  Taxing revenues means taxing products on every step in production, many many times on their path through production and the economy. You would essentially also destroy low margin businesses, like grocery and retail and Adobe they ate such low margin the entire tax bill would be paid by the end consumer.
cozzyd 9y ago
Clearly we need stochastic regulations, where the regulations are chosen randomly from time to time subject to the constraints that they accomplish their policy goals. Just have to change them faster than the accountants can figure out how to exploit them...
- tialaramex 9y ago
  Several places have what's called a "General anti-avoidance rule". The way this works is, if you think you've got a brilliant wheeze that avoids taxes, you're required to tell the tax officials about it. If you choose not to tell them then they can prosecute for evasion, and if you tell the court actually it was a clever avoidance tactic not evasion the court says hang on, why didn't you obey the General anti-avoidance rule? So you're screwed either way. On the other hand if you tell them, they get to look at your clever idea and decide to either allow it, change the rule for next year, or go to court saying you're wrong this avoidance method doesn't work so you owe taxes.
  - petre 9y ago
    This translates to arbitrary legislation.
  - 1123581321 9y ago
    Tax minimization is still possible in such a system if it’s consistently adjudicated. If not, it is subject to regulatory capture and possibly bribes. And the nation executing this scheme still has a target effective tax rate, so the base rates will be adjusted up or down depending on the extent of minimization. I am not sure if you’re presenting this as an solution or a warning. :)
- petre 9y ago
  That's a terrible idea. You need stable tax regulations in order to make a business plan, get a loan etc. If you kill or drive away the taxpayer you're going to be left without taxes to collect.
  - deleted 9y ago

solotronics 9y ago

the company would likely relocate to bring business and money here, make the corporate tax rate very low (5%?) and have no writeoffs and no exemptions

glenstein 9y ago

I think once a loophole has been identified, it becomes a "just." But you are right that the trickier problem is with the more fundamental process of constantly searching for loopholes. If only we could "just" close that one, too.

wpietri 9y ago
Yup. It's to some extent an adversarial process. But that's part of why we have a legislature all the time, rather than just relying on laws written decades ago. A fine example is wire fraud. Existing fraud laws didn't really cover it, and innovative criminals made extensive use of the loopholes until wire fraud was criminalized. (For those interested, the Yellow Kid's autobiography is a fun read. [1]) Same thing with any sort of security hole, really. We'll always have on-line attackers, but that's not a reason to give up. It's a reason to keep plugging holes and improving state of the art. [1] https://www.amazon.com/Yellow-Kid-Weil-Autobiography-Americas/dp/1849350213 https://www.amazon.com/Yellow-Kid-Weil-Autobiography-America...

vidarh 9y ago

The thing, though, is that their main "loophole" currently consists of "play chicken with the government until someone passes a tax holiday". If you make it clear there will never be a tax holiday, but that you will instead keep adjusting the rules to go after earnings withheld abroad, at some point the rational choice for them will be to bite the bullet and repatriate the income. As it is, the most rational choice for them is to keep waiting for that amnesty/tax holiday unless they badly need the cash.

snowwrestler 9y ago
Apple is not waiting for anything. They store their money abroad, and they invest it abroad, in foreign manufacturing and foreign retail expansion and foreign R&D and foreign acquisitions. And when domestic investors complain, Apple takes on domestic debt (at very good terms) to fund stock buybacks and dividends. The idea that U.S. international tax policy is somehow hampering Apple is just not true. There's a big world out there outside U.S. borders. What it is hampering is U.S. domestic investment and job growth.
DigitalJack 9y ago
In this case it's not a loophole in American laws. It's a problem with European and Carribean laws. This money was earned abroad. Blame the Irish, and now whatever this Jersey Island place is. The EU made a move to close the loophole, apple found another. I suppose there are loopholes with them selling IP assets to subsidiaries. But that's a different loophole than the one with them floating money around different countries. That money wasn't earned in America, so why are you trying to "repatriate" it? The better term would be "appropriate" it as it was never here in the first place. Until it costs more for apple to pay interest on a loan (and/or penalties and fines) than they would pay in taxes, that money will never come here.
- _0ffh 9y ago
  It's a British crown dependency, and afaik not the only tax haven under British rule. And it seems like there's no much the EU will be able to do about those.
  - charlesdm 9y ago
    Perhaps this might change after brexit though.
    - toyg 9y ago
      Yes, French and German authorities have made it known that they cannot wait for brexit to happen because it will relieve them of any need to play nice with the UK about shenanigans like these. At the same time, the Irish border problem puts the Republic of Ireland in a similar position of weakness, and they are enemy n.2 for honest tax authorities worldwide. Enemy 3 and 4 (Luxembourg and NL) have also been weakened by the disappearance of the “free trade alliance” that ran from Poland to Ireland, and when left isolated, they have been successfully bullied in the past anyway. This is one of the very few areas where brexit might actually end up a net positive for the world at large.

ImSkeptical 9y ago

We should just keep pursuing the tax loopholes as they are discovered, they should be closed. I also think we should be lowering tax rates in conjunction with this as our tax code becomes more effective.

valuearb 9y ago
No, We need to eliminate corporate income taxes. They are a tax on investment and job formation.
ljf 9y ago
How about: it would be good if we lowered taxes /except/ for companies that had been abusing loopholes... Though to be perfectly honest, I'd rather the state used the funds for the betterment of man, but then I'm a boring lefty

munk-a 9y ago

This reads a bit fatalist, why don't we close this particular loophole and deal with the next when it comes along. This may be a game of whack-a-mole but we're never going to have a sane tax code if we don't start killing some moles. If anyone is knowledgeable in accounting and wants to point out some future loopholes that may arise, sure we can get those as well but... don't let the perfect be the enemy of the good.

pbhjpbhj 9y ago

You can close all loopholes that rely on literal interpretation by changing the approach to interpretation of the law/tax code. You can reinforce it with minimum taxation based on revenue, which prevents you having to wade through treacle in the courts.

jnordwick 9y ago
Taxing revenues means taxing products on every step in production, many many times on their path through production and the economy. You would essentially also destroy low margin businesses, like grocery and retail and Adobe they ate such low margin the entire tax bill would be paid by the end consumer.

cozzyd 9y ago

Clearly we need stochastic regulations, where the regulations are chosen randomly from time to time subject to the constraints that they accomplish their policy goals. Just have to change them faster than the accountants can figure out how to exploit them...

tialaramex 9y ago
Several places have what's called a "General anti-avoidance rule". The way this works is, if you think you've got a brilliant wheeze that avoids taxes, you're required to tell the tax officials about it. If you choose not to tell them then they can prosecute for evasion, and if you tell the court actually it was a clever avoidance tactic not evasion the court says hang on, why didn't you obey the General anti-avoidance rule? So you're screwed either way. On the other hand if you tell them, they get to look at your clever idea and decide to either allow it, change the rule for next year, or go to court saying you're wrong this avoidance method doesn't work so you owe taxes.
- petre 9y ago
  This translates to arbitrary legislation.
- 1123581321 9y ago
  Tax minimization is still possible in such a system if it’s consistently adjudicated. If not, it is subject to regulatory capture and possibly bribes. And the nation executing this scheme still has a target effective tax rate, so the base rates will be adjusted up or down depending on the extent of minimization. I am not sure if you’re presenting this as an solution or a warning. :)
petre 9y ago
That's a terrible idea. You need stable tax regulations in order to make a business plan, get a loan etc. If you kill or drive away the taxpayer you're going to be left without taxes to collect.
- deleted 9y ago