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"Such “tax optimization” – albeit legal – is only possible because specialized law firms such as Appleby devise complex company structures inaccessible to most

by jarym 9y ago

"Such “tax optimization” – albeit legal – is only possible because specialized law firms such as Appleby devise complex company structures inaccessible to most other firms" Maybe governments should simplify their own tax rules. Then you wouldn't need specialised law firms and simpler tax systems are harder to bypass. To add, there is nothing 'moral' about tax - you have no choice but to pay what you're legally obligated to pay. Given the lack of choice in the matter, since when did it become a crime to do what you need to do to stay within the law?

jlebrech 9y ago
should people who make enough money to hire an accountant be punished? because i'm sure they'll avoid/reduce some taxes?
- jarym 9y ago
  Hiring an accountant should not be a crime. Especially not while tax laws are so horrendously archaic. However, look at countries that have flat-rate taxes [1]. They are much harder to skirt and the level compliance tends to be higher. [1] https://en.wikipedia.org/wiki/Flat_tax https://en.wikipedia.org/wiki/Flat_tax
- speedplane 9y ago
  If your accountant was structuring your finances so it appeared your income came from countries other than where you worked, then yes, he should probably be punished.
  - jlebrech 9y ago
    if something isn't right but is legal, it should be made illegal. you cannot prosecute abuse prior to the change.
    - speedplane 9y ago
      The problem is that these companies through their lobbying power can influence governments and decide what is and isn't legal. If you define what is legal, you can legally do whatever you want.
    - thanatropism 9y ago
      Middle-school bullying is legal. Should we criminalize middle-school bullying?
      - makapuf 9y ago
        Why not ?
      - speedplane 9y ago
        Schools don't allow bullying. But the criminal justice system is not well tailored to enforce this rule for a variety of reasons. Instead, the school's code of conduct enforces the rule and it leads to a much better result.
speedplane 9y ago
In these situations they always say, "everything we did was legal". But the problem is that powerful individuals and companies get to make the rules. They have lobbying power and a legal budget that allows them to influence the rules themselves. They get to decide what is legal, and use the legality as a shield.
- nickpp 9y ago
  The government makes the rules. The problem is that the government is made of politicians and they are by definition open to corruption (lobbying, contributions, etc). Those campaigns cost and administration salaries are not that big. The solution? Reduce the government's power and you take away the incentive of the whole sick system.
  - Tasboo 9y ago
    Or reduce the amount of influence money can have on an election. Reducing the government's power will just enable them to continue skirting around the law. If the government has no teeth, then why would any business (or anyone for that matter) follow any rule to it's fullest.
- zeep 9y ago
  "Everything Adolf Hitler did in Germany was Legal"
thomasahle 9y ago
I wonder if you could prove something like Arrows theorem for taxes. Who knows if it's even possible to design a tax system, with the properties we want, without enabling cheating? Or maybe it's only possible if all countries in the world agree on a tax code. But what are the chances of that?
- thanatropism 9y ago
  The situation is much closer to the Prisoner's Dilemma. You're asking sovereign states to collude on a bidding war. How to establish optimal collusion?
lucozade 9y ago
> Maybe governments should simplify their own tax rules I can't see that happening. Tax policy is used by most governments as a fine grained tool for all forms of signalling. Not just economic either: alcohol, tobacco, fuel, renewables etc. all use the tax systems to promote social change. It's also quite handy for deflection i.e. if your economy's not doing as well as you'd want in an election cycle, blame the elites. Hell of a lot easier than actually making any real change as that's too hard to do without pissing off voters.
- jarym 9y ago
  Tax policy needs to be recognised as a social issue. If politicians are using the complexity as a tool then it stands to reason that the only ones that can efficiently navigate the resulting convoluting mess is the wealthy. It puts the less wealthy at a disadvantage and if the masses start calling for change then the only reasonable solution is to simplify legislation.
  - lucozade 9y ago
    > If politicians are using the complexity as a tool I've no reason to believe that's the case. They are using the tax system as a tool for other purposes that , as a consequence, means it's complex. The act of applying rules that would simplify things, on the assumption that it's not just a one off, would have the effect of taking the tool away. > if the masses start calling for change then the only reasonable solution is to simplify legislation As a general rule, the masses don't call for simplification of the tax system. They call for a) paying less tax or b) other people paying more tax. Anyway, the whole premise requires a "all other things being equal" mentality. Take consumption taxes in the UK, for example. Eminently sensible that we have one rate. Much simpler. Obviously there'd be no repercussions on the increase on tax for children's clothes or newspapers (yeah, right). Or the huge reduction in tax for tobacco, alcohol or fuel that would, presumably be covered by the increases in food and safety goods. Sure there are parts of the tax code that are less politically suicidal. There's definitely scope for tinkering. But wholesale changes? Just can't see anyone, or at least anyone elected, having the guts.
snappyTertle 9y ago
The problem is that we have a government body that can be bought and influenced by the private sector. If government powers were limited in scope, there would be no incentives for lobbying. It's perverted that companies reach a point where it's more profitable to lobby or find ways around laws rather than continuing to spend on production or other business costs.
- dx034 9y ago
  No, the problem is that the price of something is hard to estimate with tech. Apple, like everyone else, make use of transfer pricing tricks. They don't book profit in one country because the subsidiary there had to pay license fee to use the apple brand. The prices for that are obviously carefully chosen to minimise tax. But for a tax authority to dispute that and come up with a better value of the right to use the Apple brand is close to impossible. With manufactured products you have an idea what a product or brand is worth. But for the iPhone it's not clear what amount of the price accrues to the Apple brand.
  - snappyTertle 9y ago
    It's only a problem when the tax man wants to claim a piece of the income...
Marazan 9y ago
The tax rules were simple. Multi-nationals create mass webs of offshore companies to move money round outside of their primary tax jurisdiction and then bring it back sans-taxiation if they had just done the simple straight forward thing. Multinationals made the situation complex to get around simple tax rules. So the tax rules were expanded to try and keep up. And thus it is a never ending race with ever increasing complexity of tax law. Yet somehow I think you would bitterly oppose a move to principle based tax law (as opposed to rules based) which is the only way of actually simplifying tax law and putting all companies of an even level footing.

by jarym 9y ago

jlebrech 9y ago

should people who make enough money to hire an accountant be punished? because i'm sure they'll avoid/reduce some taxes?

jarym 9y ago
Hiring an accountant should not be a crime. Especially not while tax laws are so horrendously archaic. However, look at countries that have flat-rate taxes [1]. They are much harder to skirt and the level compliance tends to be higher. [1] https://en.wikipedia.org/wiki/Flat_tax https://en.wikipedia.org/wiki/Flat_tax
speedplane 9y ago
If your accountant was structuring your finances so it appeared your income came from countries other than where you worked, then yes, he should probably be punished.
- jlebrech 9y ago
  if something isn't right but is legal, it should be made illegal. you cannot prosecute abuse prior to the change.
  - speedplane 9y ago
    The problem is that these companies through their lobbying power can influence governments and decide what is and isn't legal. If you define what is legal, you can legally do whatever you want.
  - thanatropism 9y ago
    Middle-school bullying is legal. Should we criminalize middle-school bullying?
    - makapuf 9y ago
      Why not ?
    - speedplane 9y ago
      Schools don't allow bullying. But the criminal justice system is not well tailored to enforce this rule for a variety of reasons. Instead, the school's code of conduct enforces the rule and it leads to a much better result.

speedplane 9y ago

In these situations they always say, "everything we did was legal". But the problem is that powerful individuals and companies get to make the rules. They have lobbying power and a legal budget that allows them to influence the rules themselves. They get to decide what is legal, and use the legality as a shield.

nickpp 9y ago
The government makes the rules. The problem is that the government is made of politicians and they are by definition open to corruption (lobbying, contributions, etc). Those campaigns cost and administration salaries are not that big. The solution? Reduce the government's power and you take away the incentive of the whole sick system.
- Tasboo 9y ago
  Or reduce the amount of influence money can have on an election. Reducing the government's power will just enable them to continue skirting around the law. If the government has no teeth, then why would any business (or anyone for that matter) follow any rule to it's fullest.
zeep 9y ago
"Everything Adolf Hitler did in Germany was Legal"

thomasahle 9y ago

I wonder if you could prove something like Arrows theorem for taxes. Who knows if it's even possible to design a tax system, with the properties we want, without enabling cheating? Or maybe it's only possible if all countries in the world agree on a tax code. But what are the chances of that?

thanatropism 9y ago
The situation is much closer to the Prisoner's Dilemma. You're asking sovereign states to collude on a bidding war. How to establish optimal collusion?

lucozade 9y ago

> Maybe governments should simplify their own tax rules I can't see that happening. Tax policy is used by most governments as a fine grained tool for all forms of signalling. Not just economic either: alcohol, tobacco, fuel, renewables etc. all use the tax systems to promote social change. It's also quite handy for deflection i.e. if your economy's not doing as well as you'd want in an election cycle, blame the elites. Hell of a lot easier than actually making any real change as that's too hard to do without pissing off voters.

jarym 9y ago
Tax policy needs to be recognised as a social issue. If politicians are using the complexity as a tool then it stands to reason that the only ones that can efficiently navigate the resulting convoluting mess is the wealthy. It puts the less wealthy at a disadvantage and if the masses start calling for change then the only reasonable solution is to simplify legislation.
- lucozade 9y ago
  > If politicians are using the complexity as a tool I've no reason to believe that's the case. They are using the tax system as a tool for other purposes that , as a consequence, means it's complex. The act of applying rules that would simplify things, on the assumption that it's not just a one off, would have the effect of taking the tool away. > if the masses start calling for change then the only reasonable solution is to simplify legislation As a general rule, the masses don't call for simplification of the tax system. They call for a) paying less tax or b) other people paying more tax. Anyway, the whole premise requires a "all other things being equal" mentality. Take consumption taxes in the UK, for example. Eminently sensible that we have one rate. Much simpler. Obviously there'd be no repercussions on the increase on tax for children's clothes or newspapers (yeah, right). Or the huge reduction in tax for tobacco, alcohol or fuel that would, presumably be covered by the increases in food and safety goods. Sure there are parts of the tax code that are less politically suicidal. There's definitely scope for tinkering. But wholesale changes? Just can't see anyone, or at least anyone elected, having the guts.

snappyTertle 9y ago

The problem is that we have a government body that can be bought and influenced by the private sector. If government powers were limited in scope, there would be no incentives for lobbying. It's perverted that companies reach a point where it's more profitable to lobby or find ways around laws rather than continuing to spend on production or other business costs.

dx034 9y ago
No, the problem is that the price of something is hard to estimate with tech. Apple, like everyone else, make use of transfer pricing tricks. They don't book profit in one country because the subsidiary there had to pay license fee to use the apple brand. The prices for that are obviously carefully chosen to minimise tax. But for a tax authority to dispute that and come up with a better value of the right to use the Apple brand is close to impossible. With manufactured products you have an idea what a product or brand is worth. But for the iPhone it's not clear what amount of the price accrues to the Apple brand.
- snappyTertle 9y ago
  It's only a problem when the tax man wants to claim a piece of the income...

Marazan 9y ago

The tax rules were simple. Multi-nationals create mass webs of offshore companies to move money round outside of their primary tax jurisdiction and then bring it back sans-taxiation if they had just done the simple straight forward thing. Multinationals made the situation complex to get around simple tax rules. So the tax rules were expanded to try and keep up. And thus it is a never ending race with ever increasing complexity of tax law. Yet somehow I think you would bitterly oppose a move to principle based tax law (as opposed to rules based) which is the only way of actually simplifying tax law and putting all companies of an even level footing.