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What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. But there are these

• Gustomaximus 9y ago
  I feel the other solutions is obvious in that we need to align tax law to meet the global mobility of money, in the same way we aligned trading laws. Something like; 1) A group like the WTO/G12 get together and agree to minimum tax rate for any corporate/country/individual that wants to do business and or have access to these economies/nations. Any company/individual that earns income in lower tax rate countries is fine to do so but must tax equalise to the minimum or they can not do business or visit these countries. 2) Citizens of the above group of tax aligned countries must declare overseas assets and incomes and equalise tax payments if below a set minimum. Should undeclared assets/income be found the assets are forfeit and the person gets 1 year jail per $1mil. And anyone who provide information to create asset forfeit or additional tax owned gets 25% of that.
  • ThrwyAct 9y ago
    This, plus sanctions on tax havens.
• sschueller 9y ago
  Same goes for US individuals living abroad not having any business relations or even holdings in the US. Yet they are required to file and pay US taxes in addition to local taxes.
  • erickj 9y ago
    Moving abroad, I now fully understand the feeling behind "Taxation without representation is tyranny".
    • earthtolazlo 9y ago
      You are welcome to give up your American citizenship if that income tax becomes too burdensome for you.
      • onan_barbarian 9y ago
        Amazing levels of ignorance here. Even this has become difficult and awkward thanks to an effort to close the door after Eduardo Saverin et al bolted. Hacker News seems to be a reliable place for people to holding forth on situations that they don't understand; it's no wonder that the brains trust here gets regularly crucified on n-gate.
      • _acme 9y ago
        Only if you have another citizenship to turn to. Being stateless isn't an option.
        • sangnoir 9y ago
          > Being stateless isn't an option. That is unless you're a rich company - then you can create shell entities with effectively no domicile that earn income, but aren't taxed in any country. Corporations are people, my friend. People with extraordinary abilities.
          • valuearb 9y ago
            They shouldn’t be people, and shouldn’t pay income tax.
      • CamTin 9y ago
        There are actually things like the expatriation tax and "name and shame" provisions which discourage people from renouncing for tax purposes. Also (note that I am not an accountant or lawyer and this is not advice), most ordinary people won't see any problem with taxation while abroad beyond the actual inconvenience of filing a 1040 because the foreign earned income exclusion (https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore...) allows you to exclude foreign earned income up to $100,000 from US taxation. Since ordinary people pretty much all earn less than this, they only have to pay taxes to whatever country they are actually in. Only people who are rich enough to hire accountants have to worry about double taxation, and they can probably avoid it by other means that are well-studied among rich peoples' accountants.
• patrickaljord 9y ago
  Apple do pay their taxes just like you for everything they sell in the US. It's what they sell outside of the US that they don't pay, but they do pay in those other countries. The biggest unfair advantage they have against you is if you sell to overseas markets (you're paying US tax, not them) but if your market is US only then Apple isn't paying less than you are.
  • styx31 9y ago
    I am speaking for the tax rate in EU countries, what is quoted in the related article. Regarding revenues in EU countries and moving expenses/royalties between countries to benefit from the lower rates. I think that the same cases exists in the US, between states themselves (Delaware ?). Where you create companies in multiple states depending on your activity to split your revenues. Again, a small company can't afford such tricks.
  • mpweiher 9y ago
    >but they do pay in those other countries No, they do not. That is, they have optimized their rates so well as to pay next to nothing. Incidentally, this is the problem with repatriating those profits to the US: the IRS actually does recognize taxes that have already been paid and will "deduct" (don't know the exact technical mechanism, but that's the gist) the taxes that have already been paid to foreign tax authorities from the taxes due to the US. However, due to the tax "optimization" that's been happening, the actual tax paid is minuscule, and so the tax due on repatriation is substantial. So what Apple and other US multinationals would prefer is for the "tax already paid" to be a boolean rather than an amount. As in "we already paid 0.00004% tax on this, therefore it is already taxed and the IRS gets nothing", whereas the IRS says "well you paid 0.00004%, so we get (US rate - 0.00004%)". Of course, the corps call this "double taxation" and rail against it, but in fact double taxation is not happening, or only in that very warped sense.
  • Ixio 9y ago
    > It's what they sell outside of the US that they don't pay, but they do pay in those other countries. Except they don't. The open letter says "What these filings also show is that since 2010, Apple’s foreign-earned income has been taxed at a rate of between 1 and 7 percent" however in Europe most countries have a corporate tax rate around 20% (cf https://en.wikipedia.org/wiki/Tax_rates_in_Europe https://en.wikipedia.org/wiki/Tax_rates_in_Europe). For Germany it looks like Apple is paying at least ten times less taxes than it should.
• nickpp 9y ago
  By default, big companies always get preferential treatment from governments. Open a mega-factory? They get tax cuts, cheap real estate, free utilities. Why? Those shiny new jobs look great on a politician's resume for the next election... What does the little business guy get? A letter of "don't forget to pay your taxes in full or else" It's time to accept the fact that governments are NOT a fair and impartial warden of the economy. Therein lies the problem. Reducing their power of meddling in the economy is the solution.
  • wslh 9y ago
    Yes, it is like wholesellers vs. retailers. Governments don't like to spend time talking with zillion of companies when they can talk with the few ones.
  • sfifs 9y ago
    Those with wealth will always try to capture the system - whether its formal or informal. The natural state of any business is to try and become a monopoly because that maximizes rent taking ability - NOT competition. Practically the ONLY power able to stop monopolies from forming is the government. In absence of the government's ability to "meddle", businesses can and will cut deals with big competitors and squelch smaller ones through anti competitive practices to dominate
    • nickpp 9y ago
      Monopolies are granted by governments. The free market has a natural solution to monopolies, it's called competition - startups. Big Cos will always lobby governments to add rules and regulation to raise the barrier of entry on their market and thus reduce competition. They, in fact, buy their monopoly from the government. Solution? Take away the government's ability to grant monopolies.
      • pjc50 9y ago
        This is a reductionist view that ignores economies of scale, real barriers to entry, the actual requirement for regulation for most markets to function, not to mention basic safety. Or are you campaigning for the abolition of patents as a concept?
• yAnonymous 9y ago
  I'm really waiting for someone who makes the tax evasion system scale for small companies and regular people.
  • vixen99 9y ago
    Tax evasion is and always will be, illegal. Tax avoidance is legal and undertaken by every single sane tax-payer who pays the minimum tax but computes that amount in accordance with the tax rules. The courts are available for redress if the tax authorities think the rules are being bent. Judgement is a legal matter and not one for debate by armchair moralists. Those who don't like the way some tax laws operate in the realm of complex company operations should lobby the law-makers not those tax-payers working in compliance with the law.
    • ptaipale 9y ago
      Yes. People who disapprove "tax avoidance" or "tax optimization" should reflect on the idea a few years back: High-earning professionals like medical doctors in a North European country had a very high marginal tax rate (well over 50 %). They also had long working hours. Thus, many opted to reduce their work amount; it's better to take unpaid leave and mend your house, rather than to work in a responsible job, get close to zero net compensation, and have a leaking roof in your house. This is called tax optimization or tax avoidance. Now, the government notices this and proposes a "tax on work that was not done with the purpose of avoiding tax". Will you approve? This kind of mechanisms are what we talk about in tax avoidance and tax optimization.
• mtrn 9y ago
  Playing devils advocate here: > What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. How about a startup providing "tax-optimization" for the masses? Keep a cut of the money saved: win-win. Or win-win-lose, if you include the state.
  • _acme 9y ago
    How would this possibly work? Just throwing out the word 'startup' doesn't solve anything. The only way to reasonably take this comment seriously is as subtle sarcasm.
    • nikcub 9y ago
      Similar services exist. If you're a foreign short-term contractor in the UK it's common to use a services company to setup a company in Jersey for you, setup the bank account and then run payroll for you. I could see something like Stripe Atlas but in an offshore jurisdiction - they set you up with a company, bank account and merchant account which you can then process international credit card transactions out of (ie. transactions that originate from countries other than the one you're based in) The other application is for entrepreneurs in developing nations where there are regular occurrences of businesses being shaken down (or outright taken over) by corrupt officials. Using local banks can often tip off the wrong type of people as to who is wealthy enough to go after
  • pjc50 9y ago
    http://www.independent.co.uk/news/uk/crickhowell-welsh-town-moves-offshore-to-avoid-tax-on-local-business-a6728971.html http://www.independent.co.uk/news/uk/crickhowell-welsh-town-... However, most of these techniques have a high fixed cost. For Apple paying $1m fixed cost to reduce the percentage tax to zero is economical, for a corner shop it isn't.
  • Maarten88 9y ago
    You do have to make a profit and pay corporation tax in order to be able to "optimize" it... Most startups I know do not, and they benefit (in the future, or via transfer to shareholders) from the inverse taxation on losses.
• akanet 9y ago
  Well, it's more about familiarity with the system than work required to game them. I've met one-man operations paying effectively the same rate as Apple, they just know the legalese well enough to do it on their own.
  • styx31 9y ago
    All companies are supposed to be equals regarding taxes. If a part of them can trick this rule, then it is not fair and must be fixed. I agree that there is a part of entrepreneurship which include being able to understand the rules and laws and use them efficiently, but all these familiarities used to game the system are only valid if only a minority of the people use them. One people finding this trick is ok, but big companies being able to buy these tricks is another scale.
    • _acme 9y ago
      All companies are supposedly equal in doing business, but some manage to compete better than others. Taxes are just another area of competition.
      • mrob 9y ago
        Competition in business is beneficial to society as a whole, by providing better products and services. Competition in tax avoidance has no plausible benefit. It's spending resources to solve an entirely artificial problem. If the problem was removed then the resources could instead be spent on something useful to everybody.
    • akanet 9y ago
      Oh, sorry, I'm not saying it's _good_ that this is the case, just that you'd be surprised by the number of small companies pulling this kind of shit too.
      • styx31 9y ago
        Yes, we were also tempted (suggested) to do the same at some point in our history. Perhaps as suggested elsewhere in this thread, some startup will be able to create an offer to easily outsource some revenues. That will certainly declare the end of the game.
• dagaci 9y ago
  A summary: Small Business -> Small government tax breaks and benefits Medium Business -> Token government tax breaks and benefits Large Business -> Vast government tax breaks and benefits --- Poor people -> Small government tax breaks and benefits Middle class -> Token government tax breaks and benefits The Rich -> Vast government tax breaks and benefits --- It is quite astonishing that in 2017 that we are still astonished by this.
• cm2187 9y ago
  All they are doing is arbitraging loopholes in the tax systems. Politicians have been trying to solve way too many problems by taxes (taxing differently x and y) or giving tax gifts to donors and various organised interests. As a result it creates an arbitrage-able tax system. I wouldn't point your annoyance to those who are optimising their taxes (after all this is merely their fiduciary duties to their share holders) but to the designers of this tax system. Create a flat tax and pretty much all tax avoidance schemes disappear.
  • eru 9y ago
    A flat tax on income would help, but it's still a tax on income, and so you can move that around with clever transfer pricing etc. Land value tax works even better: it's physically impossible to move or hide land.
    • cm2187 9y ago
      Flat tax is not just about removing thresholds, but also using the same tax rate across the board. If you tax in the same way income, capital gains or corporate profits, don't give a tax exemption for debt, don't charge a stamp duty on property (or charge the same rate on the purchase of all assets, property or not), etc, then you kill all these tax schemes.
      • eru 9y ago
        Isn't that usually called a broad based tax or so? I mean I mostly agree with what you are saying, just noting that I'm used to different terminology. Yes, it's a good idea to put eg debt and equity on the same level; don't tax transactions that improve economic efficiency (tax consumption instead for example). Land value tax is still a great idea for these and other reasons. Eg you can jack the lvt really high and basically tax away all land rent without negatively impacting the economy. So even in an otherwise 'flat tax world' like you describe, it might be a good idea to get the majority of revenue from taxing land rent (and in the wider sense, resource extraction and commons like pollution carrying capacity).
• loceng 9y ago
  These companies evading taxes are responsible for increased hardship and suffering of a society as well, leeching off of the nations they exist in, and being able to outcompete the honest organizations and people in them. The damages are far greater than the tax avoided. "They are doing it too" isn't a valid excuse either.
  • tyingq 9y ago
    They aren't, for the most part, doing anything illegal though. They are using the existing laws to their best advantage. The fix for this can't be trying to appeal to their morals. It would have to be something else that just limits the legal choices. Edit: If you disagree, are you saying that shaming them into not doing this solely on some moral compass is the right fix? Does that scale?
    • m12k 9y ago
      Agreed, the only sane solution to this is a massive overhaul of international tax law. Shaming companies just isn't a scalable solution in any way. There's a massive opposition against this both from multinationals and tax haven countries though - this article is a good way to start making it obvious to normal citizens that this issue should be on the ballot.
      • jcion 9y ago
        It's tough when the "only sane solution" also happens to be a enormous task to even begin talking about. I agree with you, but I also struggling to imagine a time when that overhaul could take place.
        • m12k 9y ago
          I agree, it's a massive undertaking and getting support for something like that is really, really hard. The way I see it, all of that anti-globalism rage that is currently being directed toward foreigners really ought to be directed toward fixing this, since this would actually help (e.g. have more money for a wellfare system to handle unemployment from outsourcing and automation). But unfortunately it's much easier directing rage toward 'weird people with other skin tones and religion' than something abstract like a broken international tax system.
• Joeri 9y ago
  There's a terrific opportunity here for a financial company that specializes in tax havens for small business. Bundle together ten thousand mom and pop shops, and you have enough resources to do this kind of financial wizardry.
  • freeflight 9y ago
    That sounds a bit like the plot from the show Ozark, but there they do it to launder drug money.
• urza 9y ago
  Rich people and corporations will never pay full taxes. The only way to make it fair is to lower taxes for everyone. EDIT: downvote me all you like, but the facts and all human history are on my side. Taxes are and always have been paid mostly by poor + middle class. Rich people used to collect them and now have a ways to negotiate a better deals or to avoid them. Look at Trump and his loans schemese. Look at multinational corporations. Look at our local oligarchs in eastern Europe. If you are in middle class, your only hope is to fight for more fair society where tax hells dont exists, and taxes are low for everyone. Because high taxes will never be paid by everyone.
• fgjjgutjvnu 9y ago
  I think you could probably create offshore accounts even as a small company. I was offered (and declined) to have part of my salary as an IT feelancer paid into an offshore account. All I would had to do was to say "yes", and I would have been in the game. So I think it is probably not very difficult to do. Still risky and possibly illegal, though, so I'd personally advise against it.
• DanielBMarkham 9y ago
  This is the problem with a complex and byzantine tax code: entities that can manage and manipulate the complexity profit by it. Entities that don't have those kinds of resources are stuck. It would be good if folks from all political walks of life could come together for some kind of tax simplification. I highly doubt this will ever happen, though, as tax law is used as just another club by big businesses to beat down the small. They have the money, and they're willing to pay-off the political class to make various arguments about how simplifying things would be bad for the little guys. That's not changing. (This has nothing to do with current politics, by the way. I am not following the U.S. tax discussion and it's not relevant to my point. My point is that whether it's business, tech, or government, complexity itself is an enemy)
• jsz0 9y ago
  > I can't evade from my country tax system. You can however use different tactics to minimize your tax burden which is exactly what Apple is doing.
• freeflight 9y ago
  > But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate. I wonder if there's actually a correlation between how ruthlessly a company evades taxes/cuts other corners and how quickly such a company becomes big enough to enable even more tax evasion/corner-cutting? Or to put the question simpler: Was the tax evasion there first or did that only start happening after reaching a certain size enabled tax evasion? Imho there's always opportunities to cheat, not all of them are big but many small ones can still add up to a lead. Most of us just chose not to cheat thus don't even notice these opportunities for what they are.
• ajeet_dhaliwal 9y ago
  Tax is really just skimming the surface of the advantages that result from being big and powerful. Yes it means that they get subsidized in a way by the public tax payers but their employees pay for it even worse. The inequality between executive pay and ordinary workers is more than ever over the last few decades and those workers are paying for it by living a two hour commute away in crappy property, saving pennies at the grocery store etc. all of these are sacrifices and subsidies for the big company, the tax savings are just half of it.
  • ihsw2 9y ago
    What you are describing is a perfect storm of two economic fallacies -- the theory of marginal productivity and regressive taxation. The former describes how increasing pay will correspondingly increase productivity and the latter describes gradually decreasing tax rates as the amount being taxed increases. Executive productivity is notoriously difficult to quantitatively measure and it is generally determined by compensation committees, whom are staffed by executives themselves and/or those with a vested interest in voting to raise executive pay. Such incestuous planning structures are almost always subject to graft and corruption. Regressive taxation (including generous deductions hidden to those unable to afford the best tax planners) may be touted as necessary to reduce capital flight but the naked and bald-faced wealth inequality is simply unconscionable. Relatedly, Trump's tax plan is most definitely a bone throw to the rich as it includes repealing the estate tax. Democracy and progressive taxation have gone hand-in-hand since the end of WWII and it must go hand-in-hand in the twenty-first century.
• sdiepend 9y ago
  We have a global economy but not a global tax system or a global set of rules. That's the essence of the issue here I think. What also happens is countries upping one another with lower taxes and exceptions to attract big companies hoping to get some (small) benefit from it.
• josephjrobison 9y ago
  100% agree with the article. When an iPhone is sold in Germany, there is a VAT on that product that definitely goes to the government, right? So the main question is the corporate tax and not the per unit? Perhaps it would make sense to capture the true tax for in-country sales by adjusting the per unit tax?
  • zmk_ 9y ago
    It's the customers who pay the VAT, not Apple. That's why electronics bought in US where the sales taxes are generally much lower than VAT rates seem cheaper from the European perspective. A higher VAT also hits more the less privileged and effectively crowds them out of the market. For goods like these you can think of the VAT is 'the price to be able to buy' and corporate tax as 'the price to be able to sell'.
    • valuearb 9y ago
      No corporation pays taxes, in reality it’s either customers or shareholders who pay them. The point being Apple still generates maeve taxes for Germany and shouldn’t pay it squat in income tax.
• spunker540 9y ago
  So what you're saying is as a small business owner you'd like to evade taxes too? Seems like a great startup idea- "offshore accounts for everyone!"
• loxs 9y ago
  One day people will realize it. All taxation is theft.
• mstade 9y ago
  This. I run a small company as well, and taxes are a damn maze. I just checked the tax authorities website in this country, and there are no less than 121 different tax-exempt health activities – things my company can pay for me, without having to also pay taxes. For most other things, there's sales tax (possibly other kinds of tax too, but let's limit it ourselves for brevity) that comes in at no less than three different levels, depending on what you're paying for. Many things, most things, my company can't legally pay for directly, but must pay me income, which I then pay for, as well as paying the taxes. This probably makes sense, except of course now I'm being taxed twice: once on the income itself, and then again on the expense. Oh unless of course it's a deductible expense, in which case I might be able to deduct it from my year end declaration. Also this depends on what it is I'm paying for, some services are subsidized and the subsidy is applied immediately, so I'm only paying half the taxes – unless I've used up my subsidy limit (which I can't check.) I don't mind paying taxes, I really don't, because I can clearly see what I get for them for the most part. The streets are clean, health care is paid for and mostly seems to work for me, the garbage truck shows up on time, the water flows freely from my taps, and the electric grid never seems to have any issues. My friends with children get to take a lot of time off to care for their kids, and when they are old enough for day care that works too. I had the privilege of attending great public schools, and higher education is paid for. The list goes on. I really don't mind paying a reasonable amount of taxes, and I'm not even that upset about companies and people investing their money wisely. But when there are legal ways of "optimizing" your tax foot print, if you can afford the expertise to do so, it becomes really demoralizing to pay your taxes as asked. Corporations and individuals aren't going to change their ways, so government has to step in and fix these things. It's probably real hard to do, but it needs to be done. Either that or provide tax optimization services for free, so we can all enjoy these same incredibly low tax rates. (At which point tax reform probably has to happen anyway.)
  • danilocesar 9y ago
    Governments have no interest in fixing it. Usually law makers and legislators benefits from those loopholes, directly (with their own money) or indirectly (with campain supporters). Not only in corrupt contries but also in well stablished democracies. Those loopholes are used even by people who claims doing a lot of charity, as Paradise paper is showing. I'm very pessimist about this going away anytime soon.
• valuearb 9y ago
  What taxes does Apple, an American company, owe Germany? Are you paying taxes half way across the world from your place of business?
  • germanier 9y ago
    I don't pay taxes half way across the world because I don't do business there. Apple does. They have employees in Germany and sell their products (including in their own stores). Of course the vast majority of value is not created there but in the US. However, it's not like they pay their full share of taxes there because on paper the value is largely created in a place that conveniently doesn't tax that.
    • valuearb 9y ago
      They pay huge amounts of taxes to Germany in VAT and employment taxes. Their income taxes should be paid where they are based, Germany is trying to double dip here. Apples accounting for where profits are located has to be approved by tax authorities.
      • germanier 9y ago
        The point is that they don't pay those taxes where they are based either. Additionally, they create some value in Germany (a small share but still large on Apple scales). Taxing income derived from that is not double-dipping.
        • valuearb 9y ago
          They are the largest US taxpayer. They are the worlds largest taxpayer. They absolutely pay taxes where they are based, and where they aren't based. Their worldwide tax rate is 24.6%, one of the highest in the world.
• maxxxxx 9y ago
  I felt the same when I ran my business. A lot of rules are designed so that only the big guys can afford to take advantage of them. We also had a situation where the county lured a big company with monstrous tax cuts while the small guys got nothing despite being "job creators" too.
• DigitalJack 9y ago
  "afford to create offshore companies" You can setup an offshore "shell" company in the virgin islands for $1500. It's not something you have to be a big super rich company to afford.
  • ionised 9y ago
    Think about the people who live paycheck to paycheck, without any savings whatsoever (i.e., most people). They don't have a spare $1500.
• freyir 9y ago
  We cannot expect companies to voluntarily pay more taxes than the minimum, while there are legal loopholes at their disposal. The solution may mean reducing the tax rate for all companies, closing the loopholes, and then enforcing the law. But that would require elected government leaders to put their jobs on the line (lowering corporate taxes sounds bad to many voters since corporations have been vilified, even though it has bipartisan support among economists). So it’s unlikely to happen any time soon.
  • sveme 9y ago
    I don't understand why you have to lower corporate tax rates first before closing all loop holes...
  • ctchocula 9y ago
    Can you give a citation on "bipartisan support among economists"? All I have read seems to indicate economists are all in support for the other direction - that lowering corporate taxes at this moment is bad economics. [1] http://larrysummers.com/2017/10/22/one-last-time-on-who-benefits-from-corporate-tax-cuts/ http://larrysummers.com/2017/10/22/one-last-time-on-who-bene... [2] https://www.cbpp.org/research/federal-tax/corporate-rate-cuts-are-a-poor-way-to-help-the-economy-and-most-workers-and https://www.cbpp.org/research/federal-tax/corporate-rate-cut... [3] http://microeconomicinsights.org/benefits-corporate-tax-cuts-evidence-local-us-labour-markets/ http://microeconomicinsights.org/benefits-corporate-tax-cuts...
    • freyir 9y ago
      I heard it only on an NPR podcast, where they claimed the measure had support from "economists of all stripes." And actually, the proposed policy was much more drastic: complete elimination of corporate taxes. But clearly there are arguments on both sides of the issue. [1] https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-...
• curiousgeorgio 9y ago
  > They are screwed. That's true if you think the solution has to come from more legislation and/or more taxation. Those approaches will simply encourage companies to move more of their operations to other more favorable jurisdictions. If there's a way to save money, and companies have a responsibility to shareholders to be as profitable as (legally) possible, they'll do what they need to in order to save the money. We need to stop expecting some kind of moral accountability above what the law demands. There are plenty of natural incentives for companies to be morally responsible above what the law requires, but anything less isn't illegal unless it's illegal. You can continue to play cat and mouse with laws and loopholes, or take a different approach... Instead, if you consider the option of lowering taxes (on all companies) to compete with those other countries, you'll actually provide an incentive for more large companies to keep their businesses - and their taxable profits - in the US. It may be a lower tax as a percentage, but it would actually increase tax revenue in the long run, in addition to boosting the economy. The music industry can provide a fairly good analogy: when (the original) Napster became popular along with other file sharing networks, the music industry wanted to solve the growing piracy problem by throwing people in jail and pushing for stricter laws. In the end, that did nothing to help the problem. What did help? When iTunes actually provided a decent, legal alternative to piracy, it took off and hoards of people who had been pirating music actually spent money obtaining music legally because it was reasonable and competitive (in terms of convenience) with networks like Napster. The lesson: you don't fight widespread behavior with legislation; you steer it with aligned incentives.
  • tsbertalan 9y ago
    Even better than bringing all corporate taxes down to the lowest rate; force tax havens to bring the lowest rate up to something reasonable. A global economy demands global rule of law. Then, yes, market forces can be used to direct corporate citizenship (and therefore employment+tax revenue) to where it is needed (assuming sufficiently far-sighted governance to realize the global equivalent of Ohio needing more federal assistance than California, and also robustness to regulatory capture). Your race to the bottom would only ensure that governments eventually cede all power to multinational corporations. Then, we're back to feudalism, only global this time.
• balabaster 9y ago
  Would you not make use of a tax break even if you taking it harmed your neighbour? Everyone's response would be "It may suck for you that you can't leverage that loophole, but that person is not breaking the law." It's like the difference between claiming mileage vs. claiming vehicle rental/gas for work trips. You're not breaking the law by claiming one over the other, you're leveraging the framework to greater effect than some others are able. It doesn't make it morally right, but at the end of the day, everyone leverages the opportunities they have. You can't blame someone for that. They are working within the confines of the framework defined for their circumstance. If that framework had loopholes that could be leveraged by that individual, they would take them.
  • holografix 9y ago
    That’s why the opportunity shouldnt be there. It’s unfair and leads to further concentration of power. In other words it’s anti competitive.
    • balabaster 9y ago
      I do agree with this. Opportunities shouldn't be there unfairly. If one person should be able to leverage an opportunity, in my mind, so should everyone. In that sense, I'm currently in favour of the basic income strategy being piloted in Sweden right now. I would like to see everyone on an equal playing field. But that said, in the meantime I'm going to leverage every tool I have access to, just as you should and everyone else should.
  • arethuza 9y ago
    J.K Rowling, author of the Harry Potter books and who is fairly wealthy has an interesting moral stance on paying tax: "... I am indebted to the British welfare state; the very one that Mr. Cameron would like to replace with charity handouts. When my life hit rock bottom, that safety net, threadbare though it had become under John Major’s Government, was there to break the fall. I cannot help feeling, therefore, that it would have been contemptible to scarper for the West Indies at the first sniff of a seven-figure royalty cheque. This, if you like, is my notion of patriotism..." http://www.taxfairness.ca/en/news/j-k-rowling-paying-taxes-and-welfare-state http://www.taxfairness.ca/en/news/j-k-rowling-paying-taxes-a...
• clamprecht 9y ago
  We need a service that makes it easy to setup whatever structures are necessary to pay the same taxes as Apple et al. Hear me out. Let's call it "Double Irish as a Service", referring to the famous Double Irish tax strategy[0]. Similar to Stripe Atlas, you sign up, and it sets up whatever structures and accounts are necessary to get the tax advantages. Then, once every company can do this (and not just the big companies), then the laws may change. 0. https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
• ChuckMcM 9y ago
  Sounds like we need an 'uber for tax avoidance' where the start up creates a holding company in a low tax environment and then you sign up and for a 3% going down to say 1% of your "normal" tax obligation they will slosh all your revenue through the tax haven. This is not a joke, it is a serious suggestion. The issue here is governments and regulatory capture where the wealthy have insured these tax avoidance schemes can work and the governments allow it because they can still get enough taxes from people who aren't wealthy enough to play the game. If we can create a startup that lets everyone avoid taxes the system will be threatened and it will force the governments of the world to fix this or to run out of money.
  • ringaroundthetx 9y ago
    Well as you can see with the poor OPSEC, the offshore incorporation industry is ripe for disruption. Although I've never had any of my entities "leaked", as if they were secret anyway, these leaks are mana from heaven as these are client lists you can POACH and offer better services for cheaper. I've been using OTONOMOS for some time for incorporation and offshore entity management, which stores some client signatures on a blockchain, but behind the scenes they still defer to more antiquated registrars. The costs of forming offshore entities are perpetuated by the expensive lawyers, registered agents and incompetent government representatives in these tiny jurisdictions. (For what its worth, even most United States are pretty incompetent at these administrative processes. Really only a few financial centers and a few exceptions have it all streamlined.) These are scale problems primarily. Also, American citizens should note that it isn't as simple as making a HOLDING company to avoid US taxes, unless you were just going to try to be NON-compliant and not tell anyone which will be a losing battle. There is a way, but it isn't simple. For American citizens, offshore company's primary benefit are: - protect trade secrets or initiate transactions without showing your hand to the market - to deter creditors (as long as they aren't the US Government) as it raises the bar for them to find those assets and sue it and get a judgement and collect on that judgement - segregated assets. Some jurisdictions offer entity structures which are very immature in the United States or haven't caught on yet. The Series LLC exists in a handful of US states but may lack case law, Segregated Portfolio Companies exist in other places like the British Virgin Islands and may have more case law or better statutory conditions. - deal with more international clientele. Many times there are parallel US laws specifically for offshore clientele. For investors its the difference between Reg D and Reg S, I had one other example but I forgot it.
• bayonetz 9y ago
  While they don't violate the letter of the law, they certainly violate the spirit of it. Minimally, I'd like to see them recognize their unfairly gotten gains and use some order-of-magnitude more of it for philanthropic ends or tax reform lobbying. That would be the classy move. It really bothers me how high regular business and personal effective tax rates are compared to these jokers'.
• chx 9y ago
  > What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. I am not even annoyed by that. I am an immigrant into Canada. We sort of made a deal: you let me into a place where I can live a safe and free life and I will pay my taxes leading to that. I stand by that deal. I had a company in Gibraltar (which, by the way, was completely legal, I am a citizen of the EU and I exercised my right to establish a company wherever I in the EU pleased) which I closed down and moved my affairs into Canada and I am a proud Canadian taxpayer (and now even a citizen but that came much later). But gosh. I am a very small fish here. I only make a few hundred thousands a year. Could we please implement a system where I report my earnings (not my profits), slap a flat tax on it and that's it? No bookkeepers. No complexity. No exceptions. Just a friendly, flat small business tax.
  • dalore 9y ago
    A tax on earnings? Do you mean revenue? I think that's a bit insane and lot's of business wouldn't be able to survive. If I buy something for $100 and sell it for $110 I now have to pay tax on the $110 amount rather then the $10 amount, increasing my tax tremendously. For businesses with lot's of inventory that would be murder.
    • gwenzek 9y ago
      I think it would be the only solution, because it will always be easier to manipulate your benefits than earnings. Although we could imagine something more complex: pay taxes on (revenue - expenses to compagnies that also pay taxes). So now if you buy a product $100 to a company paying 25% taxes and sell it $110, you pay taxes on the $10, but if you buy your product to a company in some island, you pay taxes on the $110. Smarter: if you buy to a company that pays a 20% tax while in your country you should pay a 30% tax, then you pay taxes on ($110 - $100*(30%-20%) = $20). Everything get more complex but it's just a bit more CPU time.
    • chx 9y ago
      Wherever this is implemented it's an option. It's never mandatory. There are tons of knowledge based operations where expenses are way too few. Obviously if you are a traditional buy stuff, add value, sell stuff business then you want to bother with bookkeeping sure.
• antaviana 9y ago
  Most of the taxes a company actually pays are factored in with their workers' salaries. For example, if your company's average salary is lower to that of Apple for a comparable employee profile, you are effectively paying less taxes than Apple. Or, if you company does not have profits, you are paying less taxes than a company that reports profits. I do not think a company has to wear any nation flag. Companies have to care for their customers, employees and shareholders (in that order), wherever these are based. Lawmakers need to care for their citizens, and need to legislate in a way that optimizes their tax collection in a sustainable way (i.e. lawmakers do not want companies or people fleeing to other countries or regions). The resulting scenario is an optimal equilibrium of forces.
• unabst 9y ago
  These companies will follow the law. When Ireland changed theirs, Apple moved. This problem can be fixed with laws. What's difficult is changing those laws, because the rich pay off those that write them. Think sales tax. Apple can't avoid sales tax. But they don't care, because it's not them being taxed. But then again, Amazon did avoid sales tax, and used the internet loophole to compete with local smaller businesses using their "no sales tax" discount. And they kept pushing for special treatment in ways no small businesses could. Now the laws have been adjusted, and they collect sales tax. If profit had to be taxed within the country or even district of sale, it's over. There is no "if laws are changed we will be screwed" mechanism. The laws are designed to screw and unscrew. Attention should be directed to those writing them, because they know exactly what they're doing, because they are succeeding.
• phonyname 9y ago
  They are using the laws that already exist to their advantage
• PopsiclePete 9y ago
  That's why being rich is so amazing - you get to play by a different set of rules. Or, once you're "3rd level rich" - write the rules of the game. Apple aren't breaking any laws. They, and other of their size, can just ~bribe~ lobby politicians to make special little loopholes for them, loopholes you can't take advantage of, but you can't pay an army of accountants. But, honestly, I can't blame Apple too much here. We are at a place of our history where giant, global corporations operate outside of any national/political boundary. They have offices everywhere, employees everywhere - it's a nightmare to figure out whom they should even pay taxes to, and how much. I'm not even close to being Apple-level, but even lowly plebs like myself face similar issues. I have two passports, but it's a major pain for me to live in place A for more than X months and pay taxes to country C which has an office in D but I'm technically an employee only in office G in region Z - even though it's all the same damn company - again - who gets to tax me? Both countries? One country? No country? Why can't I live in Spain and work for a US company that has European HQ without incredible hassles? And if I could - the US would still like their share of my pie in the form of taxes. I think a lot of this stems from the simple truth that we are in a new kind of economy, where money and information can flow instantaneously, yet our laws are still bound to archaic nation-state concepts of "physical presence". Which made total sense pre 1950, not so much anymore.
• ttoinou 9y ago
  Is this really that difficult for a small company to evade tax? I think you can do it
• otakucode 9y ago
  If governments want to effectively tax the largest players, they would need to take up arms against those companies and spill some blood. Or at least grab a few top level executives and put a gun to their head and lock them in a cage. Do you see that happening? Of course not, it sounds entirely insane. And the executives know that. For them, however, the true sociopaths who rise to the top because they are willing to do literally any thing short of slitting their own throat in order to be at the top, a gun in the face is the sole thing they will listen to. When they accept that as their standard of having their behavior changed in a room full of people not bankrupt enough to pull a trigger? They don't have a single thing to worry about. Those who fail to learn from history will be doomed to repeat it. All the things you really wish to cry out "but no one would DO that"... can you really not think of any examples from history where it already has been done? And on smaller scales even? Why would someone now not be willing to do it for much higher stakes?
• tmd83 9y ago
  So much of this. This happens everywhere even when it's not in the form of a multi-national tax avoidance scheme. You can tell all you want that it's the fault of the law which it is but that doesn't change the fact the system is like this because these companies and people have over the years have done everything they can to make sure these loopholes exists and these loophole remains including outright bribing where they can get away with it. And for the most part no one individually did it and so you can't event point it out properly. At least in my country individuals are often in even worst position in terms of taxes. The less capital you have the more you will be taxed seem to be the norm of the world these days.
• slavik81 9y ago
  > What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. This is a real problem in the US, too. The corporate tax rate is very high, but there's so many exemptions and deductions that few end up paying the headline rate. There's a lot of variation between businesses in what they pay. Lowering the tax rate and simplifying the tax code could make it more fair in a revenue-neutral way.
  • downrightmike 9y ago
    It used to be much higher: https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco... If companies want access to the best market in the world, they need to pay to be there.
    • slavik81 9y ago
      I don't follow. I didn't suggest changing the average effective rate. There would be no change to the amount paid. I just suggested splitting it more fairly.
• comstock 9y ago
  Why do you think you can’t? Have you tried? If you have a business that looks somewhat like Apple’s does (producing goods in China and selling internationally). I don’t think it would be very hard to keep revenue out of the US tax system. I would guess you could setup an offshore company in a region with zero corporation tax and conduct the majority of international business via this? Moving funds back to the US is trickier, but then it is for Apple too.
• cwkoss 9y ago
  We need a progressive tax on corporations: if your company has more than X in profit, it is taxed in a higher bracket. Ideally, should be multiple brackets, with a tax increase on the biggest companies offsetting a tax break on the smaller ones. Would incentivize companies to break into smaller functional sub-organizations which can compete against each other for the benefit of consumers.
• dpatru 9y ago
  > What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate. You're like the farmer whose cow has died and is upset that his neighbor's cow has not died. Direct your annoyance at the government that is oppressing you rather than at other people who are not being oppressed as much.
• woolvalley 9y ago
  Countries do try to compensate for this by introducing specific small business tax rates and special benefits for being locally owned or controlled. The Canadian example: "After the general tax reduction, the net tax rate is 15%. For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is 10.5%." https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html https://www.canada.ca/en/revenue-agency/services/tax/busines...