6 ms·

This was bound to happen. What many people outside of the USA don't realise is that the Common Reporting Standard (CRS) means that the IRS is very likely going

by icu 9y ago

This was bound to happen. What many people outside of the USA don't realise is that the Common Reporting Standard (CRS) means that the IRS is very likely going to share this info with a great many other countries. However at present I don't believe the USA has signed up to the CRS. If your tax residency resides outside of the USA, and you made a taxable capital gain, I strongly advise to report it to your tax authority.

relyio 9y ago
I wonder why there hasn't been an attempt at making a country where regulations are kept minimal and taxes nonexistent or only dependent on what you use. It would probably attract a ton of economic activity. Does it exist? edit: rephrase
- YorickPeterse 9y ago
  The Cayman Islands?
  - caymanjim 9y ago
    This is largely how the Cayman Islands operate. There's no income or capital gains tax, but everything brought to the island for consumption is subject to 20%+ import duties. Non-citizen professionals working there must pay $10-25k annually for a work permit. It's a very expensive place to live, on par with some of the most expensive cities in the US, but there's no direct tax on wealth. If you're a US citizen, however, you have to pay taxes to the US (beyond roughly the first $100k, anyway).
- eli 9y ago
  Somalia maybe?
- icu 9y ago
  If you are American the answer is no... Americans are taxed by way of citizenship. The only way out is to give up your citizenship and that's not easy. Other countries have different rules that apply to their citizens and also to residents. Generally speaking I think it's far better too focus on making the money more than mitigating the tax. So while I believe there is no moral obligation to pay more tax than legally required, you would have benefited from the tax of previous generations so why should you have a free ride?
  - therealmarv 9y ago
    If a US citizen lives somewhere else how is he supposed to pay taxes to the country he lives in? Only to the US usually? Double tax treaty? I bet many countries do not like that. Just asking out of curiosity.
    - rcxdude 9y ago
      Taxes paid to another country are (generally) deducted from the tax to pay to the US. There is also a rather high total income exclusion. In practice most US citizens living and earning money overseas do not pay significant tax to the US, but they must still file the paperwork (most expats who renounce their citizenship do so because of the expense/time to do so, as well as the difficulty of banking as a US citizen overseas due to the restrictions the US effectively enforces on foreign banks who have US citizens as customers).
    - URSpider94 9y ago
      Some countries have tax treaties. For those that don’t, you can deduct foreign tax paid from your US income taxes. In most cases, you won’t end up paying again in the US, if you already paid overseas, unless you have large amounts of income that are US-taxable and exempt in your country of residence.
  - MadSudaca 9y ago
    > you would have benefited from the tax of previous generations so why should you have a free ride? Is there another choice?
- Dangeranger 9y ago
  How would this government raise the funding to protect this economic activity? Would they ask everyone to please be nice?
  - therealmarv 9y ago
    There are some countries which are really rich (like UAE). And some countries only tax inside country income and not things from outside (there are many countries doing it that way). It's not a model for every country... countries which are doing that are usually not very big.
    - Dangeranger 9y ago
      Another commonality of these countries is that they have a valuable exploitable resource within their borders which allows for them to fund their government through the nationalization of that resource. Unless the libertarian utopia/dystopia referenced above were to nationalize the economy of it's residents (not likely) I don't see a way for that government to nurture productive commerce and protect that commerce at the same time.
- repomies6999 9y ago
  Numerous tax haven countries? There are like dozens.
- tim333 9y ago
  There have been a lot of attempts with varying success. Places like Monaco, the Bahamas and Dubai have close to zero tax but still regulations. Hong Kong was a successful example of low tax and light regulation. Probably the biggest way of avoiding tax and regulation these days is to be multinational. Then no one country can really control you for better or worse.
  - tonfa 9y ago
    With most dual taxation treaty, and automatic sharing between countries (incl. almost all those you cited, starting this and next year), that is slowly going away.
    - tim333 9y ago
      On the other hand cheap flights and the internet make it easy to travel. You get the likes of Rupert Murdoch with bases in London, NY and Aus and the businesses held by various tax haven trusts and not much tax paid.
- matt4077 9y ago
  That's a sort of libertarian fever dream, yes. It fails to account for lots of things, among them: - The idea of unspecified "regulations" inflicting grave damage on the economy for no useful purpose is simply wrong. Yes, there may be regulations some people consider too broad, or intrusive. But it's a question of degree, and I assure you, you wouldn't want to life in a place without any of them. The best case scenario is that instead of a law that forbids the use of lead as colouring agents for potato chips, you'll get a less-effective, more expensive private certification scheme with the same rule. - Corporations only pay taxes on profits. As such, these taxes have no effect on the corporation's investments, research, or other spending. - Governments tend to be more effective in spending than private companies. Medicare % medicaid, for example, have something like 1% or 2% of administrative overhead, compared to roughly 20% of overhead and profits for private insurance. As further evidence of the stinginess of governments, compare the average desktop PC in government offices to those at your favourite company. - Such a country could reduce spending almost exclusively by picking and choosing the people to admit, leaving other countries to care for poor, old, or sick people.
- grandalf 9y ago
  The problem is that wealth redistribution policies have irresistible appeal, and no regulatory system that is freedom-oriented adequately addresses the aspect of luck that impacts one's lot in life. For instance, if the initial population of such a country all sat down together and agreed on what level of social support they would want if they happened to be born with below-average IQ, having some severe physical disability, being suddenly unable to work, having a special needs child whose care cost more than their own annual wages, etc., then the rules of the game could be set up in a sustainable way so that generation after generation there would not be the same sort of market for social entrepreneurship intended merely to achieve after-the-fact wealth redistribution, since a fair system would have been baked in from the start. I don't think this is so much a classic market failure as it is a failure of human brains to perform counter-factual reasoning. Also, values change over time. What is viewed as a fair system now might be viewed very differently in a 50 or 100 years, all else being equal.
deleted 9y ago
[deleted]
therealmarv 9y ago
If your tax residency resides outside of the USA, and you made a taxable capital gain, I strongly advise to report it to your tax authority. You should always do that! And if you are intelligent enough you can create easily structures so that everything is legal (like the big guys [e.g. Apple, Google] are doing). It only depends on the place where you are living how easy this world wide company structures can be set up.
- repomies6999 9y ago
  I could be intelligent enough to set up sone structures, but I would rather spend my time somehow else than thinking and planning taxes.
- icu 9y ago
  While I agree that there are morally legitimate ways of mitigating tax, I also think there are morally illegitimate ways. IMHO Apple and Google are going about their tax affairs in a morally illegitimate way.
- pyvpx 9y ago
  those structures costs tens of thousands of dollars to setup as well as maintain. your taxable revenues must exceed the difference in effective tax rates versus the structure(s) maintenance costs in order for it to make sense. "easily" is not the word I'd use for that. by my calculations your annual taxable (aka net) income would need to exceed 300,000 (USD/EUR) before you see a break even point. plus there is the risk (did your accountants and lawyers set it up correctly? will the laws or regulations change next year? etc etc)
  - deleted 9y ago
    [deleted]
lawlessone 9y ago
If i actually lost a little can i use it to offset something? :-)
- raverbashing 9y ago
  Actually in some cases yes, check legislation of where you are and talk to an accountant
ckastner 9y ago
The IRS won't share a thing, because the CRS doesn't apply to the USA -- they aren't participants in the AEOI. The USA have FATCA, so the IRS receives this information from all other countries. Most other countries will be sharing information with each other through CRS (which was modeled after FATCA), but they won't receive anything from the USA. Why would the USA share? The have nothing to gain as they already receive all the info they need (through FATCA), and only to lose through sharing. I've said it before, I'll say it again: the USA are the last big tax haven.
- JumpCrisscross 9y ago
  > I've said it before, I'll say it again: the USA are the last big tax haven It's a long-reported problem [1][2]. You can set up a trust or LLC in many states e.g. Delaware without providing any identification. That is not possible in most countries, in large part due to American lobbying. [1] https://www.economist.com/news/finance-and-economics/21677647-index-financial-secrecy-highlights-american-hypocrisy-mega-haven https://www.economist.com/news/finance-and-economics/2167764... [2] https://www.economist.com/news/international/21693219-having-launched-and-led-battle-against-offshore-tax-evasion-america-now-part https://www.economist.com/news/international/21693219-having...
  - ckastner 9y ago
    Incredible! Contrast that to Europe, where the Fourth Anti-Money Laundering Directive will soon force all states to hold information on beneficial owners of legal entities in a central register, where it may be queried from by any lawyer, bank or other party with a legitimate interest...

by icu 9y ago

relyio 9y ago

I wonder why there hasn't been an attempt at making a country where regulations are kept minimal and taxes nonexistent or only dependent on what you use. It would probably attract a ton of economic activity. Does it exist? edit: rephrase

YorickPeterse 9y ago
The Cayman Islands?
- caymanjim 9y ago
  This is largely how the Cayman Islands operate. There's no income or capital gains tax, but everything brought to the island for consumption is subject to 20%+ import duties. Non-citizen professionals working there must pay $10-25k annually for a work permit. It's a very expensive place to live, on par with some of the most expensive cities in the US, but there's no direct tax on wealth. If you're a US citizen, however, you have to pay taxes to the US (beyond roughly the first $100k, anyway).
eli 9y ago
Somalia maybe?
icu 9y ago
If you are American the answer is no... Americans are taxed by way of citizenship. The only way out is to give up your citizenship and that's not easy. Other countries have different rules that apply to their citizens and also to residents. Generally speaking I think it's far better too focus on making the money more than mitigating the tax. So while I believe there is no moral obligation to pay more tax than legally required, you would have benefited from the tax of previous generations so why should you have a free ride?
- therealmarv 9y ago
  If a US citizen lives somewhere else how is he supposed to pay taxes to the country he lives in? Only to the US usually? Double tax treaty? I bet many countries do not like that. Just asking out of curiosity.
  - rcxdude 9y ago
    Taxes paid to another country are (generally) deducted from the tax to pay to the US. There is also a rather high total income exclusion. In practice most US citizens living and earning money overseas do not pay significant tax to the US, but they must still file the paperwork (most expats who renounce their citizenship do so because of the expense/time to do so, as well as the difficulty of banking as a US citizen overseas due to the restrictions the US effectively enforces on foreign banks who have US citizens as customers).
  - URSpider94 9y ago
    Some countries have tax treaties. For those that don’t, you can deduct foreign tax paid from your US income taxes. In most cases, you won’t end up paying again in the US, if you already paid overseas, unless you have large amounts of income that are US-taxable and exempt in your country of residence.
- MadSudaca 9y ago
  > you would have benefited from the tax of previous generations so why should you have a free ride? Is there another choice?
Dangeranger 9y ago
How would this government raise the funding to protect this economic activity? Would they ask everyone to please be nice?
- therealmarv 9y ago
  There are some countries which are really rich (like UAE). And some countries only tax inside country income and not things from outside (there are many countries doing it that way). It's not a model for every country... countries which are doing that are usually not very big.
  - Dangeranger 9y ago
    Another commonality of these countries is that they have a valuable exploitable resource within their borders which allows for them to fund their government through the nationalization of that resource. Unless the libertarian utopia/dystopia referenced above were to nationalize the economy of it's residents (not likely) I don't see a way for that government to nurture productive commerce and protect that commerce at the same time.
repomies6999 9y ago
Numerous tax haven countries? There are like dozens.
tim333 9y ago
There have been a lot of attempts with varying success. Places like Monaco, the Bahamas and Dubai have close to zero tax but still regulations. Hong Kong was a successful example of low tax and light regulation. Probably the biggest way of avoiding tax and regulation these days is to be multinational. Then no one country can really control you for better or worse.
- tonfa 9y ago
  With most dual taxation treaty, and automatic sharing between countries (incl. almost all those you cited, starting this and next year), that is slowly going away.
  - tim333 9y ago
    On the other hand cheap flights and the internet make it easy to travel. You get the likes of Rupert Murdoch with bases in London, NY and Aus and the businesses held by various tax haven trusts and not much tax paid.
matt4077 9y ago
That's a sort of libertarian fever dream, yes. It fails to account for lots of things, among them: - The idea of unspecified "regulations" inflicting grave damage on the economy for no useful purpose is simply wrong. Yes, there may be regulations some people consider too broad, or intrusive. But it's a question of degree, and I assure you, you wouldn't want to life in a place without any of them. The best case scenario is that instead of a law that forbids the use of lead as colouring agents for potato chips, you'll get a less-effective, more expensive private certification scheme with the same rule. - Corporations only pay taxes on profits. As such, these taxes have no effect on the corporation's investments, research, or other spending. - Governments tend to be more effective in spending than private companies. Medicare % medicaid, for example, have something like 1% or 2% of administrative overhead, compared to roughly 20% of overhead and profits for private insurance. As further evidence of the stinginess of governments, compare the average desktop PC in government offices to those at your favourite company. - Such a country could reduce spending almost exclusively by picking and choosing the people to admit, leaving other countries to care for poor, old, or sick people.
grandalf 9y ago
The problem is that wealth redistribution policies have irresistible appeal, and no regulatory system that is freedom-oriented adequately addresses the aspect of luck that impacts one's lot in life. For instance, if the initial population of such a country all sat down together and agreed on what level of social support they would want if they happened to be born with below-average IQ, having some severe physical disability, being suddenly unable to work, having a special needs child whose care cost more than their own annual wages, etc., then the rules of the game could be set up in a sustainable way so that generation after generation there would not be the same sort of market for social entrepreneurship intended merely to achieve after-the-fact wealth redistribution, since a fair system would have been baked in from the start. I don't think this is so much a classic market failure as it is a failure of human brains to perform counter-factual reasoning. Also, values change over time. What is viewed as a fair system now might be viewed very differently in a 50 or 100 years, all else being equal.

deleted 9y ago

[deleted]

therealmarv 9y ago

If your tax residency resides outside of the USA, and you made a taxable capital gain, I strongly advise to report it to your tax authority. You should always do that! And if you are intelligent enough you can create easily structures so that everything is legal (like the big guys [e.g. Apple, Google] are doing). It only depends on the place where you are living how easy this world wide company structures can be set up.

repomies6999 9y ago
I could be intelligent enough to set up sone structures, but I would rather spend my time somehow else than thinking and planning taxes.
icu 9y ago
While I agree that there are morally legitimate ways of mitigating tax, I also think there are morally illegitimate ways. IMHO Apple and Google are going about their tax affairs in a morally illegitimate way.
pyvpx 9y ago
those structures costs tens of thousands of dollars to setup as well as maintain. your taxable revenues must exceed the difference in effective tax rates versus the structure(s) maintenance costs in order for it to make sense. "easily" is not the word I'd use for that. by my calculations your annual taxable (aka net) income would need to exceed 300,000 (USD/EUR) before you see a break even point. plus there is the risk (did your accountants and lawyers set it up correctly? will the laws or regulations change next year? etc etc)
- deleted 9y ago
  [deleted]

lawlessone 9y ago

If i actually lost a little can i use it to offset something? :-)

raverbashing 9y ago
Actually in some cases yes, check legislation of where you are and talk to an accountant

ckastner 9y ago

The IRS won't share a thing, because the CRS doesn't apply to the USA -- they aren't participants in the AEOI. The USA have FATCA, so the IRS receives this information from all other countries. Most other countries will be sharing information with each other through CRS (which was modeled after FATCA), but they won't receive anything from the USA. Why would the USA share? The have nothing to gain as they already receive all the info they need (through FATCA), and only to lose through sharing. I've said it before, I'll say it again: the USA are the last big tax haven.

JumpCrisscross 9y ago
> I've said it before, I'll say it again: the USA are the last big tax haven It's a long-reported problem [1][2]. You can set up a trust or LLC in many states e.g. Delaware without providing any identification. That is not possible in most countries, in large part due to American lobbying. [1] https://www.economist.com/news/finance-and-economics/21677647-index-financial-secrecy-highlights-american-hypocrisy-mega-haven https://www.economist.com/news/finance-and-economics/2167764... [2] https://www.economist.com/news/international/21693219-having-launched-and-led-battle-against-offshore-tax-evasion-america-now-part https://www.economist.com/news/international/21693219-having...
- ckastner 9y ago
  Incredible! Contrast that to Europe, where the Fourth Anti-Money Laundering Directive will soon force all states to hold information on beneficial owners of legal entities in a central register, where it may be queried from by any lawyer, bank or other party with a legitimate interest...