6 ms·

If you aren't seeking out the loopholes that apply to you, then you are paying more in taxes than you are legally required to. "legally required to" does not i

If you aren't seeking out the loopholes that apply to you, then you are paying more in taxes than you are legally required to. "legally required to" does not incur a balancing test between what is practicable vs the time it takes. If you're a regular, mid-income citizen, then there isn't likely to be a good ROI on hiring a dedicated accountant to find you loopholes. If you're making $200k a year, and you save 10%, hooray, you've saved $20k through tax avoidance, but since a CPA's average salary is ~$60k, then you'll have lost $40k. Perhaps there's a middle ground where you could employ a CPA for a finite amount of time for them to find you the obvious savings, and many people do. It's how companies like H&R Block exist. If your income is $2,000,000 a year, then it is cost effective to hire the guy who can save you 12% a year vs. the guy who can save you 10% a year, even if the 12% guy costs 10% more, because while 10% guy saves you $200k (e.g., worth the $60k salary), while the 12% guy saves you $240k. Even though his $66k salary is $6k more than the 10% guy, he's saved you $40k more, which nets out to an extra $34k. Anyway, I'm rambling, but what I'm hoping to illustrate is that many, many Americans routinely engage in tax avoidance by hiring a tax accountant that finds them deductions. The fact that Ikea does the same is not cause for scorn. The fact that it is mathematically stupid for them not to do so does not mean that it is practical for you to do so. Everyone's situation varies.

jessaustin 9y ago
The difference between "many Americans" (actually other highly-taxed subjects are probably the same) and hideous unkillable corporate zombies like Ikea is that the little people use the tax laws as they are. The corporate monsters write the tax laws, to their own exclusive benefit, in every nation they invade. That's not an option for the little people.
- abakker 9y ago
  There's a narrative here that says we got into this situation by the little people being uniformed and complicit. OTOH, it is rarely so simple, since many of the little people work for those companies. When your employer does this stuff, it is probably good for you.
  - jessaustin 9y ago
    One doubts those narrators would approve of the little people doing what it would actually take to rein in big business. In any case, it seems impossible to be both uninformed and complicit. (If you were just being really subtle and meant "uniformed", then yes one would agree that uniformed people, little or big, are more likely to be complicit.)
gaius 9y ago
If you aren't seeking out the loopholes that apply to you, then you are paying more in taxes than you are legally required to. Complete nonsense. Finding a loophole in the tax code is no different to finding a flaw in some computer code that gives you some access you were never intended to have. Should we all hire professional hackers too?
- bmelton 9y ago
  Except that the laws are the rules, the rules are publicly published, and everyone has access to them. If McDonald's is selling a 10 piece McNuggets for $1.49, and a 20 piece for $4.99, then buying 2 x 10 piece McNuggets for $2.98 is a loophole around paying $4.99. If you find it immoral, so be it, but it doesn't change that you're paying more for McNuggets than McDonald's requires you to pay.
  - goty2 9y ago
    I don't find that to be an apt analogy. Tax avoidance is more like abusing coupons. Someone else is effectively paying your share, but the company can't shut it down because customer would complain or it could hurt the business overall. Eventually the business is forced to raise prices and everyone deal with coupons just to get a decent deal.
    - bmelton 9y ago
      Why isn't just getting rid of coupons a viable option?
      - goty2 9y ago
        Because coupons might be useful to sell overstock or introduce new products. And even if you wanted to you would either have to convince all your customers to change their habits or convince the other businesses not to also not use them. It is like with credit card fees in the US.
      - always_good 9y ago
belorn 9y ago
One of those loopholes that small mid to low income citizens can do is by majority elected revolutions and majority voted wealth reallocation. Should we scorn them for doing that, and on what moral principle is that different from a company exploiting loopholes or using political lobbying to disregard majority opinion in order to create laws with loopholes in them. Scorn or moral objections is not the same as legal. If 51% voted to take the land and property of the 1%, then that is a democratic decision and the publicly published law. It would also be overwhelming scorned by those effected. Should we just tell them that they too would redistribute the wealth if they could and its stupid for anyone to not take wealth if they could.
oldandtired 9y ago
Please let's get technical here. Apply to the other comments to the parent comment. Tax avoidance is an illegal means of not paying the actual tax required. What you and the others who have replied to your comment mean is "tax minimisation", which is legal and uses the specified tax code to minimise your tax burden. What is often done in discussions about this subject is classifying legal tax minimisation processes as tax avoidance. Tax minimisation is perfectly fine and quite moral. Tax avoidance is not fine and is often immoral, though not necessarily. There is a second thing at play here though. As I have friends who have worked in one national taxation organisation, they have explained that the way the system works is that the taxing organisation has internal descriptions of what they will allow as legitimate deductions which are different to what the legislation might read. If you use the correct descriptions and terminology, they will allow your claim through with no challenge. But, if you do not use the correct description or terminology then they will challenge said deduction. Such descriptions are not publicly available. That is why good tax accountants get those obtuse deductions for their clients. The tax law is written so that every citizen (including corporate) is only required to pay the minimum amount required and not anything above that.
- bmelton 9y ago
  > Tax avoidance is an illegal means of not paying the actual tax required It seems curious that you'd start by defining terms and then define those terms incorrectly. tax a·void·ance taks əˈvoidns noun the arrangement of one's financial affairs to minimize tax liability within the law. In short, what you're referring to as minimisation is avoidance. For what it's worth, I've been using them interchangeably up to this point, and I agree that it's innocuous, harmless, etc. The illegal act you're referring to is tax evasion. > the taxing organisation has internal descriptions of what they will allow as legitimate deductions which are different to what the legislation might read In America, the IRS is bound to the same laws as the citizenry, and while there may be some allowed discretion in interpretation, re-interpreting the law on their own is in fact illegal.
  - oldandtired 9y ago
    Tax avoidance is the avoidance of the required tax (an alternative name is tax evasion), tax minimisation is paying one's required tax and no more. From the perspective of tax collectors, avoidance is evasion and not minimisation. Politicians also use the term "tax avoidance" as a synonym for "tax evasion" when it is useful to them. Having friends who worked at various stages for various kinds of bureaucracies (including tax collection), they have spoken of the distinct terminology used and why it is used. It is not a matter of re-interpreting the "tax law" but creating the appropriate internal definitions as to what that "tax law" means. The problem that people face is that legal definitions quite often do not match the general populous understanding of the words used. We can always argue over whether or not "tax avoidance" is the same as "tax evasion" or "tax minimisation". The reality is that each of these terms has a definitive meaning dependent on who is using the term. Taxation collection organisations will have one set of meanings, politicians will have another, the general population will have another. The only meanings that are relevant are what the taxation collection organisations assign to those terms in their internal working processes. I am using the definitions of those terms as shared to me by my friends in taxation. One of the reasons for using tax accountants these days is that many years ago, I was audited by the relevant tax authority. The upshot was that they disallowed the claim in question and in my last conversation with the auditor, he made the comment that the deduction was allowable but he wasn't going to tell me how to claim it. I have used accountants since then. I let them deal with the complexity of the taxation law. A good accountant is worth the cost just to avoid having to deal with the "insanity" of current taxation regimes. I don't have a problem with taxation per se, only with the insane level of complexity that has built up in modern times. When tax law goes from say 80 pages at the start to 30,000 + pages today, one has to ask why? YMMV. Lastly, if in America, the IRS is bound by those same laws as the citizenry, why are the so many documented cases of the IRS "draining" the bank accounts of so many little people when nothing illegal has been done? The IRS has interpreted the law by their own internal definitions.

jessaustin 9y ago

The difference between "many Americans" (actually other highly-taxed subjects are probably the same) and hideous unkillable corporate zombies like Ikea is that the little people use the tax laws as they are. The corporate monsters write the tax laws, to their own exclusive benefit, in every nation they invade. That's not an option for the little people.

abakker 9y ago
There's a narrative here that says we got into this situation by the little people being uniformed and complicit. OTOH, it is rarely so simple, since many of the little people work for those companies. When your employer does this stuff, it is probably good for you.
- jessaustin 9y ago
  One doubts those narrators would approve of the little people doing what it would actually take to rein in big business. In any case, it seems impossible to be both uninformed and complicit. (If you were just being really subtle and meant "uniformed", then yes one would agree that uniformed people, little or big, are more likely to be complicit.)

gaius 9y ago

If you aren't seeking out the loopholes that apply to you, then you are paying more in taxes than you are legally required to. Complete nonsense. Finding a loophole in the tax code is no different to finding a flaw in some computer code that gives you some access you were never intended to have. Should we all hire professional hackers too?

bmelton 9y ago
Except that the laws are the rules, the rules are publicly published, and everyone has access to them. If McDonald's is selling a 10 piece McNuggets for $1.49, and a 20 piece for $4.99, then buying 2 x 10 piece McNuggets for $2.98 is a loophole around paying $4.99. If you find it immoral, so be it, but it doesn't change that you're paying more for McNuggets than McDonald's requires you to pay.
- goty2 9y ago
  I don't find that to be an apt analogy. Tax avoidance is more like abusing coupons. Someone else is effectively paying your share, but the company can't shut it down because customer would complain or it could hurt the business overall. Eventually the business is forced to raise prices and everyone deal with coupons just to get a decent deal.
  - bmelton 9y ago
    Why isn't just getting rid of coupons a viable option?
    - goty2 9y ago
      Because coupons might be useful to sell overstock or introduce new products. And even if you wanted to you would either have to convince all your customers to change their habits or convince the other businesses not to also not use them. It is like with credit card fees in the US.
    - always_good 9y ago

belorn 9y ago

One of those loopholes that small mid to low income citizens can do is by majority elected revolutions and majority voted wealth reallocation. Should we scorn them for doing that, and on what moral principle is that different from a company exploiting loopholes or using political lobbying to disregard majority opinion in order to create laws with loopholes in them. Scorn or moral objections is not the same as legal. If 51% voted to take the land and property of the 1%, then that is a democratic decision and the publicly published law. It would also be overwhelming scorned by those effected. Should we just tell them that they too would redistribute the wealth if they could and its stupid for anyone to not take wealth if they could.

oldandtired 9y ago

Please let's get technical here. Apply to the other comments to the parent comment. Tax avoidance is an illegal means of not paying the actual tax required. What you and the others who have replied to your comment mean is "tax minimisation", which is legal and uses the specified tax code to minimise your tax burden. What is often done in discussions about this subject is classifying legal tax minimisation processes as tax avoidance. Tax minimisation is perfectly fine and quite moral. Tax avoidance is not fine and is often immoral, though not necessarily. There is a second thing at play here though. As I have friends who have worked in one national taxation organisation, they have explained that the way the system works is that the taxing organisation has internal descriptions of what they will allow as legitimate deductions which are different to what the legislation might read. If you use the correct descriptions and terminology, they will allow your claim through with no challenge. But, if you do not use the correct description or terminology then they will challenge said deduction. Such descriptions are not publicly available. That is why good tax accountants get those obtuse deductions for their clients. The tax law is written so that every citizen (including corporate) is only required to pay the minimum amount required and not anything above that.

bmelton 9y ago
> Tax avoidance is an illegal means of not paying the actual tax required It seems curious that you'd start by defining terms and then define those terms incorrectly. tax a·void·ance taks əˈvoidns noun the arrangement of one's financial affairs to minimize tax liability within the law. In short, what you're referring to as minimisation is avoidance. For what it's worth, I've been using them interchangeably up to this point, and I agree that it's innocuous, harmless, etc. The illegal act you're referring to is tax evasion. > the taxing organisation has internal descriptions of what they will allow as legitimate deductions which are different to what the legislation might read In America, the IRS is bound to the same laws as the citizenry, and while there may be some allowed discretion in interpretation, re-interpreting the law on their own is in fact illegal.
- oldandtired 9y ago
  Tax avoidance is the avoidance of the required tax (an alternative name is tax evasion), tax minimisation is paying one's required tax and no more. From the perspective of tax collectors, avoidance is evasion and not minimisation. Politicians also use the term "tax avoidance" as a synonym for "tax evasion" when it is useful to them. Having friends who worked at various stages for various kinds of bureaucracies (including tax collection), they have spoken of the distinct terminology used and why it is used. It is not a matter of re-interpreting the "tax law" but creating the appropriate internal definitions as to what that "tax law" means. The problem that people face is that legal definitions quite often do not match the general populous understanding of the words used. We can always argue over whether or not "tax avoidance" is the same as "tax evasion" or "tax minimisation". The reality is that each of these terms has a definitive meaning dependent on who is using the term. Taxation collection organisations will have one set of meanings, politicians will have another, the general population will have another. The only meanings that are relevant are what the taxation collection organisations assign to those terms in their internal working processes. I am using the definitions of those terms as shared to me by my friends in taxation. One of the reasons for using tax accountants these days is that many years ago, I was audited by the relevant tax authority. The upshot was that they disallowed the claim in question and in my last conversation with the auditor, he made the comment that the deduction was allowable but he wasn't going to tell me how to claim it. I have used accountants since then. I let them deal with the complexity of the taxation law. A good accountant is worth the cost just to avoid having to deal with the "insanity" of current taxation regimes. I don't have a problem with taxation per se, only with the insane level of complexity that has built up in modern times. When tax law goes from say 80 pages at the start to 30,000 + pages today, one has to ask why? YMMV. Lastly, if in America, the IRS is bound by those same laws as the citizenry, why are the so many documented cases of the IRS "draining" the bank accounts of so many little people when nothing illegal has been done? The IRS has interpreted the law by their own internal definitions.