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The fine is also tax-deductible.
by satya71 7y ago
The fine is also tax-deductible.
- mey 7y agoDo larger companies optimize when they pay fines to adjust their tax burden?
- krustyburger 7y agoWhich is especially irksome because Alphabet pays such a low rate already.
- Naga 7y agoTaxes are assessed at a percentage of income. If a fine is deductible, you have lower income, and your taxes are lower, yes. But you paid the government for that right! If your tax rate is 30% and you pay a $1000 fine, you save $300 in taxes. But you paid $1000 for that right!
- Ntrails 7y ago> If your tax rate is 30% and you pay a $1000 fine, you save $300 in taxes. But you paid $1000 for that right! What it actually means is that your effective net punishment/fine is $700, irrespective of the headline number. Which matters if the numbers are designed to be impactful.
- erikpukinskis 7y agoYou’re advocating for having three categories in corporate accounting instead of two: revenue, costs, and penalties? Ostensibly the courts would factor in tax benefits to their calculations for punitive damages, under the current system. I don’t believe there are any limits on what punitive damages can account for, beyond “make it hurt”. Not sure if this is a fine written into law though, which would not be able to easily account for tax differences.
- bryanrasmussen 7y agonot being an accountant as I understand it in my country fines to the tax ministry are not tax deductible. So if this is the case in other countries there would be some legal precedence for saying "fines for this type of offense are not tax deductible"
- throwaway_law 7y agoIts still just two categories revenue/costs. Not all costs are legitimate business expenses and tax deductible. Certainly, penalties that follow as a result of violations of law should not be tax deductible business expenses.
- tick_tock_tick 7y agoEvery single cost is. The only thing corps are taxed on is profit if you pay a fine you made less profit there isn't some hidden bullshit.
- nothrabannosir 7y agoEvident counter example: penalties to the IRS. Very analogous to the costs here discussed, no need to look for "bullshit".
- throwaway_law 7y ago>Every single cost is. No. Taxes are expenses, taxes are not tax deductible. The most common fines and penalties (late fees on federal and state tax returns, are not tax deductible (nor are parking tickets or safety violations). Insurance is an expense, some insurances premiums are and some are not tax deductible. Capital Expenses and Equipment, depends, but usually not deductible as a expense but as depreciation over time. Commuting Costs, generally non-allowable deductions. Home Office, its tricky and full of bullshit. Same with personal expenses (car/phone) Political Contributions, tricky and full of bullshit, generally not tax deductible. Corporate gifts? your deduction is capped at $25. The Tax Code doesn't have bright-line rules like "every cost" is tax deductible.
- 7y ago
- muro 7y agoThe fine might be paid to a different country than the tax. It depends on the other country whether to allow the fine to be deductible.
- dmurray 7y agoIt depends. If you're a profitable company and the money comes out of a dividend you were going to pay your owners, it's $700 (and the ultimate cost to the owners is less again). But if you're struggling to pay the bills, or the fine is big enough to threaten your operating cashflow, it's a full $1000 you can't spend on new machinery or whatever.
- akavi 7y agoIf Alphabet pays a low rate, then the benefit of a tax deduction's reduced, so I'm not sure I understand the "especially" here.
- outside1234 7y agoBecause it effectively still makes the fine lower?
- FussyZeus 7y agoBecause penalties for bad behavior shouldn't come out of your tax burden? I dunno if that's what GP meant but it's certainly horrendously unethical enough for me.
- nvr219 7y agoThe tax-deduction is also cursed
- llama052 7y agoThis irritates me more than it should, but again I'm not getting tax-deductions for speeding tickets or fines.
- noname120 7y agoDo you know where I could find more information about this? This is very surprising to me.
- hansthehorse 7y agoIf the settlement was made "without admitting wrongdoing" it will be tax deductible. If it's a fine for breaking the law it isn't.