4 ms·

How are they not paying taxes? The people selling their stock to the company in the buyback have to pay taxes on any gains and the people holding onto the stoc

by mrep 7y ago

How are they not paying taxes? The people selling their stock to the company in the buyback have to pay taxes on any gains and the people holding onto the stock long term will eventually have to pay taxes on any gains when they finally do sell (they're not going to hold onto a stock until the heat death of the universe so they are going to realize their gains and pay taxes on them at some point).

jf22 7y ago
I believe your comment is referencing normal people paying taxes, where the comment you are replying too is referencing the ultra-wealthy and corporations paying taxes. The ultra-wealthy and big corporations take advantage of schemes to lower their taxes.
tw04 7y ago
If you have enough money, there are limitless ways to avoid paying taxes that range from illegal to legal but extremely questionable. https://en.m.wikipedia.org/wiki/Panama_Papers https://en.m.wikipedia.org/wiki/Panama_Papers
pwinnski 7y ago
That's a great question with a complicated answer. Here's a start: https://www.theatlantic.com/politics/archive/2018/12/rich-people-are-getting-away-not-paying-their-taxes/577798/ https://www.theatlantic.com/politics/archive/2018/12/rich-pe...
xt00 7y ago
The companies are in many cases doing things like this: 1) their revenue they classify is centered in a different country like Ireland 2) they setup a massive line of credit with an international bank 3) they take out massive loans against the money they have “overseas” that is not taxed 4) they then pay the buybacks and other things to their investors with that loaned money in US 5) they then pay back the bank at their international site 6) the bank then borrows more money from federal reserve at nearly zero interest rate Rinse and repeat.. tons of companies have done this. So sure some investors will eventually cash out but companies should also be taxed if they derive some benefit from the country they are from or selling products. I would argue those taxes should be low but allowing companies to totally dodge them seems like a bad setup long term.
- ivalm 7y ago
  Sure, when a company BUYS stock someone SELLS it to then. The selling party incurs capital gains and pays taxes on it.
- refurb 7y ago
  OK, but that has nothing to do with whether or not the people selling their stock back pay taxes on it.
  - xt00 7y ago
    Wouldn't it be hilarious if the bank prior to the buyback bought a bunch of the stock (I don't know if this is true, but seems plausible). Then in that case the company would literally be taking out a loan from the bank in order to buy the stock from the bank. So then the question is if its possible for the bank to claim some sort of thing where when they sell the stock to the actual company that it is some special type of transaction and maybe gets favorable tax treatment? Wow I want to look into that.. sounds interesting / shady if thats possible to do..
- bsanr2 7y ago
  What I don't understand about this is... Why can't I partake? If my employer is based out of these havens for tax purposes, why can't they pay "me" by paying into the bank account of the foreign on-paper-only company I own, whose line of credit with a foreign bank I then use for my own expenses? I feel like this must be against the law somehow, but I don't quite understand where the line is.
  - CharlesColeman 7y ago
    > What I don't understand about this is... Why can't I partake? Honestly: because you're not rich and connected enough to have the rules written for to your benefit your naked self-interest. If it was legal and economical for ordinary people to evade taxes, too many people would do it and the country would collapse.
  - lotsofpulp 7y ago
CuriouslyC 7y ago
You can borrow against the stock, and defer gains basically forever as long as it appreciates more quickly than the interest rate of your loan.

by mrep 7y ago

jf22 7y ago

I believe your comment is referencing normal people paying taxes, where the comment you are replying too is referencing the ultra-wealthy and corporations paying taxes. The ultra-wealthy and big corporations take advantage of schemes to lower their taxes.

tw04 7y ago

If you have enough money, there are limitless ways to avoid paying taxes that range from illegal to legal but extremely questionable. https://en.m.wikipedia.org/wiki/Panama_Papers https://en.m.wikipedia.org/wiki/Panama_Papers

pwinnski 7y ago

That's a great question with a complicated answer. Here's a start: https://www.theatlantic.com/politics/archive/2018/12/rich-people-are-getting-away-not-paying-their-taxes/577798/ https://www.theatlantic.com/politics/archive/2018/12/rich-pe...

xt00 7y ago

The companies are in many cases doing things like this: 1) their revenue they classify is centered in a different country like Ireland 2) they setup a massive line of credit with an international bank 3) they take out massive loans against the money they have “overseas” that is not taxed 4) they then pay the buybacks and other things to their investors with that loaned money in US 5) they then pay back the bank at their international site 6) the bank then borrows more money from federal reserve at nearly zero interest rate Rinse and repeat.. tons of companies have done this. So sure some investors will eventually cash out but companies should also be taxed if they derive some benefit from the country they are from or selling products. I would argue those taxes should be low but allowing companies to totally dodge them seems like a bad setup long term.

ivalm 7y ago
Sure, when a company BUYS stock someone SELLS it to then. The selling party incurs capital gains and pays taxes on it.
refurb 7y ago
OK, but that has nothing to do with whether or not the people selling their stock back pay taxes on it.
- xt00 7y ago
  Wouldn't it be hilarious if the bank prior to the buyback bought a bunch of the stock (I don't know if this is true, but seems plausible). Then in that case the company would literally be taking out a loan from the bank in order to buy the stock from the bank. So then the question is if its possible for the bank to claim some sort of thing where when they sell the stock to the actual company that it is some special type of transaction and maybe gets favorable tax treatment? Wow I want to look into that.. sounds interesting / shady if thats possible to do..
bsanr2 7y ago
What I don't understand about this is... Why can't I partake? If my employer is based out of these havens for tax purposes, why can't they pay "me" by paying into the bank account of the foreign on-paper-only company I own, whose line of credit with a foreign bank I then use for my own expenses? I feel like this must be against the law somehow, but I don't quite understand where the line is.
- CharlesColeman 7y ago
  > What I don't understand about this is... Why can't I partake? Honestly: because you're not rich and connected enough to have the rules written for to your benefit your naked self-interest. If it was legal and economical for ordinary people to evade taxes, too many people would do it and the country would collapse.
- lotsofpulp 7y ago

CuriouslyC 7y ago

You can borrow against the stock, and defer gains basically forever as long as it appreciates more quickly than the interest rate of your loan.