8 ms·

I really wish people would stop seeing large companies paying low taxes as cheating and "loop holes". It is neither and it makes us blind to the cause of the pr

I really wish people would stop seeing large companies paying low taxes as cheating and "loop holes". It is neither and it makes us blind to the cause of the problem. The politicians we vote in deliberately create laws that allow large companies to pay little to no tax. It is not an accident or a sneaky corporation that outwitted a dumb politician, it is by design.

rektide 6y ago
Deliberate allowances are created but big companies can hire legions of lawyers to reduce their tax burden, to find all sorts of minutia & excuses & readings of words to take advantage of every subclause they can. The aggregate effect feels enormously poisonous, totally toxic. Mega corporations can adapt far faster than anyone or anything else, including those charged with governing & regulating. Good governance is hard. And megacorps are an advanced persistent threat that goes to great lengths to claim exceptions for itself.
- aeternum 6y ago
  It only takes one clever accountant to find a loophole. The right fix is to simplify the tax code.
  - idownvoted 6y ago
    Guess why most billionaires favor political parties that agitate against simplifying the tax code...
- miemo23 6y ago
  > Mega corporations can adapt far faster than anyone or anything else i really don't think this is true, many big companies are hopelessly bureaucratic
  - rektide 6y ago
    I hugely agree with your sentiment. But I think this case still stands. As opposed to the human "resources" that do the work, which management feels it must direct & organize & lead & regulate, the financial department often speaks the same business school language, is already aligned to the board-level/business-school goals of raking in barrels & barrels of money. It's also largely a question of what change is required? I've seen a parent company move itself to become a subsidiary of a holding company which is now landed in another nation. It had almost no effect on the day to day. It was paper work. Megacorps are filled with paperwork. But that doesn't necessarily mean they are bad at it, slow at it.
  - refurb 6y ago
    Compared the government? How long did it take to fix the tax law for the Dutch Sandwich or whatever it’s called. A decade?
- chillfox 6y ago
  "find all sorts of minutia & excuses" Usually those are in there to be found and used. Your energy would be better spent being upset with the politicians for putting it in there than the lawyers for finding it.
  - rektide 6y ago
    there's a lot of sense to this, but I still continue to believe a lot of very good incentives & governance exist, that help small & medium folk, that intend well. I'm not in favor of giving up & u regulating; when systems benefits are dominated by the big, it's time to re-regulate, try to alter the ellegible beneficiaries.
    - chillfox 6y ago
      Absolutely, the solution is better laws and regulations.
rapnie 6y ago
And who lobbies said politicians with huge power and influence? Isn't that part of the design as well?
- chillfox 6y ago
  Yes, and I think that should be illegal. My point is that it would be more productive to focus on fixing the system than just getting angry at companies for "cheating".
idownvoted 6y ago
You may be misunderstanding cause and effect. > it is by design It certainly wasn't "designed" for geographically flexible entities such as Amazon that didn't even exist 30 years ago. When ever a new kind of entity fits in loop holes that weren't open one technological advance earlier it has any interest to lobby politicians to keep that niche/grey-area open. That can and should be called cheating.
- temporalparts 6y ago
  Cheating by what standard? Surely all forms of lobbying for self-interest should not be called cheating?
  - luckylion 6y ago
    Writing a letter to your representative arguing for lower taxes: cool. Making large contributions to their campaign fund, paying them tens of thousands of dollars for a 30 minute speech at your conference etc: not cool.
  - lordnacho 6y ago
    Just because it's hard to put into words doesn't make it not cheating. The fact is society evolves and it takes time to discover the negatives of a lot of business models. People who exploits such models already have the benefit of our non-retroactive judicial system.
  - Yizahi 6y ago
    They should be. Just replace every word "lobbying" with "bribing" and you will see it yourself.
    - ghayes 6y ago
      There are certainly forms of lobbying that are not bribery. Conflating the two is a false equivalency. Lobbying, in general, is the process of informing politicians about certain topics important to an interest group or set of individuals / constituents. When lobbyists bribe (which is illegal) or more realistically: when lobbyists conditionally contribute campaign donations, those actions are the moral hazard.
Gustomaximus 6y ago
I think its as much a case of technology, both product and ease of manipulating companies structures has moved past the traditional taxation rules per country. We need to start approaching more taxation rules at a trading/travel block level. E.g. G12 say minimum 25% corporate tax or any product/service that involves non-complainant countries has a X% duty type thing.... or something down that concept route. I think the real rich person law they politicians have supported and can influence is capital gains tax. Capital gains at a certain point is income. There's a reason CEO's take a $1 salary, they are clearly not living on that.
lamontcg 6y ago
The politicians are bought off by the large corporations. Its not like the corporations haven't been using their financial influence, particularly after Citizen's United, to influence the rules.
dx034 6y ago
I think a lot of it is not by design. Writing laws is hard, especially tax laws. Companies have incredible resources to find loopholes they can use. If they get patched they'll just find another one. The problem is that you'd prefer easy laws that anyone can follow, but those will always have loopholes. The more provisions you add to close loopholes, the harder it'll be for small companies and individuals to remain compliant. I don't think any of us here could come up with a tax code that cannot be exploited. And of course large companies will exploit any loophole, all of us do when filing our taxes. Maybe the problem is the existence of such powerful companies. Once you have them, it's very hard for politicians to stay on top of them. To be clear, I'm not saying that there's no corruption or politicians favoring large companies. But most loopholes used by companies tend to stem from good intentions. It's like in IT security, there are backdoors but most bugs still have a benign origin.
MrPowers 6y ago
From what I've seen, tax loopholes exist mainly because of incompetence. The Section 482-7 regs were written by the IRS to control how intellectual property is shifted offshore. The valuation methods outlined in the article were questionable. I read the regs multiple times to understand them and made an Excel valuation model to follow their rules. Don't think the IRS realized they created terrible, ridiculous theoretical models. Don't think it was intentional either. Just a few people that didn't understand the implications and congress that signed the code into law without being able to understand it. Tax code for valuing IP is highly complex. The US government writes terrible tax code in my opinion, mainly because they're just not very good. They're not as good as top private sector tax lawyers. I empathize with the "You make the tax laws @SenWarren; we just follow them. If you don't like the laws you've created, by all means, change them" sentiment. Multinational corporations have to comply with tax laws from multiple countries that are arbitrary and complex.

rektide 6y ago

Deliberate allowances are created but big companies can hire legions of lawyers to reduce their tax burden, to find all sorts of minutia & excuses & readings of words to take advantage of every subclause they can. The aggregate effect feels enormously poisonous, totally toxic. Mega corporations can adapt far faster than anyone or anything else, including those charged with governing & regulating. Good governance is hard. And megacorps are an advanced persistent threat that goes to great lengths to claim exceptions for itself.

aeternum 6y ago
It only takes one clever accountant to find a loophole. The right fix is to simplify the tax code.
- idownvoted 6y ago
  Guess why most billionaires favor political parties that agitate against simplifying the tax code...
miemo23 6y ago
> Mega corporations can adapt far faster than anyone or anything else i really don't think this is true, many big companies are hopelessly bureaucratic
- rektide 6y ago
  I hugely agree with your sentiment. But I think this case still stands. As opposed to the human "resources" that do the work, which management feels it must direct & organize & lead & regulate, the financial department often speaks the same business school language, is already aligned to the board-level/business-school goals of raking in barrels & barrels of money. It's also largely a question of what change is required? I've seen a parent company move itself to become a subsidiary of a holding company which is now landed in another nation. It had almost no effect on the day to day. It was paper work. Megacorps are filled with paperwork. But that doesn't necessarily mean they are bad at it, slow at it.
- refurb 6y ago
  Compared the government? How long did it take to fix the tax law for the Dutch Sandwich or whatever it’s called. A decade?
chillfox 6y ago
"find all sorts of minutia & excuses" Usually those are in there to be found and used. Your energy would be better spent being upset with the politicians for putting it in there than the lawyers for finding it.
- rektide 6y ago
  there's a lot of sense to this, but I still continue to believe a lot of very good incentives & governance exist, that help small & medium folk, that intend well. I'm not in favor of giving up & u regulating; when systems benefits are dominated by the big, it's time to re-regulate, try to alter the ellegible beneficiaries.
  - chillfox 6y ago
    Absolutely, the solution is better laws and regulations.

rapnie 6y ago

And who lobbies said politicians with huge power and influence? Isn't that part of the design as well?

chillfox 6y ago
Yes, and I think that should be illegal. My point is that it would be more productive to focus on fixing the system than just getting angry at companies for "cheating".

idownvoted 6y ago

You may be misunderstanding cause and effect. > it is by design It certainly wasn't "designed" for geographically flexible entities such as Amazon that didn't even exist 30 years ago. When ever a new kind of entity fits in loop holes that weren't open one technological advance earlier it has any interest to lobby politicians to keep that niche/grey-area open. That can and should be called cheating.

temporalparts 6y ago
Cheating by what standard? Surely all forms of lobbying for self-interest should not be called cheating?
- luckylion 6y ago
  Writing a letter to your representative arguing for lower taxes: cool. Making large contributions to their campaign fund, paying them tens of thousands of dollars for a 30 minute speech at your conference etc: not cool.
- lordnacho 6y ago
  Just because it's hard to put into words doesn't make it not cheating. The fact is society evolves and it takes time to discover the negatives of a lot of business models. People who exploits such models already have the benefit of our non-retroactive judicial system.
- Yizahi 6y ago
  They should be. Just replace every word "lobbying" with "bribing" and you will see it yourself.
  - ghayes 6y ago
    There are certainly forms of lobbying that are not bribery. Conflating the two is a false equivalency. Lobbying, in general, is the process of informing politicians about certain topics important to an interest group or set of individuals / constituents. When lobbyists bribe (which is illegal) or more realistically: when lobbyists conditionally contribute campaign donations, those actions are the moral hazard.

Gustomaximus 6y ago

I think its as much a case of technology, both product and ease of manipulating companies structures has moved past the traditional taxation rules per country. We need to start approaching more taxation rules at a trading/travel block level. E.g. G12 say minimum 25% corporate tax or any product/service that involves non-complainant countries has a X% duty type thing.... or something down that concept route. I think the real rich person law they politicians have supported and can influence is capital gains tax. Capital gains at a certain point is income. There's a reason CEO's take a $1 salary, they are clearly not living on that.

lamontcg 6y ago

The politicians are bought off by the large corporations. Its not like the corporations haven't been using their financial influence, particularly after Citizen's United, to influence the rules.

dx034 6y ago

I think a lot of it is not by design. Writing laws is hard, especially tax laws. Companies have incredible resources to find loopholes they can use. If they get patched they'll just find another one. The problem is that you'd prefer easy laws that anyone can follow, but those will always have loopholes. The more provisions you add to close loopholes, the harder it'll be for small companies and individuals to remain compliant. I don't think any of us here could come up with a tax code that cannot be exploited. And of course large companies will exploit any loophole, all of us do when filing our taxes. Maybe the problem is the existence of such powerful companies. Once you have them, it's very hard for politicians to stay on top of them. To be clear, I'm not saying that there's no corruption or politicians favoring large companies. But most loopholes used by companies tend to stem from good intentions. It's like in IT security, there are backdoors but most bugs still have a benign origin.

MrPowers 6y ago

From what I've seen, tax loopholes exist mainly because of incompetence. The Section 482-7 regs were written by the IRS to control how intellectual property is shifted offshore. The valuation methods outlined in the article were questionable. I read the regs multiple times to understand them and made an Excel valuation model to follow their rules. Don't think the IRS realized they created terrible, ridiculous theoretical models. Don't think it was intentional either. Just a few people that didn't understand the implications and congress that signed the code into law without being able to understand it. Tax code for valuing IP is highly complex. The US government writes terrible tax code in my opinion, mainly because they're just not very good. They're not as good as top private sector tax lawyers. I empathize with the "You make the tax laws @SenWarren; we just follow them. If you don't like the laws you've created, by all means, change them" sentiment. Multinational corporations have to comply with tax laws from multiple countries that are arbitrary and complex.