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Couldn’t one make the argument “there is no use because Big Tech have so many lawyers” no matter what the new policy is? If taxing the big companies is the aim

Couldn’t one make the argument “there is no use because Big Tech have so many lawyers” no matter what the new policy is? If taxing the big companies is the aim, how does one gauge the policy suggestion? (I am not Americans just watching this curiously from outside) Edit: spelling

otikik 6y ago
Well one policy could be "tax companies with more than x lawyers".
- sofixa 6y ago
  They'd just outsource them to a legal firm
- ekam 6y ago
  This doesn’t work at all, many companies don’t have lawyers of their own but keep big law firms on retainer. And companies could just offload more onto JD-advantage employees/ law student interns anyways since they’re not “lawyers”
  - terminalcommand 6y ago
    They have both in-house counsels and work with external law firms. A reason for doing this is to avoid liability. Some big companies retain multiple law firms and ask the same advice a couple of times. If an overworked attorney who barely gets any sleep ever misses a point or drafts his/her advice vaguely in a way that would enable their evil plans, they rely on that single opinion. If there are any problems they don't assume any liability, because hey they got a legal opinion from a respectable law firm. Nobody needs to know/can prove they obtained multiple opinions on the same matter because of legal privilege. In return, big law gets paid a lot of $$$, because of the risk of providing such opinions under considerable pressure and trickstery.
    - sokoloff 6y ago
      Having a legal opinion supporting an aggressive tax position that is eventually overturned doesn’t get you out of liability for that position. The appearance of food faith efforts to comply with the complex tax code may reduce penalties assessed.
      - terminalcommand 6y ago
        Sure, my comment wasn't tax code specific. There is always risk involved, but it's much less. If you need to do it anyway, better pressure a lawyer into giving you a legal opinion. The company will pay pay the fine but who can blame you for acting on it. In a big corp, I think most employees are concerned with saving the day. If the management pressures them to cut corners most will. What better way is there to pass the blame?
- sebmellen 6y ago
  Voilà! Amazon Legal Services LLC (no connection to Amazon.com Inc. ;), now provides all legal services to Amazon.com Inc.
  - deleted 6y ago
    [deleted]
- noxer 6y ago
  Such rules only act as an incentive to find new loopholes and waist money using them. A large company can spend 99% of what they save in taxes to find out how to save it and its a net gain. The solution would be to have absolute minimalist tax rules which are so simple that there wont be loopholes. Then also make judges apply common sense and smash every attempted loophole until everyone stops wasting money to find one. Never going to happen obviously but we can dream.
  - Frost1x 6y ago
    The issue with this is that tax code is often used as a proxy to fix all sorts of social problems that lead to inequality. We give tax breaks to subsets of populations who really need them. We also push policy through tax incentives, for example solar related deductions. I think we'd be better off fixing the deduction of such problems, but just pointing out that part of the reason taxes are so complicated are to enable this. Another reason is to create corporate tax loopholes...
    - noxer 6y ago
      Subsidizing anything should never be done trough tax breaks anyway. It just hides tax spending. Also this was about corporate taxes not private taxes. If a corporation "really needs a tax cut" its probably just unsustainable and if not it should find investors to bring the money voluntary not force spend the peoples money. Yes the loopholes are intentional but it only helps very few individuals and a whole industry of layer, while corporations aren't actually in the business of finding tax loopholes they are indirectly forced to participate anyway because their competitor does. People blame the companies for evading taxes but they are not the problem they have to play along because everything else would be hard to explain to the shareholders. Imagine if you are a business owner and your company slowly grows to amazon size. At what point would a sane person like to pay people to evade taxes? You would never want to do that instead of building a team of tax specialist or outsource that you could expand in real business. Your local small business owner and Jeff Bezos both have no interest in that.
bopbeepboop 6y ago
The traditional solution is to lower taxes and simplify the tax code. Large corporations have an effective tax rate below the nominal one due to antics with exceptions — while smaller businesses get hit harder. What’s called “progressive” often ends up regressive due to the imbalance in ability to do finance trickery. Rich people will always find or create exploits in the law, so those “high taxes on mega corps and billionaires!” hit the middle class and medium sized businesses: they’re who bear the brunt of taxes, in the US. You get out of doing that unnecessary damage by removing the game: no whatever exceptions, just a flat rate everyone pays. What’s called “regressive” is actually progressive in that it lightens the tax burden on the middle class and medium businesses, while making the richest pay a fair share. (Also, simpler codes are harder to cheat.) Discussing the tax burden of the poorest is a misdirection used by politicians: the poorest in the US receive more benefits than they pay, so it’s a question of how that burden is split between the middle class and the upper class.
- mcv 6y ago
  It's not that simple. As far as I know, corporate taxes are already flat. (If they weren't, corporations could easily split into several smaller ones to keep their profits below some threshold.) The big issue is with "just a flat rate that everyone pays". What do you pay that rate over? Big corporations manage to pay that rate over nothing. Generally those corporate taxes are paid over profits, so corporations avoid taking profits in countries that tax them. They sit on their money, pay it out as bonuses to executives, and take their profits in tax havens. The issue isn't the tax rate, it's the loop holes. It's that the amount that's taxed is easily manipulated. Instead of easily manipulatable profits, the tax should be levied on something less easily manipulatable. Like revenue. Of course that already happens: VAT taxes, only because you pay them on all products, they are effectively paid by consumers, not corporations. But how about allowing corporations to deduct their local external costs from their revenue? Not easily manipulatable foreign external costs, but simply the costs made in the same market as where the revenues come from? Then you're effectively still taxing profit, but tied to the local market, cutting tax havens and internal trickery out of the picture. A company on the other side of the world selling in your country but not making any costs there; no labour, manufacturing, rent, etc; would pay tax over their entire revenue, whereas a local shop that has does have all those costs, and therefore cannot help but invest in the local economy, gets to deduct those costs and pay less taxes. I think that could do a lot to even out the imbalance and make the playing field a lot fairer.
Proziam 6y ago
This is one of the primary reasons I promote using the simplest possible tax and incentive structures. The simpler it is, the easier it is to avoid creating loopholes. Besides, paying tax should be a much easier process for the small fish.
- ragnese 6y ago
  The loopholes aren't accidents.
gigatexal 6y ago
Yes. Throw enough smart tax lawyers at a problem and limit your tax regardless of what law is passed.
PoignardAzur 6y ago
One proposed reform was to give corporations an obligation to explain the difference between their profits declared to the IRS (as low as they can get away with) and their profits declared to their shareholders (accurate, because they want people to buy their shares). Both declarations are available to the IRS; if you force corporations to declare how they "bridge the gap", while it would let them practice tax evasion, it would make it easier to assess what form that evasion takes; and it would make fraud much harder. I don't remember if it went through.
- ljjvn 6y ago
  Rate reconciliations are required disclosure. See page 64 of the 2019 financial statements [1]. [1] https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/2019-Annual-Report.pdf https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/...

otikik 6y ago

Well one policy could be "tax companies with more than x lawyers".

sofixa 6y ago
They'd just outsource them to a legal firm
ekam 6y ago
This doesn’t work at all, many companies don’t have lawyers of their own but keep big law firms on retainer. And companies could just offload more onto JD-advantage employees/ law student interns anyways since they’re not “lawyers”
- terminalcommand 6y ago
  They have both in-house counsels and work with external law firms. A reason for doing this is to avoid liability. Some big companies retain multiple law firms and ask the same advice a couple of times. If an overworked attorney who barely gets any sleep ever misses a point or drafts his/her advice vaguely in a way that would enable their evil plans, they rely on that single opinion. If there are any problems they don't assume any liability, because hey they got a legal opinion from a respectable law firm. Nobody needs to know/can prove they obtained multiple opinions on the same matter because of legal privilege. In return, big law gets paid a lot of $$$, because of the risk of providing such opinions under considerable pressure and trickstery.
  - sokoloff 6y ago
    Having a legal opinion supporting an aggressive tax position that is eventually overturned doesn’t get you out of liability for that position. The appearance of food faith efforts to comply with the complex tax code may reduce penalties assessed.
    - terminalcommand 6y ago
      Sure, my comment wasn't tax code specific. There is always risk involved, but it's much less. If you need to do it anyway, better pressure a lawyer into giving you a legal opinion. The company will pay pay the fine but who can blame you for acting on it. In a big corp, I think most employees are concerned with saving the day. If the management pressures them to cut corners most will. What better way is there to pass the blame?
sebmellen 6y ago
Voilà! Amazon Legal Services LLC (no connection to Amazon.com Inc. ;), now provides all legal services to Amazon.com Inc.
- deleted 6y ago
  [deleted]
noxer 6y ago
Such rules only act as an incentive to find new loopholes and waist money using them. A large company can spend 99% of what they save in taxes to find out how to save it and its a net gain. The solution would be to have absolute minimalist tax rules which are so simple that there wont be loopholes. Then also make judges apply common sense and smash every attempted loophole until everyone stops wasting money to find one. Never going to happen obviously but we can dream.
- Frost1x 6y ago
  The issue with this is that tax code is often used as a proxy to fix all sorts of social problems that lead to inequality. We give tax breaks to subsets of populations who really need them. We also push policy through tax incentives, for example solar related deductions. I think we'd be better off fixing the deduction of such problems, but just pointing out that part of the reason taxes are so complicated are to enable this. Another reason is to create corporate tax loopholes...
  - noxer 6y ago
    Subsidizing anything should never be done trough tax breaks anyway. It just hides tax spending. Also this was about corporate taxes not private taxes. If a corporation "really needs a tax cut" its probably just unsustainable and if not it should find investors to bring the money voluntary not force spend the peoples money. Yes the loopholes are intentional but it only helps very few individuals and a whole industry of layer, while corporations aren't actually in the business of finding tax loopholes they are indirectly forced to participate anyway because their competitor does. People blame the companies for evading taxes but they are not the problem they have to play along because everything else would be hard to explain to the shareholders. Imagine if you are a business owner and your company slowly grows to amazon size. At what point would a sane person like to pay people to evade taxes? You would never want to do that instead of building a team of tax specialist or outsource that you could expand in real business. Your local small business owner and Jeff Bezos both have no interest in that.

bopbeepboop 6y ago

The traditional solution is to lower taxes and simplify the tax code. Large corporations have an effective tax rate below the nominal one due to antics with exceptions — while smaller businesses get hit harder. What’s called “progressive” often ends up regressive due to the imbalance in ability to do finance trickery. Rich people will always find or create exploits in the law, so those “high taxes on mega corps and billionaires!” hit the middle class and medium sized businesses: they’re who bear the brunt of taxes, in the US. You get out of doing that unnecessary damage by removing the game: no whatever exceptions, just a flat rate everyone pays. What’s called “regressive” is actually progressive in that it lightens the tax burden on the middle class and medium businesses, while making the richest pay a fair share. (Also, simpler codes are harder to cheat.) Discussing the tax burden of the poorest is a misdirection used by politicians: the poorest in the US receive more benefits than they pay, so it’s a question of how that burden is split between the middle class and the upper class.

mcv 6y ago
It's not that simple. As far as I know, corporate taxes are already flat. (If they weren't, corporations could easily split into several smaller ones to keep their profits below some threshold.) The big issue is with "just a flat rate that everyone pays". What do you pay that rate over? Big corporations manage to pay that rate over nothing. Generally those corporate taxes are paid over profits, so corporations avoid taking profits in countries that tax them. They sit on their money, pay it out as bonuses to executives, and take their profits in tax havens. The issue isn't the tax rate, it's the loop holes. It's that the amount that's taxed is easily manipulated. Instead of easily manipulatable profits, the tax should be levied on something less easily manipulatable. Like revenue. Of course that already happens: VAT taxes, only because you pay them on all products, they are effectively paid by consumers, not corporations. But how about allowing corporations to deduct their local external costs from their revenue? Not easily manipulatable foreign external costs, but simply the costs made in the same market as where the revenues come from? Then you're effectively still taxing profit, but tied to the local market, cutting tax havens and internal trickery out of the picture. A company on the other side of the world selling in your country but not making any costs there; no labour, manufacturing, rent, etc; would pay tax over their entire revenue, whereas a local shop that has does have all those costs, and therefore cannot help but invest in the local economy, gets to deduct those costs and pay less taxes. I think that could do a lot to even out the imbalance and make the playing field a lot fairer.

Proziam 6y ago

This is one of the primary reasons I promote using the simplest possible tax and incentive structures. The simpler it is, the easier it is to avoid creating loopholes. Besides, paying tax should be a much easier process for the small fish.

ragnese 6y ago
The loopholes aren't accidents.

gigatexal 6y ago

Yes. Throw enough smart tax lawyers at a problem and limit your tax regardless of what law is passed.

PoignardAzur 6y ago

One proposed reform was to give corporations an obligation to explain the difference between their profits declared to the IRS (as low as they can get away with) and their profits declared to their shareholders (accurate, because they want people to buy their shares). Both declarations are available to the IRS; if you force corporations to declare how they "bridge the gap", while it would let them practice tax evasion, it would make it easier to assess what form that evasion takes; and it would make fraud much harder. I don't remember if it went through.

ljjvn 6y ago
Rate reconciliations are required disclosure. See page 64 of the 2019 financial statements [1]. [1] https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/2019-Annual-Report.pdf https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/...