5 ms·

With Hollywood Accounting[1], you make taxable profits transform into untaxable expenses that you pay to yourself for services you rendered to yourself, and Ire

With Hollywood Accounting[1], you make taxable profits transform into untaxable expenses that you pay to yourself for services you rendered to yourself, and Ireland has been a common destination for this sort of money to flow. Hollywood accounting can take several forms. In one form, a subsidiary is formed to perform a given activity and the parent entity will extract money out of the film's revenue in the form of charges for certain "services". For example, a film studio has a distribution arm as a sub-entity, which will then charge the studio a "distribution fee" — essentially, the studio charging itself a sum it has total control over and hence control the profitability report of a project. [1] https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting Essentially, Apple USA makes billions selling iPhones in the USA, then pays those billions to Apple Ireland for the right to put little Apple logos on iPhones. Likewise, Google USA pays billions in US ad sales profits to Google Ireland for the right to use Google tech for Google search. When the Irish loophole closes I'm sure they'll think up another "One Weird Trick" to make taxable profits mystically transmute into untaxable expenses.

colechristensen 5y ago
Probably, but it does seem over the last twenty years there has been real actual effort to close loopholes. It is slow which can be frustrating, but we’re also talking about changing the way many businesses work and quite complex topics which are not always obviously right or wrong.
eru 5y ago
The US can change their tax system, if they want to. Eg they could tax land value. It's very hard to move land out of the country or hide it. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Or they could tax sales / consumption instead of trying to tax company profits. Company profits are just a bit too nebulous to tax properly. Eg you can reduce your profits just fine by shifting your capital structure from being financed by equity to being financed largely by debt. (And as we all know, too much leverage is not all that great for the resilience of the economy.) That doesn't even need any Hollywood accounting, it's very orthodox accounting. Yet, we keep pushing companies in that direction with the incentives that most tax systems around the world set.
- nikitaga 5y ago
  The extent to which you can take a sizeable cut of corporate profits by taxing land / real estate is pretty limited because many profitable companies don't need much real estate. There is no rate at which you can sufficiently tax Netflix, Apple or Jane Street just with LVT while not impossibly over taxing most other businesses that use more real estate per dollar of corporate profit. And the solutions to that are not any better than those that are based on taxing corporate profits directly.
  - eru 5y ago
    Sorry, I didn't imply that taking land would be a backdoor into taxing corporate profits. No, not at all. (Though the companies you mention do use quite a bit of real estate by value.) Taxing corporate profits is silly, and we shouldn't even try to do it. I suggested LVT just as the least bad way to get revenue for the fisc.
- rPlayer6554 5y ago
  > Eg they could tax land value. It's very hard to move land out of the country or hide it. Remote work would be their solution.
  - eru 5y ago
    So? The land is still in the country, and if it won't be used for offices, it will be used for something else. If I was a bit unclear: I am not suggesting LVT as a better way to tax corporate profits. In fact I think taxing corporate profits is a silly thing to even try. LVT is just the least bad way to raise general revenue for the fisc.
BelenusMordred 5y ago
> When the Irish loophole closes I'm sure they'll think up another "One Weird Trick" Should countries not compete with each other and simply bow down to accept whatever corporate taxation rate the Americans tell them to have?

colechristensen 5y ago

Probably, but it does seem over the last twenty years there has been real actual effort to close loopholes. It is slow which can be frustrating, but we’re also talking about changing the way many businesses work and quite complex topics which are not always obviously right or wrong.

eru 5y ago

The US can change their tax system, if they want to. Eg they could tax land value. It's very hard to move land out of the country or hide it. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Or they could tax sales / consumption instead of trying to tax company profits. Company profits are just a bit too nebulous to tax properly. Eg you can reduce your profits just fine by shifting your capital structure from being financed by equity to being financed largely by debt. (And as we all know, too much leverage is not all that great for the resilience of the economy.) That doesn't even need any Hollywood accounting, it's very orthodox accounting. Yet, we keep pushing companies in that direction with the incentives that most tax systems around the world set.

nikitaga 5y ago
The extent to which you can take a sizeable cut of corporate profits by taxing land / real estate is pretty limited because many profitable companies don't need much real estate. There is no rate at which you can sufficiently tax Netflix, Apple or Jane Street just with LVT while not impossibly over taxing most other businesses that use more real estate per dollar of corporate profit. And the solutions to that are not any better than those that are based on taxing corporate profits directly.
- eru 5y ago
  Sorry, I didn't imply that taking land would be a backdoor into taxing corporate profits. No, not at all. (Though the companies you mention do use quite a bit of real estate by value.) Taxing corporate profits is silly, and we shouldn't even try to do it. I suggested LVT just as the least bad way to get revenue for the fisc.
rPlayer6554 5y ago
> Eg they could tax land value. It's very hard to move land out of the country or hide it. Remote work would be their solution.
- eru 5y ago
  So? The land is still in the country, and if it won't be used for offices, it will be used for something else. If I was a bit unclear: I am not suggesting LVT as a better way to tax corporate profits. In fact I think taxing corporate profits is a silly thing to even try. LVT is just the least bad way to raise general revenue for the fisc.

BelenusMordred 5y ago

> When the Irish loophole closes I'm sure they'll think up another "One Weird Trick" Should countries not compete with each other and simply bow down to accept whatever corporate taxation rate the Americans tell them to have?