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Tax Evasion at the Top of the Income Distribution: Theory and Evidence (2021) [pdf]
- xiphias2 4y agoIt's strange to have so much detail about tax evasion without talking about tax avoidance. Just because somebody keeps his money offshore and hides it from his government, doesn't necessary mean that it's illegal (Google and co are great examples of not hiding). Most people want to follow the law, they just want to optimize taxes.
- dontreact 4y agoIt’s not a very fair system if only certain participants can afford to avoid taxes. If these schemes were doable for most folks and not only the very rich then no one would have an issue with the system (assuming that it provided enough revenue).
- andromeduck 4y agoThis is why we should just tax the land - ya can't hide land.
- SketchySeaBeast 4y agoIn that case wouldn't these companies go remote and keep just a PO box around?
- andromeduck 4y agoThen they'll be taxed where they end up but ultimately they'll stay because of the services and talent attracted to the services that tax revenue affords.
- notahacker 4y agoPretty easy for the 0.1% to avoid owning much domestic land though, unless their wealth comes mainly from real estate or primary resource extraction...
- xiphias2 4y agoSo what? If they own property that doesn't have anything to do with the country, it doesn't need maintaining roads and infrastructure (which is the tax is for in theory). Real estate property based taxation has a long history of supporters as the most fair tax there is.
- kyralis 4y agoWat? Only a small portion of services are related to land. Property tax is in fact usually considered quite regressive and hardly "the most fair tax there is."
- friend_and_foe 4y agoThe two biggest expenses, territorial defense and domestic infrastructure, are directly related to land. The other two big ones, administration of justice (courts) and protection of international commerce (navy) either are closely enough connected to land property or have their own revenue generation mechanisms.
- astrange 4y agoLVT is the optimal tax (no deadweight loss). Property tax has issues because it taxes improvements, but we probably want improvements. Both of them are very unpopular with the people who have to pay them, because they force you to find productivity increases and you might be a retiree. Or just a landlord who refuses to develop an empty lot in the middle of a city.
- kazinator 4y agoI feel the argument has gone cirular. People earn an income and keep wealth. The remark was made that those can be hidden, and the rich are good at that. Someone proposes that land be taxed: "ya can't hide land". But no, that won't work, because people can get foreign land. Oh, but that's okay because foreign land doesn't consume local resources like roads and infrastructure. So ... it's okay to hide your income into foreign land. Wait, what were we talking about?
- dsfyu404ed 4y agoIf it were that easy they'd do it. You make more money with a bunch of nickle and dime taxes. 20% to the feds, 10% to the state. 5% sales, 1% property, a litany of $10-1000 fees for interacting with government, etc, etc than you do with a single big tax that is easy to rally against even if the nickle and dime solution is lossy.
- astrange 4y agoYou make the most revenue with a giant VAT like Europe has. After that it's income/payroll tax probably.
- oceanplexian 4y agoWhat about land that’s owned by a trust in another country? Land is extremely easy and reliable way to hide money, that’s why wealthy Chinese are so well known for buying up property in the US and Canada.
- rexpop 4y agoWhat is the point of the Westphalian Nation-state if land within its borders can be owned in trust by foreign nation[al]s?
- toyg 4y agoThat's why the Westphalian nation-state is in a state of permanent crisis: unbridled globalization broke it.
- nkurz 4y agoThe land records are held by a local authority who charges a taxes on the land. If the taxes aren't being paid, the land is sold at auction, and the new owner is responsible for the back taxes. Even if you don't always know exactly who is behind a given trust, you can always collect the taxes or reclaim the land. The wealth may be hidden from the Chinese government, and the local authority may not be certain who the owner actually is, but tax evasion is avoided.
- deleted 4y ago[deleted]
- cafed00d 4y agoDoes that incentivize not buying land? I wonder if people will just prefer subscribing to everything with a long term bundle. I mean, rent and rent-like situations Only the big, powerful, faceless individuals — corporations — will own land. Is this plausible? I’m just winging it here :)
- BirdieNZ 4y agoIt's the opposite; it increases the percentage of owner occupiers. It reduces landlord/renters; see for example https://gameofrent.com/content/can-lvt-be-passed-on-to-tenants https://gameofrent.com/content/can-lvt-be-passed-on-to-tenan... or https://www.prosper.org.au/wp-content/uploads/2020/10/Prosper-Australia_The-Second-Interval.pdf https://www.prosper.org.au/wp-content/uploads/2020/10/Prospe... Most proposals for land value tax are also revenue neutral, so you essentially pay rent to society/government for the land you use, but keep more of your income.
- kazinator 4y agoIn fact, the people who avoid the most tax (as a fraction of their income) are the bottom earners.
- 0xcde4c3db 4y agoThe higher-end schemes have allegedly become so opaque, obscure, and fast-evolving that much of what goes on is only arguably legal rather than proven legal. This gray area has spawned the term "tax avoision".
- generalizations 4y ago> arguably legal rather than proven In general, it's probably better if things have to be proven illegal. I'd rather that my life wasn't limited to only doing those things which have been pre-approved. If there's a problem with something, then it should be explicitly prohibited; not the other way around.
- Hermitian909 4y ago> I'd rather that my life wasn't limited to only doing those things which have been pre-approved. Gray area means that small loopholes in legal language don't instantly balloon into carte-blanche to commit all kinds of crime, without them all it takes is a clever reading of the law to break its spirit. Practically, this means the government cannot regulate complex industries and situations. Things like "food safety" which are the bedrock of all modern countries are usually not possible without these sorts of gray areas.
- chrisbolt 4y agoThe government left in the loopholes, they can close them.
- friend_and_foe 4y ago"The solution is to write bug free code"
- chrisbolt 4y agoNo, the solution is to fix the bugs that are found.
- yunohn 4y ago> Most people want to follow the law, they just want to optimize taxes. How does the average person avail these optimisation schemes? Do they also get to lobby for the loopholes?
- xiphias2 4y agoLearn languages (Duolingo), change countries depending on your income type, ask ChatGPT, set up companies for yourself. There are lots of ways to do it, and many average people are doing it already in different ways. For example for me just moving to Switzerland made both my tax percentage lower and more legal, salary much higher, and cleaner streets from those lower taxes than anywhere else I lived before. Somehow the government was able to afford professional cleaning machines from those lower taxes.
- yunohn 4y agoI’m not sure you understood my point. Moving continents isn’t an average person solution. In fact it exposes another problem - companies can easily register anywhere and restructure their finances for lower taxes.
- pineaux 4y agoIts interesting that you put so much value on clean streets? My observation is that in many European countries its very uncool to throw trash on the floor outside. People still do it, but its usually done hidden. Also people take offense when they see someone throwing trash on the street.
- Madmallard 4y agowhat works in tiny countries does not work in large countries
- WalterBright 4y ago> How does the average person avail these optimisation schemes? The Wall Street Journal often runs articles on various aspects of the tax laws, like how to do a Roth IRA conversion. I'm sure there are plenty of books on the topic, too, just check Amazon.
- deleted 4y ago[deleted]
- samstave 4y agoAt what level should we expect "finDox'ing" vs "personal privacy"? i.e. ; Should we expect full transparency of billionaires, but not minimum wage workers? US Tax Code is horrific, and corrupt. But, what do?
- phs318u 4y agoHow about full transparency for companies? Companies are not people. The only way billionaires are able to evade taxes is through complex networks of companies.
- euroderf 4y agoMy suggestion has always been, companies may not own companies. Only a real, live human being may own a portion of a company. Combine this with public records of company officers and large shareholders. Problem solved.
- JumpCrisscross 4y ago> companies may not own companies. Only a real, live human being may own a portion of a company Wall Street would love this. No bargaining advantage for retail investors via funds. Every need for liquidity and rebalancing requiring a cascade of trades. And the introduction of a chops-like system to enable M&A.
- systemvoltage 4y agoTBH, I am equally worried about the other side of the tax party. How my tax funds are spent and how efficiently they are allocated.
- themitigating 4y agoDo you have information that it's not spent effectively?
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- logicallee 4y ago[deleting this comment]
- coolestguy 4y agoYour country doesn't allow you to file taxes on a "cash collected" basis rather than an "invoiced but not collected" basis?
- logicallee 4y ago[deleting my comment as it is not relevant.]
- cperciva 4y agoI don't know about the USA, but in some countries you can claim a "reserve" for accrued but unpaid amounts in some circumstances. Worth talking to an accountant to see if that's a thing in your case. (Note, there's also "reserve for doubtful accounts", which is if you're not sure if you're going to end up getting paid. It sounds like that one wouldn't apply; I mention it just to be clear that I'm not talking about that sort of reserve.)
- JumpCrisscross 4y agoThere is no situation in America where you need to pay tax on a general invoice within two weeks of receiving payment.
- gamblor956 4y agoThat's not true. Self employed individuals may need to make an quarterly estimated tax payment if the payee does not withhold on the payment. A payment recieved at the end of a quarter would be included in the ETP due 2 weeks later.
- adanto6840 4y agoWhat you need is a bookkeeper and/or a CPA, and probably some business/tax advice from a professional (ie attorney, CPA, etc) - probably not a loan.
- sMarsIntruder 4y agoEvery time I read something about tax evasion I wonder why there’s never a discussion about IF income tax should “exist” or not. We take it as granted and always existed. While for indirect taxation I think that’s pretty fair.
- tjpnz 4y agoIndirect taxation is regressive with lower income people paying a larger share of their income in tax.
- screye 4y agoStripping down seemingly disparate problems down to their bone will often reveal the wisdom behind certain 'rules of thumb': More rules disproportionately benefit those with the resources to navigate said rules. Be that Ivy league admissions, GDPR or lines-of-code. I believe there is a universal virtue in aspiring to make a system simpler. Every exception made with good intentions is disproportionately exploited by those it was least intended for. Blaming emergent patterns on the behavior of individuals never works. We know that shaming people into avoiding sugar doesn't decrease obesity, and shaming tax evaders won't stop tax evasion. Emergent behaviors are downstream of the systems that enable them. The humans within it are no more than blind chickens following the smell of food. Civic duty can serve as a counter-flywheel levee for a bit, but give it sufficient time and it's simply a matter of when the levee breaks. sorry At the risk of sounding like a naïve libertarian: Have a small set of tall walls. Enforce those ruthlessly. Once inside, don't sweat the details. This doesn't low taxation or removal of all nuance. It means more streamlined collection. The budget can encode all the nuance afterwards. That way, each group that avails a 'tax break', has a clear $ value associated with it in the budget, instead of an unobservable 'opportunity cost' for money that was never collected in the first place. Having said that, it is naïvely libertarian, because exposing the true subsidies that certain protected groups get in the form of a $-value, immediately makes it politically unattainable due to voter dynamics. Democracy is truly "the worst form of government" – except for all the others that have been tried .
- nly 4y agoFocusing on taxing the highly paid instead of taxing the wealthy is tiresome.