4 ms·

A multinational can change its base of incorporation, and many people can and will change their citizenship over a million bucks, let alone a billion. This kind

by rprasad 15y ago

A multinational can change its base of incorporation, and many people can and will change their citizenship over a million bucks, let alone a billion. This kind of foolish proposal would just drive more US businesses overseas. I do international tax for a living. I laughed so hard at this line I started crying. Businesses will do business in any nation where they can make money, taxes be damned. Moreover, taxes are the price of doing business in a country -- if they don't want to pay taxes in a country they won't get to do business there either. Multinationals will focus on miniziming taxes where feasible, but taxes usually aren't the biggest costs on their books. The U.S. corporate tax rate is the "highest" in the world, but it only taxes profits (most other countries base corporate income taxes on revenue), which results in effective income taxation rates in the low single digits for all but a tiny handful of companies.

Tsagadai 15y ago
Businesses will do business in any nation where they can make money, taxes be damned. Moreover, taxes are the price of doing business in a country -- if they don't want to pay taxes in a country they won't get to do business there either. Multinationals will focus on miniziming taxes where feasible, but taxes usually aren't the biggest costs on their books. Thank you for your comment. So many people seem trapped in the media doublethink loop that they forget corporations will form anywhere you can make money from forming a corporation. Taxation is rarely a hurdle to starting a successful company and if you are relying on a very thin margin (say, about the size of the effective tax rate) you probably won't be successful in five years.
temphn 15y ago
Well, if you are an international tax lawyer, obviously moves like the Double Irish show that the base of incorporation matters quite a bit: http://en.wikipedia.org/wiki/Double_Irish_arrangement The Double Irish arrangement is a tax avoidance strategy that U.S. based multinational corporations use to lower their corporate tax liability. The idea is to use payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country. It relies on the fact that Irish tax law does not include U.S. transfer pricing rules.[1] Obviously there are many more things one can do to avoid (not evade) US taxes through various international arbitrage opportunities and offshore tax havens. And I don't see why any company wouldn't do that. Why would you want more of your money wasted in Iraq and Afghanistan?
- rprasad 15y ago
  For starters, there are restrictions on the use of the Double Irish structure that generally limit the benefits to IP-based companies (i.e., technology, media, etc.), which is why most of the companies structured this way are technology companies. Manufacturing companies would derive little if any benefit from the Double Irish structure, though this depends on the circumstances of their businesses. Also, in regards to Iraq and Afghanistan, Ireland does not maintain treaties with either nation, so there is no special low rate that would shield such income. (Sorry for the late reply; I don't read HN every day.)

by rprasad 15y ago

Tsagadai 15y ago

Businesses will do business in any nation where they can make money, taxes be damned. Moreover, taxes are the price of doing business in a country -- if they don't want to pay taxes in a country they won't get to do business there either. Multinationals will focus on miniziming taxes where feasible, but taxes usually aren't the biggest costs on their books. Thank you for your comment. So many people seem trapped in the media doublethink loop that they forget corporations will form anywhere you can make money from forming a corporation. Taxation is rarely a hurdle to starting a successful company and if you are relying on a very thin margin (say, about the size of the effective tax rate) you probably won't be successful in five years.

temphn 15y ago

Well, if you are an international tax lawyer, obviously moves like the Double Irish show that the base of incorporation matters quite a bit: http://en.wikipedia.org/wiki/Double_Irish_arrangement The Double Irish arrangement is a tax avoidance strategy that U.S. based multinational corporations use to lower their corporate tax liability. The idea is to use payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country. It relies on the fact that Irish tax law does not include U.S. transfer pricing rules.[1] Obviously there are many more things one can do to avoid (not evade) US taxes through various international arbitrage opportunities and offshore tax havens. And I don't see why any company wouldn't do that. Why would you want more of your money wasted in Iraq and Afghanistan?

rprasad 15y ago
For starters, there are restrictions on the use of the Double Irish structure that generally limit the benefits to IP-based companies (i.e., technology, media, etc.), which is why most of the companies structured this way are technology companies. Manufacturing companies would derive little if any benefit from the Double Irish structure, though this depends on the circumstances of their businesses. Also, in regards to Iraq and Afghanistan, Ireland does not maintain treaties with either nation, so there is no special low rate that would shield such income. (Sorry for the late reply; I don't read HN every day.)