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(1) The tax system is very simple if you're not trying to game the system to (EDIT: changed from "or") minimize your tax burden. Almost all of the complexity a

by rprasad 15y ago

(1) The tax system is very simple if you're not trying to game the system to (EDIT: changed from "or") minimize your tax burden. Almost all of the complexity arises from the allowance for deductions and the related regulations necessary to prevent abuse of those deductions. (2). Worldwide, that is the standard tax practice. It is called "territorial taxation." Source-based taxation is the U.S. practice regarding foreign persons who are citizens of nations with which we have income tax treaties (for purposes of determining which country gets to tax them). The U.S. is an outlier in taxing worldwide income regardless of source. However, getting rid of the Irish structure would require (a) a change in other countries' tax policies or (b) a tax code even more complicated than the one we have right now. Note that I mean "game the system" in the sense of gamifying the outcome. I do not mean game in the sense of "cheating."

clarky07 15y ago
>(1) The tax system is very simple if you're not trying to game the system or minimize your tax burden. Almost all of the complexity arises from the allowance for deductions and the related regulations necessary to prevent abuse of those deductions. How is taking deductions "gaming the system?" Why on earth would I not try to minimize my tax burden. The US government is not a charity, and it functions far worse than most charities do. If I'm just going to give money away, the government is not going to be my first choice for recipient.
- rprasad 15y ago
  You wouldn't say that if you knew how most charities operate... As for "gaming the system." I mean that they are attempting to maximize their outcome by "playing" all of the rules available. (For example, by committing a holding foul to prevent a receiver from scoring a touchdown in college football.) Essentially, they have gamified the tax code. I do not intend a positive or negative inference.
beagle3 15y ago
> Almost all of the complexity arises from the allowance for deductions and the related regulations necessary to prevent abuse of those deductions. Unfortunately, that complexity also applies to taxpayers who are not trying to game the system. And while they might only be, say, 5% of the population, they vastly outnumber the outlaws for which these regulations were made. e.g., if you have control of any asset outside the US, you can spend weeks trying to satisfy the documentation and tax requirements, and still fail because they are ambiguously worded. And you are automatically assumed to be in the wrong and avoiding taxation, even if you overpaid. How is that for simple? That is regardless of any deduction you may or may not be able to take. > However, getting rid of the Irish structure would require (a) a change in other countries' tax policies or (b) a tax code even more complicated than the one we have right now. Neither is true. The tax code for persons already enforces that - no matter how many entities you have in the middle, if you are ultimately in control of a company or a bank account, you have to report it and pay taxes on the profits. It just takes the addition of one clause "Company X pays US taxes on every cent it makes in itself or a company under its control (in proportion to said control, ultimately determined by agency). Violation of this is considered lying under oath w.r.t sarbanes oaxley reporting" (or 10 in legalese, with this underlying meaning), and all of a sudden it becomes the company's issue to prove it is not in control if it doesn't want to pay taxes. Just like it is for your "real person" taxpayer.
- rprasad 15y ago
  As I said, the "related regulations necessary to prevent abuse." The FBAR and foreign asset reporting requirements which you are referring to are the direct outgrowth of wealthy Americans using offshore accounts and investments to evade taxes. Prior to this abuse, investing in foreign assets or using offshore bank accounts was siginificantly less complex.
  - beagle3 15y ago
    > related regulations necessary to prevent abuse. While we could argue about the merits of FBAR in preventing said abuse (apparently, the IRS and treasury do not believe it is useful given the recent FATCA upgrade it got), I don't want to go there. Your statement: > (1) The tax system is very simple if you're not trying to game the system to minimize your tax burden. Is demonstrably wrong. e.g. naturalized citizens who still have some assets in their country of origin (or even natural born citizens who inherit such assets), are subject to complicated tax filing whether or not they try to game the system or minimize their taxes.

by rprasad 15y ago

clarky07 15y ago

>(1) The tax system is very simple if you're not trying to game the system or minimize your tax burden. Almost all of the complexity arises from the allowance for deductions and the related regulations necessary to prevent abuse of those deductions. How is taking deductions "gaming the system?" Why on earth would I not try to minimize my tax burden. The US government is not a charity, and it functions far worse than most charities do. If I'm just going to give money away, the government is not going to be my first choice for recipient.

rprasad 15y ago
You wouldn't say that if you knew how most charities operate... As for "gaming the system." I mean that they are attempting to maximize their outcome by "playing" all of the rules available. (For example, by committing a holding foul to prevent a receiver from scoring a touchdown in college football.) Essentially, they have gamified the tax code. I do not intend a positive or negative inference.

beagle3 15y ago

> Almost all of the complexity arises from the allowance for deductions and the related regulations necessary to prevent abuse of those deductions. Unfortunately, that complexity also applies to taxpayers who are not trying to game the system. And while they might only be, say, 5% of the population, they vastly outnumber the outlaws for which these regulations were made. e.g., if you have control of any asset outside the US, you can spend weeks trying to satisfy the documentation and tax requirements, and still fail because they are ambiguously worded. And you are automatically assumed to be in the wrong and avoiding taxation, even if you overpaid. How is that for simple? That is regardless of any deduction you may or may not be able to take. > However, getting rid of the Irish structure would require (a) a change in other countries' tax policies or (b) a tax code even more complicated than the one we have right now. Neither is true. The tax code for persons already enforces that - no matter how many entities you have in the middle, if you are ultimately in control of a company or a bank account, you have to report it and pay taxes on the profits. It just takes the addition of one clause "Company X pays US taxes on every cent it makes in itself or a company under its control (in proportion to said control, ultimately determined by agency). Violation of this is considered lying under oath w.r.t sarbanes oaxley reporting" (or 10 in legalese, with this underlying meaning), and all of a sudden it becomes the company's issue to prove it is not in control if it doesn't want to pay taxes. Just like it is for your "real person" taxpayer.

rprasad 15y ago
As I said, the "related regulations necessary to prevent abuse." The FBAR and foreign asset reporting requirements which you are referring to are the direct outgrowth of wealthy Americans using offshore accounts and investments to evade taxes. Prior to this abuse, investing in foreign assets or using offshore bank accounts was siginificantly less complex.
- beagle3 15y ago
  > related regulations necessary to prevent abuse. While we could argue about the merits of FBAR in preventing said abuse (apparently, the IRS and treasury do not believe it is useful given the recent FATCA upgrade it got), I don't want to go there. Your statement: > (1) The tax system is very simple if you're not trying to game the system to minimize your tax burden. Is demonstrably wrong. e.g. naturalized citizens who still have some assets in their country of origin (or even natural born citizens who inherit such assets), are subject to complicated tax filing whether or not they try to game the system or minimize their taxes.