4 ms·

It will be very naive to believe adding IRS staff will help with that. It is far easier to audit W2 employees than dealing with mega corporations.

loeg 8mo ago
> It will be very naive to believe adding IRS staff will help with that. It is far easier to audit W2 employees than dealing with mega corporations. You're saying auditing megacorps is hard, but somehow more staff won't help? I don't buy it.
- pimlottc 8mo ago
  I think they are suggesting the lack of political will to go after big companies is the bigger problem
- up2isomorphism 8mo ago
  Of course it won’t help. If you have an audit target to meet you want target meta? This exactly why ICE agents tends to target illegal immigrants that actually get a job and contribute to the society instead of criminals. Because the former are easy targets. Also fundamentally the tax law in the US are intrinsically favor capital owners, especially large corporations, adding more IRS agents only cost more tax payer’s money and give regular people more headaches.
  - loeg 8mo ago
    > If you have an audit target to meet you want target meta? I don't believe the approach the IRS takes is to set targets and only audit the lowest hanging fruit up to some target. They have different sub-organizations pursuing different goals, and some sort of vision about fairness that means going after tough cases. > This exactly why ICE agents tends to target illegal immigrants that actually get a job and contribute to the society instead of criminals. Because the former are easy targets. This is completely orthogonal, but also untrue. It's way easier to go after criminals, as long as states cooperate. The recent Trumpian ICE is more expensive and less effective than earlier regimes. > adding more IRS agents only cost more tax payer’s money and give regular people more headaches. Many, many regular people underpay the taxes they owe. Additional IRS agents help close the gap between taxes owed and taxes paid, at a cost lower than the additional revenue. Your argument is just "individual tax cheats should be able to get away with it," which I can't agree with.
- AnthonyMouse 8mo ago
  > You're saying auditing megacorps is hard, but somehow more staff won't help? I don't buy it. It's not so much that it's hard, it's that it has a lower return on investment, because the IRS gets money from finding mistakes or intentional fraud. Megacorps have entire legal teams dedicated to preventing those things from happening, while lowering their taxes by finding lawful ways of reducing their taxes to almost nothing by pouring over the unfathomable complexity of the tax code to find obscure credits or chain together the right sequence of things so their profits end up in a jurisdiction where they're not taxed. If you audit them you spend an enormous amount of resources because their accounts are so complicated and then only get money if they screwed up, which they're less likely to have done than someone with fewer lawyers, and even then it will typically be something like you found a credit they weren't allowed to take and they owe $50,000 but the thing where they have a hundred billion in revenue and 0.2% of that in taxable profit was all by the book. Meanwhile smaller entities are far more likely to have screwed up because they have fewer resources to navigate the complexity of the tax code, and their accounts are less complicated, which makes it easier for the IRS to find mistakes and therefore get money. So if you give the IRS more resources and tell them to do audits to maximize recovery, those are the people they audit. But that also involves auditing a ton of individuals and small businesses who didn't do anything wrong in order to find the ones that did, and they rightfully hate that because nobody is paying them for the actual costs of the audit where the IRS found nothing, which is why they keep lobbying to stop the IRS from getting more resources to do that to them. And if the IRS had to pay the taxpayer's side of the audit costs then their "recovery efficiency rate" would go way down.
  - bdangubic 8mo ago
    > It's not so much that it's hard, it's that it has a lower return on investment, because the IRS gets money from finding mistakes or intentional fraud.... Isn't this exactly what all megacorps are hoping for everyone thinks? I am not saying that you are wrong but these megacorps are some of the most evil the Civilization has ever seen (see Meta) and now you and I are hired as tax attorneys - pretty soon (if not right away) one of us will go "this shit's very much so illegal but who is actually going to audit us? - the answer, per your comment is basically no one because we think these megacorps and their lawyers are there to play by the book...
kccqzy 8mo ago
It is very naïve to think adding staff won’t help. Just look at what the IRS did before staff was cut; they investigated Microsoft aggressively and announced $29 billion in back taxes for 2004 to 2013, plus penalties and interest.
- AnthonyMouse 8mo ago
  $29B over ten years is an annual amount of less than 1% of Microsoft's current annual revenue. Meanwhile the company is appealing it so the government hasn't actually won anything yet (but is incurring additional costs), and on top of that it means there is now going to be a court decision about how this works, which benefits the companies wanting to do it by clarifying the law so that even if they lose the courts will have told them what they need to do differently next time in order to win. Of course, if they win then it's even better for them because then they can just keep doing what they were doing before. The actual problem is that "transfer pricing" is inherently ambiguous and subject to manipulation but it would take structural legislative changes to the tax code (e.g. tax corporations using something other than corporate income tax) to take it out of play.
  - loeg 8mo ago
    The goal of the IRS is to enforce payers paying the correct amount, not to like, extract some huge fraction of companies' annual revenue. If that's less than 1%, but it is net additional revenue for the Treasury, great.
    - AnthonyMouse 8mo ago
      The problem with transfer pricing is that there is no correct amount. We maintain this conceit that there is a sufficiently exact "fair market value" for transfers between subsidiaries in different jurisdictions and therefore we can calculate how much of a company's profits are attributable to each one for tax purposes. Meanwhile the bulk of Microsoft's profits in the years in question were attributable to global market power downstream of anti-competitive practices. If they had engaged their US workers through a staffing firm instead of employing them directly, would the staffing firm have made billions of dollars? No way. If they engaged an external marketing firm to handle enterprise sales in Europe, would the marketing firm have ended up with the lion's share of their profits? Not bloody likely. The factory in Puerto Rico where they stamp the CDs is just as valid (i.e. just as farfetched) as any of the others because it obviously wasn't any of them. It was the fact that zillions of companies and individuals were locked into Windows and Office, which isn't something that exists in a specific jurisdiction. Microsoft is presumably going to argue that the small operation in Puerto Rico was the entity that held ownership of their copyrights, which really is (via the anti-competitive practices) the thing responsible for nearly all of their profits. That aggravates the IRS because it's easy to move into any jurisdiction you want, which would make them want to argue that it's ridiculous for a small CD factory to be responsible for billions in profits, and it is ridiculous, but that's the end result of taxing "profit" when the thing that generates the profit is so easy to move. The ridiculous outcome is the result of a tax code that imposes a method of taxation which is inherently subject to such arbitrary manipulation. I mean, serious question: Suppose assigning that much to Puerto Rico is nonsensical. Microsoft has offices on six continents. What's the IRS case that the profit should then be assigned to the US in the alternative rather than anywhere else in the world? If you take that into court, the judge then has to maintain the facade that people are being asked to do something serious instead of something capricious and incoherent. Then someone will win based on a justification that will have been made up after the fact and either the IRS will have wasted a lot of taxpayer money in order to lose, or they'll have wasted a lot of taxpayer money they still shouldn't have had to spend because the law shouldn't be this ambiguous, in order to extract a small minority of the money that multinational companies didn't pay when purely domestic ones did. IRS enforcement is a hopeless tool for that. "Net additional revenue" is not only not guaranteed, it's a false dichotomy. The real way you get them to pay the same amount as other companies is by changing to a method of taxation that isn't subject to transfer pricing.

loeg 8mo ago

> It will be very naive to believe adding IRS staff will help with that. It is far easier to audit W2 employees than dealing with mega corporations. You're saying auditing megacorps is hard, but somehow more staff won't help? I don't buy it.

pimlottc 8mo ago
I think they are suggesting the lack of political will to go after big companies is the bigger problem
up2isomorphism 8mo ago
Of course it won’t help. If you have an audit target to meet you want target meta? This exactly why ICE agents tends to target illegal immigrants that actually get a job and contribute to the society instead of criminals. Because the former are easy targets. Also fundamentally the tax law in the US are intrinsically favor capital owners, especially large corporations, adding more IRS agents only cost more tax payer’s money and give regular people more headaches.
- loeg 8mo ago
  > If you have an audit target to meet you want target meta? I don't believe the approach the IRS takes is to set targets and only audit the lowest hanging fruit up to some target. They have different sub-organizations pursuing different goals, and some sort of vision about fairness that means going after tough cases. > This exactly why ICE agents tends to target illegal immigrants that actually get a job and contribute to the society instead of criminals. Because the former are easy targets. This is completely orthogonal, but also untrue. It's way easier to go after criminals, as long as states cooperate. The recent Trumpian ICE is more expensive and less effective than earlier regimes. > adding more IRS agents only cost more tax payer’s money and give regular people more headaches. Many, many regular people underpay the taxes they owe. Additional IRS agents help close the gap between taxes owed and taxes paid, at a cost lower than the additional revenue. Your argument is just "individual tax cheats should be able to get away with it," which I can't agree with.
AnthonyMouse 8mo ago
> You're saying auditing megacorps is hard, but somehow more staff won't help? I don't buy it. It's not so much that it's hard, it's that it has a lower return on investment, because the IRS gets money from finding mistakes or intentional fraud. Megacorps have entire legal teams dedicated to preventing those things from happening, while lowering their taxes by finding lawful ways of reducing their taxes to almost nothing by pouring over the unfathomable complexity of the tax code to find obscure credits or chain together the right sequence of things so their profits end up in a jurisdiction where they're not taxed. If you audit them you spend an enormous amount of resources because their accounts are so complicated and then only get money if they screwed up, which they're less likely to have done than someone with fewer lawyers, and even then it will typically be something like you found a credit they weren't allowed to take and they owe $50,000 but the thing where they have a hundred billion in revenue and 0.2% of that in taxable profit was all by the book. Meanwhile smaller entities are far more likely to have screwed up because they have fewer resources to navigate the complexity of the tax code, and their accounts are less complicated, which makes it easier for the IRS to find mistakes and therefore get money. So if you give the IRS more resources and tell them to do audits to maximize recovery, those are the people they audit. But that also involves auditing a ton of individuals and small businesses who didn't do anything wrong in order to find the ones that did, and they rightfully hate that because nobody is paying them for the actual costs of the audit where the IRS found nothing, which is why they keep lobbying to stop the IRS from getting more resources to do that to them. And if the IRS had to pay the taxpayer's side of the audit costs then their "recovery efficiency rate" would go way down.
- bdangubic 8mo ago
  > It's not so much that it's hard, it's that it has a lower return on investment, because the IRS gets money from finding mistakes or intentional fraud.... Isn't this exactly what all megacorps are hoping for everyone thinks? I am not saying that you are wrong but these megacorps are some of the most evil the Civilization has ever seen (see Meta) and now you and I are hired as tax attorneys - pretty soon (if not right away) one of us will go "this shit's very much so illegal but who is actually going to audit us? - the answer, per your comment is basically no one because we think these megacorps and their lawyers are there to play by the book...

kccqzy 8mo ago

It is very naïve to think adding staff won’t help. Just look at what the IRS did before staff was cut; they investigated Microsoft aggressively and announced $29 billion in back taxes for 2004 to 2013, plus penalties and interest.

AnthonyMouse 8mo ago
$29B over ten years is an annual amount of less than 1% of Microsoft's current annual revenue. Meanwhile the company is appealing it so the government hasn't actually won anything yet (but is incurring additional costs), and on top of that it means there is now going to be a court decision about how this works, which benefits the companies wanting to do it by clarifying the law so that even if they lose the courts will have told them what they need to do differently next time in order to win. Of course, if they win then it's even better for them because then they can just keep doing what they were doing before. The actual problem is that "transfer pricing" is inherently ambiguous and subject to manipulation but it would take structural legislative changes to the tax code (e.g. tax corporations using something other than corporate income tax) to take it out of play.
- loeg 8mo ago
  The goal of the IRS is to enforce payers paying the correct amount, not to like, extract some huge fraction of companies' annual revenue. If that's less than 1%, but it is net additional revenue for the Treasury, great.
  - AnthonyMouse 8mo ago
    The problem with transfer pricing is that there is no correct amount. We maintain this conceit that there is a sufficiently exact "fair market value" for transfers between subsidiaries in different jurisdictions and therefore we can calculate how much of a company's profits are attributable to each one for tax purposes. Meanwhile the bulk of Microsoft's profits in the years in question were attributable to global market power downstream of anti-competitive practices. If they had engaged their US workers through a staffing firm instead of employing them directly, would the staffing firm have made billions of dollars? No way. If they engaged an external marketing firm to handle enterprise sales in Europe, would the marketing firm have ended up with the lion's share of their profits? Not bloody likely. The factory in Puerto Rico where they stamp the CDs is just as valid (i.e. just as farfetched) as any of the others because it obviously wasn't any of them. It was the fact that zillions of companies and individuals were locked into Windows and Office, which isn't something that exists in a specific jurisdiction. Microsoft is presumably going to argue that the small operation in Puerto Rico was the entity that held ownership of their copyrights, which really is (via the anti-competitive practices) the thing responsible for nearly all of their profits. That aggravates the IRS because it's easy to move into any jurisdiction you want, which would make them want to argue that it's ridiculous for a small CD factory to be responsible for billions in profits, and it is ridiculous, but that's the end result of taxing "profit" when the thing that generates the profit is so easy to move. The ridiculous outcome is the result of a tax code that imposes a method of taxation which is inherently subject to such arbitrary manipulation. I mean, serious question: Suppose assigning that much to Puerto Rico is nonsensical. Microsoft has offices on six continents. What's the IRS case that the profit should then be assigned to the US in the alternative rather than anywhere else in the world? If you take that into court, the judge then has to maintain the facade that people are being asked to do something serious instead of something capricious and incoherent. Then someone will win based on a justification that will have been made up after the fact and either the IRS will have wasted a lot of taxpayer money in order to lose, or they'll have wasted a lot of taxpayer money they still shouldn't have had to spend because the law shouldn't be this ambiguous, in order to extract a small minority of the money that multinational companies didn't pay when purely domestic ones did. IRS enforcement is a hopeless tool for that. "Net additional revenue" is not only not guaranteed, it's a false dichotomy. The real way you get them to pay the same amount as other companies is by changing to a method of taxation that isn't subject to transfer pricing.