Hacker News Reader

Comment by styx31 | Hacker News Reader

What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate.

So, what? The tax rate of a country is now "artificial", because it will never be applied to all revenues from all companies, because the higher profiles will be able to evade a part of it.

If governments want to reclaim more, they could raise up the tax rate, considering that the biggest players will only pay a fragment of it. But the small companies, the one that can only follow the rules? They are screwed.

All companies should be considered equals regarding the tax system. It is simply not the case when such schemes are used.

Edit: exactly the same point of view as jitbit: https://news.ycombinator.com/item?id=15651457

View on HN

These companies evading taxes are responsible for increased hardship and suffering of a society as well, leeching off of the nations they exist in, and being able to outcompete the honest organizations and people in them. The damages are far greater than the tax avoided. "They are doing it too" isn't a valid excuse either.

They aren't, for the most part, doing anything illegal though. They are using the existing laws to their best advantage.

The fix for this can't be trying to appeal to their morals. It would have to be something else that just limits the legal choices.

Edit: If you disagree, are you saying that shaming them into not doing this solely on some moral compass is the right fix? Does that scale?

You're acting like laws are an unmoving fundamental property of the universe. In reality these very companies have reshaped the laws to their own advantage. Companies that lobby on tax policy demonstrably pay lower taxes; see e.g., https://sunlightfoundation.com/2012/04/16/lobby-more-pay-les...

Watch Chomsky's Requiem for an American Dream if you want a great analysis of the cyclical nature of corporate power being further and further entrenched as they gain more power to write the laws that benefit them.

Chomsky's solution? Moar state !

This is absolutely the key point here.

The reason large corporations have more power is ... they have more power. They can afford to not only find loopholes, but also exploit ones with higher barrier-to-entry, AND lobby for additional ones.

Many corporations probably DON'T want loopholes that are "too easy" because then smaller businesses would be able to use them as well and become potential competitors. Kind of like how Comcast sues any potential competitor into oblivion using frivolous lawsuits. The cost to entry into the ISP market? The price of a good legal defense that can defeat Comcast. (Read: Nothing to do with the actual hardware/manpower)

I wonder how many of these comments are made by Apple's legal or PR team posing as normal people... Certainly they have the reach and resources for this kind of thing too. Rarely do we get to have a real public discussion on such topics without adulteration by these parties with personal motivations and associated power.

Your comment basically breaks HN guidelines by calling into question the motivations of all commenters that disagree with you. Some of us simply believe that taxing corporations makes little sense because companies set their pricing with applicable taxes in mind. Ultimately, only people pay taxes, so only people that have not fully considered the implications believe they are "sticking it to the man," when in reality the government is abstracting the cost of these taxes on the people.

It's simply a consumption tax that people do not realize they are paying because it is built into the products citizens are buying.

Be serious.

(1) You really think Apple cares about the discussions on one thread of Hacker News ?

(2) Even if they did how would it be an effective use of resources. It may shift a handful of people at most. When instead that time could be spent speaking with journalists or writing press releases that could actually shift a lot of people.

(3) It's a slippery slope to keep calling everyone you disagree with shills or employees of a company. Especially since on an anonymous forum they could never be able to defend themselves.

The fix can certainly involve appealing to morals and human responsibility. A company is, after all, just a group of people. This should be a very strong tactic considering how liberal Silicon Valley is. The major players preach constantly about progressive ideals, yet fail to do more than the minimum when push comes to shove. My business partner and I purposefully pay normal taxes, avoiding accountants' crazy tax reduction schemes, because we think it's the right thing to do. We're a tiny speck compared to Apple, but the principle still applies. If the big players made it the norm, their investors would suck it up and deal with it.

>The fix can certainly involve appealing to morals and human responsibility...

Are you really suggesting the management and board of every major company in the world should meet to decide how much tax they should choose to pay each year? Even if they did, where should they choose to pay it? Should Apple Pay more tax in China where the phones are assembled? In America where they are designed? In the countries where they are sold? What criteria do they use to decide?

That might conceivably work for one company, on some tax issues, for a while. These are companies that operate simultaneously in multiple countries with different tax systems. They can’t be expected to choose to pay more tax here or there.

I do agree these companies pay too little tax, but expecting them to pay more voluntarily is never going to work.

My (ultra-simplistic) idea would to only tax land and VAT. Abolish all other taxes.

Unfortunately, governments like fine-grained taxes because it gives them the illusion of control.

"My business partner and I purposefully pay normal taxes, avoiding accountants' crazy tax reduction schemes, because we think it's the right thing to do. We're a tiny speck compared to Apple, but the principle still applies. If the big players made it the norm, their investors would suck it up and deal with it."

I suspect that you and your partner have significantly more control over your enterprise than the officer of a public company does though. If you didn't your investors wouldn't suck it up, they would do as they see fit, which may be agree with your position or may be replace you.

Public companies are controlled by their share price more than they like to admit. Even if you are like Zuck and maintain complete management control of your public company, if that share price takes a huge hit it becomes very hard to attract and maintain talent/future investment/etc. Everyone has some authority to answer to.

Which is why I think the current scheme of publicly traded companies at base is flawed. Earlier this week someone posted something along the lines of, once you become public your product is stock, not whatever you produce.

I think we ought to use the power of the executive to straight up revoke charters to businesses that are American that engage in these schemes. Something I learned about while reading about the British and Dutch east India companies.

> if that share price takes a huge hit it becomes very hard to attract and maintain talent/future investment/etc.

OTOH, by paying taxes you make sure there is a talent pool to recruit from in the future.

If all the air molecules in a box spontaneously moved to one side of it at the same time, you could defeat entropy. This is no more likely to happen than the big players making it the norm to avoid tax reduction schemes.

In a box filled with air, molecules moving to one side leave a gap which results in increased pressure for molecules to move the other way. The same is true of big companies and taxes. You might be able to find some companies who would do this, and investors who prefer money to vague morality (and there's a lot of them) would abandon those companies and put more money into companies who avoid taxes as much as legally possible.

If we want to stop this behavior, the solution must be to make it illegal. Appealing to morality isn't going to get it done.

Consider that many industries literally kill people by poisoning the air or water. Not killing people as a moral principle is a lot more universally held than the idea of paying more tax than you're legally required to, but moral pressure didn't work there. Laws did.

Literally anything you do at scale will kill people unless your factories are 100% in equilibrium with nature.

That is where you are wrong. A cannot be thought of as a "group of people". A company is a legal entity, which can do absolutely ANYTHING within the law. It, the corporation, will by default do everything in its power to maximize shareholder value and that is it.

Beyond that, there's Corporate Social Responsibility, but of course that is downstream from the corporation's main objective, which is to maximize profits.

The corporation is to be understood as an "individual" and is legally so, but one which has limited legal liability.

Once upon a time, corporations were chartered, to better serve the public good. Our (USA) founding fathers suffered under the yoke of corporations (eg East India Company, Boston Tea Party) and were wise to limit their power.

Then some yahoo slipped in some legal precedent declaring corporations were legally natural persons, weaponizing the 14th amendment. And here we are today pretending that corporations are super persons, with more rights than actual people, but none of those profit sapping responsibilities.

Can you seriously look at the state of politics and business and tax evasion in 2017 and really believe most executives, even in Silicon Valley, are susceptible to "moral persuasion"?

If they were, they would already be acting in the way you think they should.

IANAL but it is my understanding that if those tax reduction schemes are legal many companies are legally bound by their stock holders to exploit them, or else be found negligent in their duties.

This is going to be tough. I think a big advantage of something like a board or a committee is the diffusion of responsibility. I'm not going so far as to say these constructions are immoral, but they definitely make it easier for their members to distance themselves from their decisions.

What management wants is not what shareholders want.

What you’re saying is impossible and the law needs to fix this, not appeal to emotion.

Could shareholders sue if Apple “opted out” of their legal tax avoidance strategy? We are talking about some very material money here, not an executive bonus pool sized chunk of cash, but like national GDP sized money.

It would be illegal and unethical for Apple to pay more taxes than it owes. That money doesn’t belong to Tim Cook, but to Apple shareholders.

A company is not just a group of people. At least, any publicly-traded company has a legal obligation to it's shareholders. The job of the Board of Directors is to ensure that the company is performing as optimally as possible to earn as much as possible for the shareholders. Morals aren't a part of the equation, it's all exploiting the confines of the law.

> They aren't, for the most part, doing anything illegal though.

OK, but that doesn't really matter. Legality and morality diverge further the higher up you go in scale.

There was a thread on here a month ago about how, at the size of the Moon, solids don't behave like solids anymore. They behave more like fluids. The Moon wouldn't shatter into bits if you "broke" it, it would just stick together. It is a good analogy for law: the bigger you go, the more malleable and "un-law like" it is. It becomes a fluid.

Multinationals can bend law. They can influence it. Law bends around their gravitational pull.

(edit: I think you meant your comment slightly differently to what I interpreted, I'll leave it up.)

I think they are often engaged in illegal activities but it is difficult to prove it. A company and its subsidiaries are different entities and when you do an IP transfer between them where a huge set of patent and trademark is exchanged for 1 euros and then used back for millions, one of the company has been wronged. Try to do the same shenanigan with a LTD and yourself and you will very fast see what the IRS (or equivalent) think of it.

A company is just a legal construction but we let people transgress the legal constrains that should rule its behavior.

Maybe the problem is in trying at all to tax something you can't pin down, like this IP transfer between (say) Apple Germany and Apple US. I mean what should its value be? Clearly Apple Germany is nothing at all like an independent company importing phones from China to sell. Much of what they sell is the software, the image, the brand... these things don't have open-market prices. So who gets to decide what their price is? Apple's accountant? Some bureaucrat?

The much simpler solution is not to bother taxing these things you can't see. Why don't we set the corporate profit tax to zero, and then this whole argument goes away.

Tax is collected every time they sell a computer in Germany. Tax is collected every time they employ someone. Tax is collected every time someone sells shares and profits. These seem like good things to tax, as they involve actual people and take place unambiguously in particular countries. If you'd like to collect more tax, then by all means adjust the rates.

Here's a solution: if you sell your IP to someone else, that other person has to be independent.

This is done a lot in anti-trust settlements. You can sell your IP to Apple Germany, but then Apple Germany is independent and could go sell that/licence that however they see fit. Including selling to competitors of Apple US.

If you're transferring IP but the receiving organisation is basically under your control.... are you really transferring anything?

This would mean that immaterial things won't have a worth in the book keeping way and can't be billed. In simple terms what happens is that Apple Europe, Inc. has to pay a lot for the license to use the Apple logo and trademark to Apple Paradise, Inc. Thus Apple Europe, Inc. doesn't have profits, while Apple Paradise, Inc. has all the profits. Now the value of the logo and trademark are artificial ...

What's needed are international agreements how to handle those licenses, that you can't simply push them to tax heavens, but tax has to be paid where they are created or used or whatever.

This is just downright false. There is an entire field inside the tax world called transfer pricing. You cannot just transfer significant IP to a foreign entity for $1 and expect that you will only need to pay tax on that $1. The IRS will come up with its own determination of what the value of the transferred asset is if it disagrees with your valuation and assess taxes based upon that. Now companies and the IRS frequently disagree on what the value should be and do end up in court. Law firms have teams of in-house economists to build defensible models of what the value of the transferred asset should be. Additionally the OECD has issued significant guidance on the topic.

If we had a way to have a realistic transfer pricing we wouldn't have the result that we have now where systematically groups make the biggest profits in countries with low taxation. If we look Apple group, their most productive employee are all based in small island nations. So on an Iphone, conceived in the US, made in china, sold in EU the biggest share of the profits is made in Bermuda or tax heaven?

This is the key point that is so often missed. Getting angry at Apple et al for following their incentives rationally is silly.

I'd love to see journalists doing a better job of explaining the failures of the tax system rather than peddling pointless outrage, but I suppose that they too are following their incentives rationally; outrage gets more clicks.

It's not silly. It's the first step in a long chain of events that hopefully will end up with a better tax code. Giving companies that do this bad PR incentivizes companies towards reporting loopholes instead of exploiting them.

Journalists already do try and explain the failures of the tax system. For example, check out this graphic: http://www.nytimes.com/interactive/2012/04/28/business/Doubl...

The tax code is complicated and boring and people would much rather read articles with outrage directed specifically at companies.

Should I say that you're silly for getting angry at journalists for following their incentives rationally?

I agree that I'm being a little silly, it's what my last line hinted at! I do think outrage is better directed at our legislators than at corporations though, but I don't hold out hope for substantive change either way.

I don't think outrage is better directed at legislators until there is some consensus on what would be changes to the tax code that would help alleviate this problem. I think we're a couple of steps from that and I see no reason why we shouldn't get angry at the large companies until they help us with that step. After all: they are the experts on loopholes and tax evasion!

Being angry at Apple can turn it into a value to behave "nice" If consumers decide to buy products of companies which don't play such tricks then we get the free market way of changing the behavior of those companies (... while it's unlikely to really have impact as along as everybody does it and consumers want cheap products)

>Getting angry at Apple et al for following their incentives rationally is silly.

That logic doesn't work because people do get mad at things they view as wrong even if they are currently legal (or were legal when they happened). In this case, people thing Apple has done wrong regardless of the legality of the action.

Agreed, the only sane solution to this is a massive overhaul of international tax law. Shaming companies just isn't a scalable solution in any way. There's a massive opposition against this both from multinationals and tax haven countries though - this article is a good way to start making it obvious to normal citizens that this issue should be on the ballot.

The tax haven countries should be subjected to overwhelming, crushing sanctions. They deserve to be international pariahs.

What is a "tax haven" country? You realise that the USA has states that act as significant tax havens in some situations, do you? Is Ireland a "tax haven" because it has low corp tax rates? The EU certainly thinks so but the Irish disagree.

It's tough when the "only sane solution" also happens to be a enormous task to even begin talking about. I agree with you, but I also struggling to imagine a time when that overhaul could take place.

I agree, it's a massive undertaking and getting support for something like that is really, really hard. The way I see it, all of that anti-globalism rage that is currently being directed toward foreigners really ought to be directed toward fixing this, since this would actually help (e.g. have more money for a wellfare system to handle unemployment from outsourcing and automation). But unfortunately it's much easier directing rage toward 'weird people with other skin tones and religion' than something abstract like a broken international tax system.

That simply won't work if there's even one country (like the known tax haven islands) that don't abide by it. Unless international tax laws start charging taxes for every penny that crosses a border, things like that will keep happening. There's a huge financial incentive for small countries to become tax havens, they take a relatively tiny amount of money, which for them multiplies their GDP.

But will people travel to this tax haven to buy their computers? Will Apple's employees all move there to write software? Nope.

What we mean by Apple operating in (say) Germany is these things: they make sales there, and they have employees there.

Where the letterhead says they're incorporated... isn't this just an implementation detail? It's like asking where their datacenter is located. It's in the cloud, who cares? It seems to me that making the tax laws care about this is crazy... why do we this?

Why not simply tax the things which cannot move, transactions involving real people who live in particular places?

Eliminating corporate income taxes would be the best way to start, given it would benefit society immensely.

How would it benefit society? Reduced state income that could be used to invest in infrastructure and people? Will the companies invest that money with society's interest at best better than the govt would? I don't think so. What do Apple do with their money? They horde it, waiting for a windfall to bring it back to the States and pay low/no corporate tax on the repatriated profits.

But overhaul can't happen like "now". It need some initial impulse, an outrage bigger than average etc. Apple case may help this.

That's a good point. I'm not dismissing the PR and awareness value of raging about Apple.

Just hoping that the fix isn't perceived as "going after apple". Going after existing law, tax havens, etc, is more productive.

"They aren't, for the most part, doing anything illegal though. They are using the existing laws to their best advantage."

They and their cronies write the laws.

Where governments aren't amazingly corrupt and can just bribed outright, corporations spend millions of dollars on lobbyists to get favorable legislation, and corporate exec and government official positions are revolving doors where the one goes to work for the other all the time and the one serves the interests of the other.

When government officials retire they regularly get cushy, high paying jobs at the very companies they favored while in office. They also regularly invest in the very companies their laws and policies favor.

Not to mention that high government positions and corporate executive positions are both staffed by the wealthy who look after the interests of the wealthy: to stay wealthy and become even wealthier.

As Alan Moore observed recently, "while in the West after many years of arduous struggle we are now allowed to elect women, non-white people and even, surely at least in theory, people of openly alternative sexualities, I am relatively certain that we will never be allowed to elect a man or woman of any race or persuasion who is poor."[1]

[1] - https://slovobooks.wordpress.com/2014/01/09/last-alan-moore-...

Furthermore, the nature of competition means "moral" companies, moral defined loosely here as those who pay more taxes than legally required, are at a disadvantage to "immoral" companies who pay the legal minimum. It's a prisoner's dilemma for executives that really do want to do right by their communities.

The solution is to fix the tax code problem. If the moral "rules" don't apply to _everyone_ then they are worthless.

it’s immoral for corporations to pay extra taxes. Those profits aren’t theirs, they belong to shareholders.

There are large companies which do take a moral stance on this and pay taxes as normal, so it is certainly a valid strategy. An example is bet365 in the UK who (according to the little knowledge I have, I used to work there) don't engage in tax avoidance schemes. The irony is that a gambling company takes a moral stance on tax whereas these big Silicon Valley companies who try to portray a liberal image are the most aggressive tax dodgers.

Corporations aren't people (dumb legal decisions to the contrary). "Shaming" doesn't really work for corporations. The solution would have to be tighter tax codes.

But our congress is highly dependent on campaign contributions, and corporations (and the individuals they make rich) can contribute. The result is that the tax code tends to be skewed in various ways.

If we don't solve campaign financing, other problems are probably hopeless.

> Edit: If you disagree, are you saying that shaming them into not doing this solely on some moral compass is the right fix? Does that scale?

Legislation doesn't do anything if actors don't see a moral responsibility to abide by it. Case in point: There are laws against murder but murder still happens.

Does that mean we need better laws in regards to murder? Imho it rather means that some parts of society still have a "moral debt" in recognizing the value of human life.

Same pretty much applies to paying taxes. For some people it's something they do out of a sense of responsibility to the society they live in, to others it's an unfair burden they need to evade at all costs.

And because the latter behavior isn't even that criminalized, there are large sectors of society where nobody feels a moral responsibility to pay taxes. Heck in many of these circles people actually boast about how much taxes they evaded/how much money they got out of the government. In that regard, there might be quite a cultural angle to this whole issue.

That analogy is hard for me to follow. Again, for the most part, no laws are being broken.

One that's probably more relatable is itemized deductions for US taxpayers. I can deduct the property taxes and mortgage interest for my house from my Federal income tax. Do people take advantage of that and deduct the costs for ridiculous mansions? Sure. Shaming them for it is silly. If that exemption isn't fair, then put a cap on it.

> That analogy is hard for me to follow. Again, for the most part, no laws are being broken.

The analogy was more to demonstrate that harsher regulation ain't always the only solution. And with something as abstract as "taxation" I think it's usually a rather bad approach because new regulations will only result in new loopholes being created, it's an endless cat&mouse game wasting a lot of resources for everybody involved.

That's why I mentioned that "moral debt". Across the whole world there exists lots of behavior that's technically not "illegal", but still frowned upon by large parts of societies, tax evasion rates among them.

Imho if you want people to follow the "rules of society", and not use every chance they get to circumvent financial legislation (which is what a lot of tax evasion effectively boils down to), then you first need to convince them that paying taxes isn't just a burden to them but also of use to them.

> I can deduct the property taxes and mortgage interest for my house from my Federal income tax.

If that's an easy and obvious process, open and evident to everybody who'd it be relevant to, then that's a-okay. Sadly that often ain't the case which is in large parts the result of the above-mentioned cat&mouse game.

I realize that my whole point might come across naive in a kinda "if people were just good we wouldn't need laws" way, but that's not at all my intention. I just think there's a real cultural rift here in terms of how seriously some people take their responsibilities towards the society they are living in, historically that's never been something you could fix through "legislation".

Laws are written by people ( sadly by lawyers paid by these companies in this case ), just change the laws.

And by trying to do this we'll see creatures come out of the woodwork and previously virtue signaling personalities going strangely MIA.

One does not simply change the laws, just like you're indicating. You need a majority vote in a government or international thing to change laws, and those are easily influenced if you have more money than the GDP of many countries.

Actually that makes me wonder when we'll see the first companies starting their own countries.

Corporate income taxes are already too high, it’s better for society if they were zero.

> The fix for this can't be trying to appeal to their morals.

A public corporation doesn't have morals. It isn't a thing that thinks and feels, it's a social construct designed single-mindedly around the creation and accumulation of wealth.

You cannot shame one of these companies. You can enforce the law against them, or you can expose them to such bad PR that they change their ways.

The only "morals" internal to a corporation are their fiduciary duty to shareholders. We either need to fundamentally change the nature of corporations, or accept this and adjust our laws to compensate for immoral agents.

The more laws available - the easier it is to find a loophole or create a scheme for evasion. Look at tons of tax lawyers and firms thriving on difficult and ever growing laws. Full tax rate is only for loosers who can't hire tax evasion lawyers.

The only way froward is to cut regulation - to be understandable and as equally applied as possible.

I don’t necessarily believe it will work to beg them to show fairer behavior.

But then, the issue that many businesses and corporations don’t consider fairness and moral as factor in their decisions and behavior is an urgent one.

I think it’s a big problem that leaders of a company might even be sued by shareholders for taking a morally good decision (as long as the other option is just bad in terms if moral, but still legal) that leads to even a slight loss in financial gain for the company and shareholders.

This goes for such tax avoiding schemes but also for any other decision with effects on society and nature. Being fair and sustainable in society, social and environmental aspects simply is not a goal for any company that way.

Legal and yet unfair.

Shaming worked pushing dolphin safe fishing practices, for example.

Laws just codify society's morals. Sometimes by leading, mostly by lagging behind social norms.

Its not an accident that these loop holes exist. And companies like Deloitte and Pricewaterhouse are happy to consult companies and help them save taxes.

Some of these accounting and financial advisory companies are also large campaign contributers with revolving doors with relevant government departments.

There is an inevitability about it, but many are either on koolaid or demonstrate an intentional naivete.

We can certainly blame companies for using loopholes secretly, rather than doing it openly, pointing out the problem, and working to get the loopholes fixed.

If the company position is that the right fix is to plug the loopholes then by all means be consistent about it.

They don't break a letter of the law (probably), but they break spirit of the law. Laws do not exist like a puzzle challenge to be beaten by clever lawyers with a reward being factual exemption from the law. They are usually intended for everyone.

Most of the criticism (of Nike and Apple, for instance) isn't for breaking even the spirit of the law.

Most often the companies are acting precisely as the law is intended to work, and criticism is based on a misunderstanding of what is turnover and what is profit, and how taxes should be calculated. Very commonly the complaint is that Nike (for instance) pays no corporate income tax to a country even though it sells a lot of goods there. This is a misunderstanding: the vehicle for collecting sales-based taxes is VAT, not corporate income tax. Corporate income tax is paid where the company operates.

A major thing people don't seem to understand is that within EU, it is perfectly OK for a company operating in one EU country to sell goods and services to another country. Free movement of goods and capital.

The very foundation of EU which infuriates people.

I have to disagree here : based in France, I sometimes do business in Belgium and I have to declare and pay VAT to Belgium for sales made there, while deducing the taxes paid locally to Belgium counterparts. That's the spirit of the law. But when you build an artificial business construct whose sole aim is to move earnings from a country to another while creating an artificial debt within an entity in a business group, just not to pay taxes, I don't see how it can be described by anything other than "Breaking the spirit of the law". I do know this is legal, but that only respects the letter of the law, not the spirit of it. The spirit of the free movements of items and people in Europe is made to promote trade and sales, not to promote the movement of money in order to evade taxes (that's actually the spirit of the tax heaven territories).

In my view, the real problem when you do not respect the spirit of the law is that you do not respect the people themselves, even if you're not doing anything illegal. And I fear that some of those people, when they learn of another case like this one in 6 months, one year or two years, could consider using violence. In the past, several terrorist groups had targeted economic or corporate symbols (the Baader group for example), so we shouldn't forget histoire. These affairs will feed those enclined to follow that path again, but against what are now documented possibilities. That is why the states across the world need to act: it is not only about getting countries' money back, it is also to avoid future violence.

It's perfectly OK if that company actually operates in that country. It is not OK if the only presence they have is a mailbox and the actual act of operation is done somewhere else.

A taxation race to the bottom is not what the fundamental principles of the EU are about. At best they are an unwanted side-effect.

> Laws do not exist like a puzzle challenge to be beaten by clever lawyers

Uh, this is demonstrably, extraordinarily untrue.

It's obviously comedy but the sentiment remains valid, Bill Burr's response to "That's what the law says"

50 years ago the law said I could beat you with a mtop handle, didn't make it right.

I think this issue is hard to fix without a United Human Government. This is an incentive and coordination problem and global companies take advantage of it.

To really fix you'd have to have all countries coordinate on tax law which makes this a really hard problem to solve in our current world especially when a lot of companies with a lot of money are able to push for legislation that's in their best short-term interest, but not necessarily the best interest of the group.

Outside of that you get what we have currently which is a stable equilibrium of governments trying to write laws to create the incentives they want and companies hiring armies of accountants to avoid paying taxes (as well as pushing for legislation changes that benefit themselves).

http://slatestarcodex.com/2014/07/30/meditations-on-moloch/

> They aren't, for the most part, doing anything illegal though.

There are many cases where legal != moral, an that's the very point of the article.

It's too bad we can't legislate morality. As long as politics is in bed with corporate interests the bigger bank roll wins.

Legality != Morality

And if the laws aren't favorable enough, they can have the laws changed.

The more interesting fact is that if Tim Cook were to pay more taxes, he'd be fired by his shareholders. CEO's of public companies are supposed to increase profitability, not decrease it.

I bet you're one of them.

Small business owner. Less than 7 figures of revenue.

“They are doing it too” is legally a valid excuse. The way legal disputes get settled usually is based on the outcome of precedent legal cases and how they relate to the current case. Your moral outrage (and the outrage caused by paradise papers type reports) is just a failure to see the world for what it is. An ant can complain all day about the size of the mammoth, complain that it’s unfair that it’s got a fur coat or that it’s one step is equivalent to hundreds of ant steps, but this won’t change reality. This is how success works: if you do it for so long and in such a way comparable to Apple, you are able to have more leg room than other ants. My only criticism of Apple is that do portray themselves as very humble engineers that love designing beautiful products. Engineers who have any experience designing software and hardware products have a deep admiration for Apple as an organization, specifically because we know exactly how much work goes into a working product, moreso because Apple’s products, even though they are not perfect, show a high level of resiliency both in the market and in our day to day lives.

Admitting thus that at least some of the people and companies that hide their money in tax havens made their money in a legitimite way (we’ll get into this later), don’t you think they are entitled to try to save as much of it as they can? The author of the piece makes reference to the mostly public educational system which implies Apple has some social reaponsibility to give back to it’s country. How about the high salaries that Apple pays to its engineers? Isn’t this enough to show that they value craftmanship?

Oh well, guess we should stop all attempts at improving society guys. Apple can do it, so they should do it, and we should stop discussing the matter.

Like goddammit man, the moral outrage is not there because people fail to see the world the way it is. It's there precisely _because_ people can see the way it is now and it's fucked up.

And paying it's engineers a high salary is enough of a payback to society? Did that cover the roads they ship their goods on? The international Navy that protects their supply lines from overseas factories? The education system which produced their engineers? All the other inputs they rely on and externalities they offload?

No it didn't, because once you get rich you get your own set of rules. Paying back what you owe is for the proles

There's no failure on my part to see how the world is. Legally speaking, law is to be interpreted. In these cases of tax evasion, it's fairly obvious they're breaking the spirit of the law. Your entitlement argument is bizarre to me. They are entitled to save as much as they can, after they've paid their dues back to the society who helped support a more stable environment. In Canada for example, many health care costs are covered for every citizen - so businesses don't have to necessarily pay as high of wages to workers - they of course are partially paying for these health costs through taxes. Same with public transit and road systems their employees will use. Apple paying high salaries is an apples and oranges argument - likewise, they couldn't "afford" as high of salaries if they were paying proper taxes; of course they still could afford such high salaries because of their profits. Imagine how good Apple would look right now if they were one of the few massive companies who didn't avoid paying fair taxes? Especially since they can afford it.

But that's not how legal systems works. If you're caught running a red light, you can't argue that "many other people are doing it, too". Similarly, if a dozen cars run a red light at the same time, and only you are stopped, the best you can do is argue discrimination; you still broke the law, and you're still culpable, and it's the police's prerogative to catch whomever they can.

That's also not how legal precedent works. Legal precedents in the US are derived from court decisions, not whether something is occurring en masse. I'm not even sure why precedents work, given that there's no "case" here.

Your misplaced cynicism about moral outrage becomes more obvious if you replace tax evasion with something much worse, e.g. child labour or human trafficking, something which is in fact prevalent, though probably not within Apple's sphere. But the moral outrage exists because these papers expose something so blatantly immoral that people are genuinely surprised and dismayed at the sheer scale at which rich companies and people are stockpiling money in secret. We know human trafficking occurs every day, all over the world; if someone uncovers a big network of, say, politicans involved in this trafficking, aren't we right to be outraged? Is it a "failure to see the world for what it is" just because it's accepted that evil things happen? How blasé can one get?

Re "don't you think they are entitled to try to save as much of it as they can?", this confuses morality with legality. As David Mitchell eloquently points out [1], the current systems are effectively a tax on conscience. Taxes are traditionally designed to incentivize good behaviour (e.g. tax breaks on saved pensions, because that benefits both you and society), but the system currently incentivizes bad behaviour among the select few who have the means and lack of scruples to do it, penalizing those who lack the means and are conscientious about their taxes.

[1] https://www.youtube.com/watch?v=xc8epam4NyY

Other people are doing it too is NOT legally a valid excuse for anything.

Source: tax lawyer.

Precedent legal cases is the common law system in the former commonwealth countries and the US. The Napoleanic system is in-place in Germany and much of Europe.

How exactly are they inflicting all that harm, hardship and suffering? In my eyes, they are creating tremendous value every day while following every single law nations impose on them. They would risk everything otherwise.

You're throwing demagogic, populist accusations without a single shred of support. Is emotional discourse an acceptable replacement for the rational one?

And I suppose I could say you present no evidence or support of my being demagogic? These companies are breaking the spirit of the law. You know how it's common in agreements/contracts that it states both parties are acting in good faith? That's the same idea..

Maybe this video from the HMRC.gov.uk helps you to understand why evading tax is bad and it is better for all to pay the full tax ;)

https://www.youtube.com/watch?v=C3_VwZ-Cmac

Apple pays the full tax. It pays huge amounts of taxes in Germany.

... apple clearly evades tax in all markets in europe

http://europa.eu/rapid/press-release_IP-17-3702_en.htm

Well, that's not true: https://projekte.sueddeutsche.de/paradisepapers/politik/dear...

Just a nitpick but they are not "evading" taxes, which would be illegal.

The correct term would be "tax avoidance", which is legal (albeit ethically questionable).

So... Basically Apple is increasing the suffering by creating all those laptops and iphones? That is very difficult for me to grasp. Apple creates computers and phones which make peoples lives a lot better, and people are willing to pay for those. Why is the suffering increasing? I guess world would be a better place if apple would pay more taxes, but I'm pretty sure that world would be worse place without Apple, whether it pays taxes or not.

Apple cannot exist outside of the "ecosystem" of infrastructure and institutions maintained by the State, i.e. ordinary taxpayers. Good luck getting your iPhone without roads, or keeping it without a police force. Tax evading companies like Apple and Google justify it by claiming that they create value in a vacuum, so should keep all of it.

Or, maybe more directly to the point in this case, a communications regulator to control radio spectrum usage, in order to ensure that slices of spectrum are carved out for specific uses, and protected from excessive interference resulting from other uses.

Y'know, the regulation that makes the ubiquitous and reliable microwave, cellular, Wi-Fi, and Bluetooth communications that these companies' products rely on to be useful possible in the first place.

Police and roads aren't services provided to Apple. They're services provided to you. I've never once seen a corporation travelling down a road - has anyone else?

The only government services corporations specifically use re legal services like courts and patent offices. Those have fees attached and in the USA the PTO is actually a profit center, so tax is irrelevant.

There's no moral argument for taxing artificial social constructs like corporations.

Tee hee, do iPhones teleport all the way from China into your hand then?

Think about it this way, if I had an objectively better phone than the iPhone I would go out of business because Apple keeps more of their money in dishonest tax schemes. They hurt innovation. And that money is supposed to go to governments to use, which it doesn't, hampering the ability for others to thrive. Now there's is less competition

> I had an objectively better phone than the iPhone I would go out of business because Apple keeps more of their money in dishonest tax schemes.

why would that happen? unless apple uses their tax dodged profits to directly prevent you from operating, which would be illegal to do in the first place.

It wouldn't have to be direct to have an effect. If their reduced taxes causes education to be underfunded, I cannot hire enough talented engineers, for example.

Apple is the biggest taxpayer in the world. It pays every bit of tax it owes. It should be taxed less, not more. Corporate income taxes are corrosive to maintaining our society.

I'm not going to argue whether or not it pays all the taxes it owes. I'm pointing out that if they have access to offshore accounts that most businesses can't, they gain an unfair advantage over those other businesses. If you want to remove corporate income taxes, it should happen at the same time, not selectively to larger corporations.

Wow, "Let them eat cake" is the first thing that sprang into my mind upon reading your comment. Yes, having good phones and laptops surely is something great.

But we're talking here about a vast and growing gap between the rich and the poor, and if you're slaving away in your shit-town on your minimum wage job you don't give a damn about how awesome your life is now thanks to the iPhone.

> slaving away in your shit-town on your minimum wage job

but does that have anything to do with coporate tax dodge? Or is that really a failure in education (which may be due to tax dodges in-so-far as the lack of education funding)?

Hmm, Apple should probably stop paying any wages to any factory workers and force them to sleep in the factory and work 18hrs a day. As long as they keep making those nice phones and laptops...

I mean I guess it would be better if they didn't do that, but then again have you seen the next competetors laptop? The world would be a worse place if we had to use that.

I use normal computers and they work just fine. I see some colleagues using Apple computers and it doesn't always work for them. The world would be as normal as it is without apple products please.

Apple isn't increasing suffering by creating laptops. They are increasing suffering by not paying taxes. It is possible to enrich lives of some people, and increase suffering if others at the same time.

They are the biggest taxpayer in the world. By all rights they should pay less taxes, the current tax rate on Apple profits is over 60%.

I think he is talking about the big impact large companies have on climate change (due to products and product parts transportation), for example. Also the fact that a lot of phone's components are made from minerals that fuel conflicts in third world countries. A small company like FairPhone, which tries to combat that, can't evade taxes like Apple do...

By default, big companies always get preferential treatment from governments. Open a mega-factory? They get tax cuts, cheap real estate, free utilities. Why? Those shiny new jobs look great on a politician's resume for the next election...

What does the little business guy get? A letter of "don't forget to pay your taxes in full or else"

It's time to accept the fact that governments are NOT a fair and impartial warden of the economy. Therein lies the problem. Reducing their power of meddling in the economy is the solution.

Those with wealth will always try to capture the system - whether its formal or informal. The natural state of any business is to try and become a monopoly because that maximizes rent taking ability - NOT competition.

Practically the ONLY power able to stop monopolies from forming is the government. In absence of the government's ability to "meddle", businesses can and will cut deals with big competitors and squelch smaller ones through anti competitive practices to dominate

There used to be a lot of natural factors which worked against monopolies.

Every new market you introduced your product in brought along with it a layer of bureaucracy and middle management, which left you more bloated and unwieldy.

This allowed smaller,local companies to have an agility and responsiveness advantage even if they offered the same service at a higher fee.

Computers and the internet have made the process of expanding a lot smoother with instant inventory management, communication etc.

Not sure what government can do to stop this. The more power you give to the government, the more lobbyists and corruption it will result in. And even if they do manage to sign some legislation, there will be workarounds and loopholes.

I am struggling to even think of rules that would efficiently limit the growth of Amazon,Google etc. Cap their market share somehow? Tax companies which have more than x% of market share at an exorbitant rate?

Monopolies are granted by governments. The free market has a natural solution to monopolies, it's called competition - startups.

Big Cos will always lobby governments to add rules and regulation to raise the barrier of entry on their market and thus reduce competition.

They, in fact, buy their monopoly from the government.

Solution? Take away the government's ability to grant monopolies.

Well, the flip side of this is that the society we build and paid for with income tax has become a huge risk because of automation.

We’re wealthier than ever, but we can’t use the wealth to society, because we’ve moved it from the masses to the few.

Now this probably isn’t a popular thing to say in American contexts because it sounds like socialism, but historically the levels of inequality we’re seeing now have lead to only one violent outcome.

We’re not in danger yet, the middle class isn’t starving after all, but if we don’t radically change taxation to match modern society then we’re going to be fucked in 25-50 years. Because we’ll desperately need a model for society where not everyone has to work.

The way I view it is in terms of an idealized society. What is the ideal society? One where everyone must work their entire life? Or one where people are free to choose what they do with their time, even if they don't want to work at all? I would argue the latter.

Automation offers a unique ability to deliver the idealized society, but first we have to get rid of the notion that full employment is the goal. If anything, modern governments should be trying to lower employment, not raise it (or rather provide more choice to not work). You can't do that without a taxation strategy shift form income to capital gains.

There is a lot of double think today around issues of fairness and justice, most of it lends towards enabling ideas consistent with movements towards centralizing powers, and authoritarianism. Small business enthusiasm--consistent with individual determination, responsibility, democracy, and consumer rights & choice--is just passe. No one is tweet storming about "small business rights."

Or, let's just go trip over all the homeless on the way to work in the Bay Area while tweet storming about the imminent dangers of mansplaining to society.

Not only do they get tax cuts and cheap real estate from governments, they also get direct money.

When google decided to create a data center in Sweden, the Swedish government gifted them $20 million in "establishment support". Money sent from the tax payer directly to the bank account of Google. Reason? So that google would pick Sweden. The politicians argument is that Sweden grain prestige if google has their data center here so its worth spending those millions. Its a bribe in all the sense of the word except that its a game between nations.

Ireland has the same problem. Attracting large amount of data centres which don't really create all that many jobs. It also then shifts the costs because the electricity demand is so huge and it strains infrastructure.

Wouldn't that increase the number of highly skilled individuals working in Sweden, who pay more tax/increase the jobs available? Which is a good thing?

The charitable interpretation is that large companies create demand for services in the community where they are located, thus functioning as an economic stimulus. The demand may entice smaller companies to co-locate in the same neighborhood.

With this interpretation it would make sense to entice large corporate entities to arrive and/or stay put.

Of course, the path from economically motivated kick backs to pure cronyism is not too long, so cynicism is always warranted.

There is an amount that the gov loses by allowing tax breaks and other perks to such businesses. Is this amount recovered (by some measure) through the assumed economic stimulus?

I'm certain that someone has looked at these numbers in case studies, but I don't have the time to wade through literature currently.

You need a globally cohesive solution in order for this to happen. Countries part of the solution will need to play by the decided upon rules or not be able to participate in the economies of those in the agreement. It's as simple as that - of course the status quo exists being of bullies.

Yes, it is like wholesellers vs. retailers. Governments don't like to spend time talking with zillion of companies when they can talk with the few ones.

Apples not getting any direct government subsidies. It’s paying more taxes than anyone else in the world, and doing it legally.

Sounds like we need an 'uber for tax avoidance' where the start up creates a holding company in a low tax environment and then you sign up and for a 3% going down to say 1% of your "normal" tax obligation they will slosh all your revenue through the tax haven.

This is not a joke, it is a serious suggestion. The issue here is governments and regulatory capture where the wealthy have insured these tax avoidance schemes can work and the governments allow it because they can still get enough taxes from people who aren't wealthy enough to play the game. If we can create a startup that lets everyone avoid taxes the system will be threatened and it will force the governments of the world to fix this or to run out of money.

Well as you can see with the poor OPSEC, the offshore incorporation industry is ripe for disruption.

Although I've never had any of my entities "leaked", as if they were secret anyway, these leaks are mana from heaven as these are client lists you can POACH and offer better services for cheaper.

I've been using OTONOMOS for some time for incorporation and offshore entity management, which stores some client signatures on a blockchain, but behind the scenes they still defer to more antiquated registrars.

The costs of forming offshore entities are perpetuated by the expensive lawyers, registered agents and incompetent government representatives in these tiny jurisdictions. (For what its worth, even most United States are pretty incompetent at these administrative processes. Really only a few financial centers and a few exceptions have it all streamlined.)

These are scale problems primarily.

Also, American citizens should note that it isn't as simple as making a HOLDING company to avoid US taxes, unless you were just going to try to be NON-compliant and not tell anyone which will be a losing battle. There is a way, but it isn't simple.

For American citizens, offshore company's primary benefit are:

- protect trade secrets or initiate transactions without showing your hand to the market

- to deter creditors (as long as they aren't the US Government) as it raises the bar for them to find those assets and sue it and get a judgement and collect on that judgement

- segregated assets. Some jurisdictions offer entity structures which are very immature in the United States or haven't caught on yet. The Series LLC exists in a handful of US states but may lack case law, Segregated Portfolio Companies exist in other places like the British Virgin Islands and may have more case law or better statutory conditions.

- deal with more international clientele. Many times there are parallel US laws specifically for offshore clientele. For investors its the difference between Reg D and Reg S, I had one other example but I forgot it.

I think tax avoidance as a service could be a thing. If I could get someone to hire me as an 'individual supplier of engineering services' and they could pay my holding company in the Cayman islands directly. Places like Apple already hire janitorial services so that they don't have to hire janitors directly, they could hire my engineering service. Pay the agreed upon rate and leave tax/medical/retirement to my service, which would work through another holding company to set up regional medical providers who could service my medical needs in the US but any costs would go back through the Caymans. Similarly I could arrange to purchase things through their service where they buy for shipment out of state and then cross ship items back to my location instantaneously avoiding any sales taxes. No doubt with a clever legal team such a startup could develop a number of "perfectly legal" arrangements such that one's lifestyle could avoid most of the inconvenient taxes that currently are plied upon us poor working folk.

So I foreshadowed this already but Americans can't have passive holding companies and expect to avoid US tax. (Holding company implies passive property ownership.)

1960s era Congress already created CFC, PFIC, FBSCI, FBHCI laws which ensures that compliant Americans can't have passive offshore companies to defer taxes indefinitely. You looked like you were on to an original idea but your grandparents already thought of it. What you suggested still requires your non-compliance and the opposite of perfectly legal.

Those laws put your offshore earnings from US connected entities right back on your US personal income tax.

Most of these regulations are undermined by not having a passive holding company but an offshore company with additional business operations.

I didn't say it would be easy :-) Which is good in that it creates a nice moat around others entering the space. The question I would throw out to a tax lawyer that was operating at the level of Appleby would be this, "What set of relationships, companies, and structure would be necessary for a US person to shield all of their US tax exposure while living in the US?" Then I would ask my MBA friend, can we create such a structure so that the marginal cost of adding an additional US person to the structure would be significantly less than 3 - 10% of their shielded tax.

The theory being that the company would be funded on that margin and by knowing the cost to set it up and the rate of return from the marginal cost, you could put together a plan to build it and grow it.

yeah that could be interesting, it just requires trust which could be undermined with no recourse. there are also so many on-shore methods for US citizens that it is less worth it.

A non-US citizen could set up a corporation in a zero tax jurisdiction and allow partners to come in and keep diluting their share as long as it remains over 50% .... or a few other stipulations when it got over a certain number of members. but then adding additional property to this gets murky, and the non-US majority beneficiary has claims on the direction of all the property.

If you are functionally able to control it then then US courts will undermine it anyway and levy a big tax bill on you.

Same goes for US individuals living abroad not having any business relations or even holdings in the US. Yet they are required to file and pay US taxes in addition to local taxes.

The US is the only major country in the world that has such a ridiculous and distorting rule for corporate taxation as the repatriation rules. This single rule drives a very large portion of the global tax avoidance industry. It drives economic behaviour which results in misallocation of resources via situations like companies borrowing onshore US against their overseas cash horde and using the proceeds to return to shareholders.

They should abolish this silly rule and go with what everyone else does: either tax US corporates on global earnings and allow deductions for foreign taxes paid, or tax territorial earnings only.

Eritrea has an expat tax as well. FATCA and CBT are a poison to overseas Americans.

Moving abroad, I now fully understand the feeling behind "Taxation without representation is tyranny".

You are welcome to give up your American citizenship if that income tax becomes too burdensome for you.

There are actually things like the expatriation tax and "name and shame" provisions which discourage people from renouncing for tax purposes.

Also (note that I am not an accountant or lawyer and this is not advice), most ordinary people won't see any problem with taxation while abroad beyond the actual inconvenience of filing a 1040 because the foreign earned income exclusion (https://www.irs.gov/individuals/international-taxpayers/fore...) allows you to exclude foreign earned income up to $100,000 from US taxation. Since ordinary people pretty much all earn less than this, they only have to pay taxes to whatever country they are actually in. Only people who are rich enough to hire accountants have to worry about double taxation, and they can probably avoid it by other means that are well-studied among rich peoples' accountants.

I guess it depends on your definition of "ordinary people", but if you're going abroad for long-term work in any "middle class" industry, you're eventually going to have extremely complicated taxes.

Retirement savings, stock options, real estate, and any sort of investment account makes your U.S. tax return go from "a 1040" to a towering mountain of special forms. A lot of them also lose you the right to e-file, for some reason. And many aren't supported by tax software, or are handled incorrectly.

A lot of "foreign" banks – i.e. your _local_ banks – won't even talk to you. They tell you to make your investments in the U.S. instead, so you get to pay international wire transfer fees and foreign currency exchange fees on every investment. And if you want to move it back, you get to pay them again.

You won't necessarily owe any tax in the U.S., but you sure pay for it in either filing time (10s to 100s of hours) or expat tax accountant fees.

> They tell you to make your investments in the U.S.

And, extra maddeningly, a number of American institutions won't even talk to you, either.

Try calling up Vanguard or Charles Schwab if you're just a normal person who lives abroad and see how quickly they'll tell you "sorry! we don't want your business"

Even if you still have a permanent US address (i.e., not just some post box).

WBK (https://www.bzwbk.pl/) seemed more than willing to open me a bank account quite recently. There were a few more forms due to my being a US citizen, but it seemed like actually fewer than my wife (a Polish citizen with a US Green Card) needed to do the same thing. Maybe things are stricter in the West than in Poland?

It depends on the bank. Essentially it boils down to whether the "foreign" bank is willing to go through the compliance and data-sharing that is impressed upon them by working with Americans. Some do, many understandably can't be bothered.

Right, so why all the fuss over whether some of them don't bother? How many banks do you need? As long as there's one that will take your business, why should you care that the one down the block won't? I guess it could be an issue if you're in a rural area with limited banking competition? Even then, most banking is done online now and a couple of trips a year to the "big city" to get some business taken care of (see the consulate, visit a specialist doctor, sign for a loan, whatever) is just part of life if you're in a smaller town, no matter where in the world that is.

"All of the fuss" is not so much that the choices of banking available to an American abroad are reduced (though they are, and not necessarily due to the laws and regulations of the host country; and of course it depends how difficult it is based on the country) but that FINCEN/FBAR compliance which is in principle aimed at those evading taxes actually results in real pain for typical Americans who are living and working abroad, who only want to do right tax-wise.

> most ordinary people won't see any problem with taxation while abroad beyond the actual inconvenience of filing a 1040 because the foreign earned income exclusion

Well that and most banks refusing American customers because they don't want to deal with FBAR/FINCEN reporting.

My American friends here in Europe have a really difficult time opening a bank account due to this rule.

It's not only foreign banks refusing American customers. American companies such as Fidelity, Vanguard, Charles Schwab and so on won't open investment accounts for Americans abroad and will freeze accounts if they discover you are abroad.

You don't know what you're talking about. Social Security isn't earned income for example, so expat retirees get to pay taxes on that in the US AND their country of residence. You also don't seem to understand how FATCA works and taxation from stuff such as rental properties or retirement account income or even ordinary capital gains such as selling a house.

> Since ordinary people pretty much all earn less than this..

Ever lived in Switzerland? Or London?

> I am not an accountant or lawyer and this is not advice..

It's worse than that, it's just ignorant of the tax and financial reality of being an overseas American.

Sorry, I'm not ignorant of that stuff, it just doesn't apply to me in any meaningful degree. I'm not retired, or close to it, and I don't have any investment income, and I've never owned a home. I just work for a living. Perhaps I oversimplified when I said "ordinary people," but I meant regular working stiffs. I guess I should have remembered the audience on this site is mainly not in that category.

There are lots of complicated interactions with things like pension funds and mortgages that can easily push your "income" over $100k/yr even if your salary is nowhere near that level, which is at any rate, not all that much these days especially for people in the Hacker News industries.

It's a pretty terrible systems.

So making $110k now makes me a rich person with an army of accountants. Got it. Thanks.

All other things aside, the American taxation-by-citizehship instead of residence has some nasty and unfortunate consequences that your comment suggests you've never considered.

Some Dutch people in the Netherlands who were incidentally born in the US (ergo, also US citizens) but have never lived or worked in the US are now presented with the absurd scenario of actually having to do what you suggest. Of course this is just one country; in principle it applies to anyone who returned home to another country after being born in the US.

Here is the case of a woman, who was taken by her parents back to the NL as a baby, now has to establish herself first in a country in which she's never worked or lived in order to renounce an unwanted citizenship. She must get a social security number, file six years of previous taxes to a foreign country, and only then can she seek renouncing of her US citizenship. In case you were unaware, simply renouncing also costs several thousand dollars.

https://nos.nl/nieuwsuur/artikel/2044332-amerikaanse-belasti...

http://www.dutchnews.nl/news/archives/2015/06/us-tax-service...

So yeah, just give it up! Piece of cake! /s

Amazing levels of ignorance here. Even this has become difficult and awkward thanks to an effort to close the door after Eduardo Saverin et al bolted. Hacker News seems to be a reliable place for people to holding forth on situations that they don't understand; it's no wonder that the brains trust here gets regularly crucified on n-gate.

Good luck with that, fee has increased significantly and you may be required to pay an exit tax:

"The Exit Tax is computed as if you sold all your assets on the day before you expatriated, and had to report the gain. Currently, net capital gains can be taxed as high as 23.8%, including the net investment income tax."

This doesn't actually prevent you from leaving though, and is probably seen by many (most?) people as entirely fair.

It prevents you from leaving if you can't afford to pay the tax. And lol, how is an exit tax even remotely fair? Would you have described the USSR's exit visas as fair too? The US acts like it owns its citizens as property. The tax regime around citizenship is dangerously close to crossing the line to slavery.

Indeed. Almost a quarter of my net worth? The income from the remainder would still be taxed in the new jurisdiction.

Slaves in antiquity could commonly buy their freedom, too.

Presumably you have to pay the tax due to capital gains on assets you own, so the solution is pretty simple: sell a fraction of those assets to cover the tax. This really isn't rocket science.

That's an incredibly ignorant comment.

When you give up your US citizenship and the process is complete, as far as the US is concerned, you might as well never have been a citizen at all. This means that when you want/need to visit the country (such as to visit a sick or dying family member), you can be denied entrance - the claim they'll use is that you don't have enough "ties" to your new country for them to be certain that you won't try to stay illegally.

While not everyone goes through that, it can and does happen.

> as far as the US is concerned, you might as well never have been a citizen at all

I guess that's better than the alternative: being treated worse because you're deemed a "traitor" or "deserter" for giving up US citizenship.

> This means that when you want/need to visit the country, you can be denied entrance

This I can understand. You aren't a citizen anymore and thus have the same rights as any other foreigner visiting the US.

If there is no further discrimination against you for being a ex-citizen, I personally don't see why ex-citizens shouldn't have the same requirements as non-citizens for entry.

> the claim they'll use is that you don't have enough "ties" to your new country for them to be certain that you won't try to stay illegally.

Yeah, that's extra shitty.

You aren’t allowed to give up your US citizenship without paying at least 10 more years of US taxes. Even if your citizenship was inherited and you haven’t lived in the s since you were a toddler.

Only if you have another citizenship to turn to. Being stateless isn't an option.

> Being stateless isn't an option.

That is unless you're a rich company - then you can create shell entities with effectively no domicile that earn income, but aren't taxed in any country.

Corporations are people, my friend. People with extraordinary abilities.

They shouldn’t be people, and shouldn’t pay income tax.

It's quite difficult and time-consuming to acquire an alternate passport, absent family ties or similar.

The US has very strong lock-in with regard to taxes, and they don't hesitate to exploit it.

I actually have a hypothesis that US citizens are actually less likely to even consider going abroad to work because of this filing requirement. There are many other reasons too (the US is a large market in its own right and has been for many years now), but it'd be interesting to compare and contrast the local population count of other developed countries with their expatriate population count.

A follow on hypothesis would be that a country having a larger percentage expatriate population compared to another all other things equal would have more global outlook e.g. the local population is more favorable towards immigration and free trade, and has a more accurate knowledge of the details behind world events.

You can apply for the foreign earned income tax exemption. I work abroad, and I reclaimed all my US taxes for my income earned abroad.

But you still have to file. No other western nation requires their citizens to file if they are living and working overseas for the full year.

While I agree, and have done the same in the past - You still have to file, and it's only the first $100k that is exempt.

Deleted comment

That would indeed be fair. I think what many people here may be forgetting is that this doesn't result in double taxation in practice, because you can deduct the taxes paid in your country of residence from the taxes due in your country of citizenship.

The only possible downside is the implied bureaucracy. Not all countries are good at minimizing that.

When it hits the fan, and you want to come back to the US for safety, unmolested, you'll be able to. Should that be free?

It is in Canada, Europe...

But don't forget that those are third-rate (more like fourth-rate) countries, almost undeveloped brutes...

<sarcasm/> (as an EU-citizen)

We don't even pay for our health bills in Germany when leaving a doctor's office ;-)

Hold on! You have to pay 10 euros or so every year or no? I remember there was an outcry many years ago!

We got rid of that some time ago.

How barbaric!

>Should that be free?

I think you're missing the part where anyone (well, most) who live abroad is actually paying anything.

But as an US citizen you still use some US benefits like the army and international protection, right?

(I'm not from USA or currently living abroad but i think that is "fair")

This is incredibly stupid. A US citizen abroad gets very little additional protection from the "army and international protection" that the other citizens of the country in which they are generally resident get; i.e. a US citizen in Germany or Japan gets a lot and a US citizen resident in, say, China or Indonesia gets nothing. This is one of the dumbest arguments I have ever heard for this kind of wacky double taxation and I wonder at the persistence of its appearance.

This and "US healthcare subsidizes cheap healthcare for the rest of the world" are 2 of the stupidest, jingoistic statements that people make for paying too much for so little.

How else would you sell global taxation to people? People try and find all sorts of reasons why they're paying taxes to their home country when living abroad, while others aren't.

And you've got to pay for all your citizen services anyway (renewing passports, etc).

Tell that to the US citizens and NGO workers in Yemen. You think the US military or State department did anything for them? [0]

British, Dutch, and German citizens were evacuated by their governments.

[0] https://travel.state.gov/content/travel/en/YemenCrisis.html

The USA charges people for evacuation at military rates. There are cases of people being bankrupted by this and wishing they'd not been "rescued".

Tax is really just skimming the surface of the advantages that result from being big and powerful. Yes it means that they get subsidized in a way by the public tax payers but their employees pay for it even worse. The inequality between executive pay and ordinary workers is more than ever over the last few decades and those workers are paying for it by living a two hour commute away in crappy property, saving pennies at the grocery store etc. all of these are sacrifices and subsidies for the big company, the tax savings are just half of it.

What you are describing is a perfect storm of two economic fallacies -- the theory of marginal productivity and regressive taxation. The former describes how increasing pay will correspondingly increase productivity and the latter describes gradually decreasing tax rates as the amount being taxed increases.

Executive productivity is notoriously difficult to quantitatively measure and it is generally determined by compensation committees, whom are staffed by executives themselves and/or those with a vested interest in voting to raise executive pay. Such incestuous planning structures are almost always subject to graft and corruption.

Regressive taxation (including generous deductions hidden to those unable to afford the best tax planners) may be touted as necessary to reduce capital flight but the naked and bald-faced wealth inequality is simply unconscionable. Relatedly, Trump's tax plan is most definitely a bone throw to the rich as it includes repealing the estate tax. Democracy and progressive taxation have gone hand-in-hand since the end of WWII and it must go hand-in-hand in the twenty-first century.

We need a service that makes it easy to setup whatever structures are necessary to pay the same taxes as Apple et al. Hear me out. Let's call it "Double Irish as a Service", referring to the famous Double Irish tax strategy[0]. Similar to Stripe Atlas, you sign up, and it sets up whatever structures and accounts are necessary to get the tax advantages. Then, once every company can do this (and not just the big companies), then the laws may change.

0. https://en.wikipedia.org/wiki/Double_Irish_arrangement

Rich people and corporations will never pay full taxes. The only way to make it fair is to lower taxes for everyone.

EDIT: downvote me all you like, but the facts and all human history are on my side. Taxes are and always have been paid mostly by poor + middle class. Rich people used to collect them and now have a ways to negotiate a better deals or to avoid them. Look at Trump and his loans schemese. Look at multinational corporations. Look at our local oligarchs in eastern Europe. If you are in middle class, your only hope is to fight for more fair society where tax hells dont exists, and taxes are low for everyone. Because high taxes will never be paid by everyone.

If governments want to effectively tax the largest players, they would need to take up arms against those companies and spill some blood. Or at least grab a few top level executives and put a gun to their head and lock them in a cage. Do you see that happening? Of course not, it sounds entirely insane. And the executives know that. For them, however, the true sociopaths who rise to the top because they are willing to do literally any thing short of slitting their own throat in order to be at the top, a gun in the face is the sole thing they will listen to. When they accept that as their standard of having their behavior changed in a room full of people not bankrupt enough to pull a trigger? They don't have a single thing to worry about.

Those who fail to learn from history will be doomed to repeat it. All the things you really wish to cry out "but no one would DO that"... can you really not think of any examples from history where it already has been done? And on smaller scales even? Why would someone now not be willing to do it for much higher stakes?

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

I am not even annoyed by that. I am an immigrant into Canada. We sort of made a deal: you let me into a place where I can live a safe and free life and I will pay my taxes leading to that. I stand by that deal. I had a company in Gibraltar (which, by the way, was completely legal, I am a citizen of the EU and I exercised my right to establish a company wherever I in the EU pleased) which I closed down and moved my affairs into Canada and I am a proud Canadian taxpayer (and now even a citizen but that came much later).

But gosh. I am a very small fish here. I only make a few hundred thousands a year. Could we please implement a system where I report my earnings (not my profits), slap a flat tax on it and that's it? No bookkeepers. No complexity. No exceptions. Just a friendly, flat small business tax.

A tax on earnings? Do you mean revenue?

I think that's a bit insane and lot's of business wouldn't be able to survive. If I buy something for $100 and sell it for $110 I now have to pay tax on the $110 amount rather then the $10 amount, increasing my tax tremendously.

For businesses with lot's of inventory that would be murder.

I think it would be the only solution, because it will always be easier to manipulate your benefits than earnings.

Although we could imagine something more complex: pay taxes on (revenue - expenses to compagnies that also pay taxes).

So now if you buy a product $100 to a company paying 25% taxes and sell it $110, you pay taxes on the $10, but if you buy your product to a company in some island, you pay taxes on the $110.

Smarter: if you buy to a company that pays a 20% tax while in your country you should pay a 30% tax, then you pay taxes on ($110 - $100*(30%-20%) = $20).

Everything get more complex but it's just a bit more CPU time.

Wherever this is implemented it's an option. It's never mandatory. There are tons of knowledge based operations where expenses are way too few. Obviously if you are a traditional buy stuff, add value, sell stuff business then you want to bother with bookkeeping sure.

These companies will follow the law. When Ireland changed theirs, Apple moved.

This problem can be fixed with laws. What's difficult is changing those laws, because the rich pay off those that write them.

Think sales tax. Apple can't avoid sales tax. But they don't care, because it's not them being taxed.

But then again, Amazon did avoid sales tax, and used the internet loophole to compete with local smaller businesses using their "no sales tax" discount. And they kept pushing for special treatment in ways no small businesses could. Now the laws have been adjusted, and they collect sales tax.

If profit had to be taxed within the country or even district of sale, it's over.

There is no "if laws are changed we will be screwed" mechanism. The laws are designed to screw and unscrew. Attention should be directed to those writing them, because they know exactly what they're doing, because they are succeeding.

This. I run a small company as well, and taxes are a damn maze.

I just checked the tax authorities website in this country, and there are no less than 121 different tax-exempt health activities – things my company can pay for me, without having to also pay taxes. For most other things, there's sales tax (possibly other kinds of tax too, but let's limit it ourselves for brevity) that comes in at no less than three different levels, depending on what you're paying for. Many things, most things, my company can't legally pay for directly, but must pay me income, which I then pay for, as well as paying the taxes. This probably makes sense, except of course now I'm being taxed twice: once on the income itself, and then again on the expense. Oh unless of course it's a deductible expense, in which case I might be able to deduct it from my year end declaration. Also this depends on what it is I'm paying for, some services are subsidized and the subsidy is applied immediately, so I'm only paying half the taxes – unless I've used up my subsidy limit (which I can't check.)

I don't mind paying taxes, I really don't, because I can clearly see what I get for them for the most part. The streets are clean, health care is paid for and mostly seems to work for me, the garbage truck shows up on time, the water flows freely from my taps, and the electric grid never seems to have any issues. My friends with children get to take a lot of time off to care for their kids, and when they are old enough for day care that works too. I had the privilege of attending great public schools, and higher education is paid for. The list goes on.

I really don't mind paying a reasonable amount of taxes, and I'm not even that upset about companies and people investing their money wisely. But when there are legal ways of "optimizing" your tax foot print, if you can afford the expertise to do so, it becomes really demoralizing to pay your taxes as asked.

Corporations and individuals aren't going to change their ways, so government has to step in and fix these things. It's probably real hard to do, but it needs to be done.

Either that or provide tax optimization services for free, so we can all enjoy these same incredibly low tax rates. (At which point tax reform probably has to happen anyway.)

Governments have no interest in fixing it. Usually law makers and legislators benefits from those loopholes, directly (with their own money) or indirectly (with campain supporters). Not only in corrupt contries but also in well stablished democracies.

Those loopholes are used even by people who claims doing a lot of charity, as Paradise paper is showing.

I'm very pessimist about this going away anytime soon.

Yes, this is probably the sad truth. You hear officials lament the immoral actions of corporations one day, then sign loopholes designed by BigCo and friends into law the next.

Which is exactly why I think the tax office should provide a free service to anyone looking to optimize their tax footprint. If it's legal, why not?

an alternative (which i m not sure is better, but...) is to have absolutely zero tax across the board. Then every possible service any entity requires is paid for in a user pays system.

I personally don’t believe this works, and that there are plenty of things history can teach us of what can work in a decentralized and presumably privatized sector, and what must remain in a public (albeit not necessarily centralized) sector. I don’t think taxes are inherently bad, but I think there’s something to be said for reducing the distance between paying the money and seeing (even if not necessarily receiving) the benefits of doing so. I think there’s a balance to be had, but I don’t think we get there with the kind of complex tax systems we have in most(?) countries today.

I don’t know what such a system would look like. I just know that when Netflix came around and made streaming easier than piracy, for a reasonable amount of money, I jumped on board and never looked back. It’s a flawed analogy I know, but there’s something to be said for just making things dead pan simple and reasonable. There’ll still be people and companies trying their best to avoid taxes, but if we can reduce them juicy margins enough, maybe at some point it just isn’t worth the hassle...

I feel the other solutions is obvious in that we need to align tax law to meet the global mobility of money, in the same way we aligned trading laws. Something like;

1) A group like the WTO/G12 get together and agree to minimum tax rate for any corporate/country/individual that wants to do business and or have access to these economies/nations. Any company/individual that earns income in lower tax rate countries is fine to do so but must tax equalise to the minimum or they can not do business or visit these countries.

2) Citizens of the above group of tax aligned countries must declare overseas assets and incomes and equalise tax payments if below a set minimum. Should undeclared assets/income be found the assets are forfeit and the person gets 1 year jail per $1mil. And anyone who provide information to create asset forfeit or additional tax owned gets 25% of that.

This, plus sanctions on tax havens.

We cannot expect companies to voluntarily pay more taxes than the minimum, while there are legal loopholes at their disposal.

The solution may mean reducing the tax rate for all companies, closing the loopholes, and then enforcing the law.

But that would require elected government leaders to put their jobs on the line (lowering corporate taxes sounds bad to many voters since corporations have been vilified, even though it has bipartisan support among economists). So it’s unlikely to happen any time soon.

Can you give a citation on "bipartisan support among economists"? All I have read seems to indicate economists are all in support for the other direction - that lowering corporate taxes at this moment is bad economics.

[1] http://larrysummers.com/2017/10/22/one-last-time-on-who-bene...

[2] https://www.cbpp.org/research/federal-tax/corporate-rate-cut...

[3] http://microeconomicinsights.org/benefits-corporate-tax-cuts...

I heard it only on an NPR podcast, where they claimed the measure had support from "economists of all stripes." And actually, the proposed policy was much more drastic: complete elimination of corporate taxes. But clearly there are arguments on both sides of the issue.

[1] https://www.npr.org/sections/money/2012/07/19/157047211/six-...

I don't understand why you have to lower corporate tax rates first before closing all loop holes...

This is the problem with a complex and byzantine tax code: entities that can manage and manipulate the complexity profit by it. Entities that don't have those kinds of resources are stuck.

It would be good if folks from all political walks of life could come together for some kind of tax simplification. I highly doubt this will ever happen, though, as tax law is used as just another club by big businesses to beat down the small. They have the money, and they're willing to pay-off the political class to make various arguments about how simplifying things would be bad for the little guys. That's not changing. (This has nothing to do with current politics, by the way. I am not following the U.S. tax discussion and it's not relevant to my point. My point is that whether it's business, tech, or government, complexity itself is an enemy)

I'm really waiting for someone who makes the tax evasion system scale for small companies and regular people.

Tax evasion is and always will be, illegal. Tax avoidance is legal and undertaken by every single sane tax-payer who pays the minimum tax but computes that amount in accordance with the tax rules. The courts are available for redress if the tax authorities think the rules are being bent. Judgement is a legal matter and not one for debate by armchair moralists.

Those who don't like the way some tax laws operate in the realm of complex company operations should lobby the law-makers not those tax-payers working in compliance with the law.

Yes. People who disapprove "tax avoidance" or "tax optimization" should reflect on the idea a few years back:

High-earning professionals like medical doctors in a North European country had a very high marginal tax rate (well over 50 %). They also had long working hours. Thus, many opted to reduce their work amount; it's better to take unpaid leave and mend your house, rather than to work in a responsible job, get close to zero net compensation, and have a leaking roof in your house.

This is called tax optimization or tax avoidance.

Now, the government notices this and proposes a "tax on work that was not done with the purpose of avoiding tax". Will you approve?

This kind of mechanisms are what we talk about in tax avoidance and tax optimization.

Would you not make use of a tax break even if you taking it harmed your neighbour? Everyone's response would be "It may suck for you that you can't leverage that loophole, but that person is not breaking the law." It's like the difference between claiming mileage vs. claiming vehicle rental/gas for work trips. You're not breaking the law by claiming one over the other, you're leveraging the framework to greater effect than some others are able.

It doesn't make it morally right, but at the end of the day, everyone leverages the opportunities they have. You can't blame someone for that. They are working within the confines of the framework defined for their circumstance. If that framework had loopholes that could be leveraged by that individual, they would take them.

J.K Rowling, author of the Harry Potter books and who is fairly wealthy has an interesting moral stance on paying tax:

"... I am indebted to the British welfare state; the very one that Mr. Cameron would like to replace with charity handouts. When my life hit rock bottom, that safety net, threadbare though it had become under John Major’s Government, was there to break the fall. I cannot help feeling, therefore, that it would have been contemptible to scarper for the West Indies at the first sniff of a seven-figure royalty cheque. This, if you like, is my notion of patriotism..."

http://www.taxfairness.ca/en/news/j-k-rowling-paying-taxes-a...

Another reason I think she's an amazing woman to look up to and aspire to be like... but I'm not making 7 figure royalty cheques. I'm paying the same taxes (give or take) as everyone else that can't afford to leverage West Indies tax shelters. In the meantime, I'm stuck utilizing tax loopholes that save me tens of dollars a year.

I think was I was probably reacting to "everyone leverages the opportunities they have." and I was pointing out that there are some people, like Rowling, who avoid paying very large amounts of tax (tens or hundreds of millions in her case) for largely moral reasons. I'm just happy that people like that exist.... :-)

I don't begrudge those that have made it, in fact, the opposite is true, I'm happy they managed to cross the chasm. Unfortunately many of us that still have to work hard to afford a relative life of comfort vs. struggling at the poverty line can't afford to not leverage every tax loophole we can in order to give our kids every possible opportunity for success that we've fought tooth and nail for.

That’s why the opportunity shouldnt be there. It’s unfair and leads to further concentration of power. In other words it’s anti competitive.

I do agree with this. Opportunities shouldn't be there unfairly. If one person should be able to leverage an opportunity, in my mind, so should everyone. In that sense, I'm currently in favour of the basic income strategy being piloted in Sweden right now. I would like to see everyone on an equal playing field. But that said, in the meantime I'm going to leverage every tool I have access to, just as you should and everyone else should.

Most of the taxes a company actually pays are factored in with their workers' salaries. For example, if your company's average salary is lower to that of Apple for a comparable employee profile, you are effectively paying less taxes than Apple.

Or, if you company does not have profits, you are paying less taxes than a company that reports profits.

I do not think a company has to wear any nation flag. Companies have to care for their customers, employees and shareholders (in that order), wherever these are based.

Lawmakers need to care for their citizens, and need to legislate in a way that optimizes their tax collection in a sustainable way (i.e. lawmakers do not want companies or people fleeing to other countries or regions).

The resulting scenario is an optimal equilibrium of forces.

All they are doing is arbitraging loopholes in the tax systems. Politicians have been trying to solve way too many problems by taxes (taxing differently x and y) or giving tax gifts to donors and various organised interests. As a result it creates an arbitrage-able tax system. I wouldn't point your annoyance to those who are optimising their taxes (after all this is merely their fiduciary duties to their share holders) but to the designers of this tax system. Create a flat tax and pretty much all tax avoidance schemes disappear.

I think you are fundamentally missing the nature of the loopholes being exploited. They have less to do with the complexity of the taxes in one country but rather the complexity that emerges naturally from different countries having different tax codes. How would a flat tax help avoid this scheme for example?: http://www.nytimes.com/interactive/2012/04/28/business/Doubl...

The whole point is they skip the U.S. tax code entirely.

If you don't have control over foreign loopholes, you eliminate them by applying to companies what you apply to individuals in the US. I.e. that US companies may not pay less taxes than they would pay if their activity was all in the US.

It would of course increase the effective tax rate in for US large companies a lot, but the US corporate tax rate is very high vs other countries. If it becomes efficient you can afford to reduce it.

I don't think getting rid of these foreign loopholes is as simple as you think it is. 1. What counts as a "US Company"?

2. So you're proposing that Apple pay the U.S. taxes on sales in Germany? Also that every country should do this?

1. Companies which parent owner is based in the US. Companies are already paying taxes based on consolidated regime, it is just that they consolidate all entities within a tax jurisdiction. So the concept exists, it could just be extended.

2. You wouldn't have a double taxation. You would apply to companies what the US applies to US individuals. If you have a subsidiary in Germany and paying local taxes of 10, but that would be paying 15 if you had the same income in the US, then you owe 5 to the US taxman in addition to the 10 you owe to the German taxman.

There are taxes that are harder to skip than others. (At the risk of sounding like a broken record, land value taxation is basically impossible to avoid if you are using land.)

Would that really be effective? A lot of very large companies may just own very little land.

You'd pay for land by value, not amount.

So Google owning an block in Manhattan to put their office on would probably garner a higher bill than a farmer with a bunch of fields.

But yes, you can side-step the tax by using less land and eg more capital. (But that's fine, somebody else will use that land you are not using, and pay the tax for it. And if everyone is doing that substitution, it'll make land more expensive in the end.)

Apple doesn’t skip the US tax code, they pay huge amounts of US taxes. They don’t repatriate foreign earnings because it would cost shareholders over a 50% tax rate.

It is not believable to me that such a high fraction of Apple's profits are happening in Ireland. Clearly something is being distorted or manipulated to avoid either the U.S. or some other country's tax code.

If this was all so above board and not a loophole or gray area, why do they want to be so secretive about it? "“For those of you who are not aware Apple are extremely sensitive concerning publicity,” wrote Cameron Adderley, global head of Appleby’s corporate department, in a March 20, 2014 email to other senior partners. “They also expect the work that is being done for them only to be discussed amongst personnel who need to know.”

https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey....

Virtually none of Apples profits are made in Ireland and Apple doesn’t claim they are. Ireland is where they’ve invested the profits, after paying taxes on them to the countries they were earned in.

The controversy is only on how much tax they should pay on the interest on their profits. Ireland gave them a sweet deal because it cost them nothing to let Apple deposit $100B+ in Irish banks.

And all corporate decisions have basic levels of privacy attached. No accountant, tax or otherwise, should talk about their clients tax and business decisions.

>All they are doing is arbitraging loopholes in the tax systems. Politicians have been trying to solve way too many problems by taxes (taxing differently x and y) or giving tax gifts to donors and various organised interests. As a result it creates an arbitrage-able tax system.

The loopholes themselves are gifts to friends, lobbyists and donors.

>I wouldn't point your annoyance to those who are optimising their taxes (after all this is merely their fiduciary duties to their share holders) but to the designers of this tax system.

Why are you pretending that those optimizing their taxes are not furiously lobbying to keep them "optimized"?

>Create a flat tax and pretty much all tax avoidance schemes disappear.

The flat tax is possibly the most regressive tax system ever conceived. If you want to reward owning for a living and punish working for a living then it's almost the perfect tax.

A flat tax on income would help, but it's still a tax on income, and so you can move that around with clever transfer pricing etc.

Land value tax works even better: it's physically impossible to move or hide land.

Somehow I doubt the person making $20k/year paying the government 20% would see it the same way as the person making $100k/year.

What do you mean?

A few points, but I am not sure which one you are referring to:

- interesting enough actual taxation in the US seems to be mostly flat in practice (after a certain threshold): rich people get more deductions and can hire lawyers to use all the loopholes

- you can have a mostly fixed marginal rate of taxation on income, but still have progression in average rates. Eg give everyone $10k/year as an allowance, and tax at a fixed 20%.

- for taxes on income there's a trade-off between equality, ability to pay, but also blunting incentives and raising revenue. Luckily, if you tax land value instead, you can tax away essentially the whole of land rent without blunting any incentives to work or invest. (So the whole conundrum about the right way to tax income can be mostly side-stepped.)

I'm about to move to Singapore. They have a progressive income tax system with almost no deductions, but the maximum marginal rate is 22%. (VAT is 7%.) Since there system is so simple and rates are low, it's usually easier to just pay instead of trying to find loopholes.

I mean that flat-tax rates punish the poor. One may have to miss a meal to pay their taxes. The other will have a few less bottles of champagne to purchase.

Even in your follow up post as soon as we make provisions for the reality we live in the flat tax goes back to being a progressive tax, again.

So what we really need is a simpler progressive tax rather than a gradually complex flat tax.

Flat tax is not just about removing thresholds, but also using the same tax rate across the board. If you tax in the same way income, capital gains or corporate profits, don't give a tax exemption for debt, don't charge a stamp duty on property (or charge the same rate on the purchase of all assets, property or not), etc, then you kill all these tax schemes.

Isn't that usually called a broad based tax or so? I mean I mostly agree with what you are saying, just noting that I'm used to different terminology.

Yes, it's a good idea to put eg debt and equity on the same level; don't tax transactions that improve economic efficiency (tax consumption instead for example).

Land value tax is still a great idea for these and other reasons. Eg you can jack the lvt really high and basically tax away all land rent without negatively impacting the economy. So even in an otherwise 'flat tax world' like you describe, it might be a good idea to get the majority of revenue from taxing land rent (and in the wider sense, resource extraction and commons like pollution carrying capacity).

LVT sounds good in theory, but a large number of rich people _are_ acting as rent seekers (they own property, and extract value via rents on people who work/produce actual value on it). It would not be politically feasible, unless the gov't is prepared to fight against those powerful land owners.

> They are screwed.

That's true if you think the solution has to come from more legislation and/or more taxation. Those approaches will simply encourage companies to move more of their operations to other more favorable jurisdictions.

If there's a way to save money, and companies have a responsibility to shareholders to be as profitable as (legally) possible, they'll do what they need to in order to save the money. We need to stop expecting some kind of moral accountability above what the law demands. There are plenty of natural incentives for companies to be morally responsible above what the law requires, but anything less isn't illegal unless it's illegal.

You can continue to play cat and mouse with laws and loopholes, or take a different approach...

Instead, if you consider the option of lowering taxes (on all companies) to compete with those other countries, you'll actually provide an incentive for more large companies to keep their businesses - and their taxable profits - in the US. It may be a lower tax as a percentage, but it would actually increase tax revenue in the long run, in addition to boosting the economy.

The music industry can provide a fairly good analogy: when (the original) Napster became popular along with other file sharing networks, the music industry wanted to solve the growing piracy problem by throwing people in jail and pushing for stricter laws. In the end, that did nothing to help the problem. What did help? When iTunes actually provided a decent, legal alternative to piracy, it took off and hoards of people who had been pirating music actually spent money obtaining music legally because it was reasonable and competitive (in terms of convenience) with networks like Napster. The lesson: you don't fight widespread behavior with legislation; you steer it with aligned incentives.

Even better than bringing all corporate taxes down to the lowest rate; force tax havens to bring the lowest rate up to something reasonable. A global economy demands global rule of law. Then, yes, market forces can be used to direct corporate citizenship (and therefore employment+tax revenue) to where it is needed (assuming sufficiently far-sighted governance to realize the global equivalent of Ohio needing more federal assistance than California, and also robustness to regulatory capture).

Your race to the bottom would only ensure that governments eventually cede all power to multinational corporations. Then, we're back to feudalism, only global this time.

> force tax havens to bring the lowest rate up to something reasonable

Easier said than done. Not going to happen any time soon (or ever, in my opinion).

> Your race to the bottom would only ensure that governments eventually cede all power to multinational corporations.

If corporate taxes are the only thing standing between where we are now and the downfall of governments or the rise of global feudalism, we're already screwed. The corporate tax rate could be 0, and it really wouldn't make that big of a difference in terms of total tax revenue or government power (individual taxes still make up the vast majority of tax revenue).

Playing devils advocate here:

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

How about a startup providing "tax-optimization" for the masses? Keep a cut of the money saved: win-win. Or win-win-lose, if you include the state.

http://www.independent.co.uk/news/uk/crickhowell-welsh-town-...

However, most of these techniques have a high fixed cost. For Apple paying $1m fixed cost to reduce the percentage tax to zero is economical, for a corner shop it isn't.

How would this possibly work? Just throwing out the word 'startup' doesn't solve anything. The only way to reasonably take this comment seriously is as subtle sarcasm.

Similar services exist. If you're a foreign short-term contractor in the UK it's common to use a services company to setup a company in Jersey for you, setup the bank account and then run payroll for you.

I could see something like Stripe Atlas but in an offshore jurisdiction - they set you up with a company, bank account and merchant account which you can then process international credit card transactions out of (ie. transactions that originate from countries other than the one you're based in)

The other application is for entrepreneurs in developing nations where there are regular occurrences of businesses being shaken down (or outright taken over) by corrupt officials. Using local banks can often tip off the wrong type of people as to who is wealthy enough to go after

You do have to make a profit and pay corporation tax in order to be able to "optimize" it...

Most startups I know do not, and they benefit (in the future, or via transfer to shareholders) from the inverse taxation on losses.

I felt the same when I ran my business. A lot of rules are designed so that only the big guys can afford to take advantage of them. We also had a situation where the county lured a big company with monstrous tax cuts while the small guys got nothing despite being "job creators" too.

We have a global economy but not a global tax system or a global set of rules. That's the essence of the issue here I think. What also happens is countries upping one another with lower taxes and exceptions to attract big companies hoping to get some (small) benefit from it.

So much of this. This happens everywhere even when it's not in the form of a multi-national tax avoidance scheme. You can tell all you want that it's the fault of the law which it is but that doesn't change the fact the system is like this because these companies and people have over the years have done everything they can to make sure these loopholes exists and these loophole remains including outright bribing where they can get away with it. And for the most part no one individually did it and so you can't event point it out properly.

At least in my country individuals are often in even worst position in terms of taxes. The less capital you have the more you will be taxed seem to be the norm of the world these days.

> But there are these big companies which can afford to create offshore companies/holding just to evade some tax system, and lower their tax rate.

I wonder if there's actually a correlation between how ruthlessly a company evades taxes/cuts other corners and how quickly such a company becomes big enough to enable even more tax evasion/corner-cutting?

Or to put the question simpler: Was the tax evasion there first or did that only start happening after reaching a certain size enabled tax evasion?

Imho there's always opportunities to cheat, not all of them are big but many small ones can still add up to a lead. Most of us just chose not to cheat thus don't even notice these opportunities for what they are.

There's a terrific opportunity here for a financial company that specializes in tax havens for small business. Bundle together ten thousand mom and pop shops, and you have enough resources to do this kind of financial wizardry.

That sounds a bit like the plot from the show Ozark, but there they do it to launder drug money.

Countries do try to compensate for this by introducing specific small business tax rates and special benefits for being locally owned or controlled.

The Canadian example:

"After the general tax reduction, the net tax rate is 15%.

For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is 10.5%."

https://www.canada.ca/en/revenue-agency/services/tax/busines...

"afford to create offshore companies"

You can setup an offshore "shell" company in the virgin islands for $1500. It's not something you have to be a big super rich company to afford.

Think about the people who live paycheck to paycheck, without any savings whatsoever (i.e., most people).

They don't have a spare $1500.

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

This is a real problem in the US, too. The corporate tax rate is very high, but there's so many exemptions and deductions that few end up paying the headline rate. There's a lot of variation between businesses in what they pay.

Lowering the tax rate and simplifying the tax code could make it more fair in a revenue-neutral way.

It used to be much higher: https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco...

If companies want access to the best market in the world, they need to pay to be there.

I don't follow. I didn't suggest changing the average effective rate. There would be no change to the amount paid. I just suggested splitting it more fairly.

Why do you think you can’t? Have you tried? If you have a business that looks somewhat like Apple’s does (producing goods in China and selling internationally). I don’t think it would be very hard to keep revenue out of the US tax system.

I would guess you could setup an offshore company in a region with zero corporation tax and conduct the majority of international business via this? Moving funds back to the US is trickier, but then it is for Apple too.

While they don't violate the letter of the law, they certainly violate the spirit of it. Minimally, I'd like to see them recognize their unfairly gotten gains and use some order-of-magnitude more of it for philanthropic ends or tax reform lobbying. That would be the classy move. It really bothers me how high regular business and personal effective tax rates are compared to these jokers'.

> I can't evade from my country tax system.

You can however use different tactics to minimize your tax burden which is exactly what Apple is doing.

We need a progressive tax on corporations: if your company has more than X in profit, it is taxed in a higher bracket.

Ideally, should be multiple brackets, with a tax increase on the biggest companies offsetting a tax break on the smaller ones.

Would incentivize companies to break into smaller functional sub-organizations which can compete against each other for the benefit of consumers.

That's why being rich is so amazing - you get to play by a different set of rules. Or, once you're "3rd level rich" - write the rules of the game.

Apple aren't breaking any laws. They, and other of their size, can just ~bribe~ lobby politicians to make special little loopholes for them, loopholes you can't take advantage of, but you can't pay an army of accountants. But, honestly, I can't blame Apple too much here.

We are at a place of our history where giant, global corporations operate outside of any national/political boundary. They have offices everywhere, employees everywhere - it's a nightmare to figure out whom they should even pay taxes to, and how much.

I'm not even close to being Apple-level, but even lowly plebs like myself face similar issues.

I have two passports, but it's a major pain for me to live in place A for more than X months and pay taxes to country C which has an office in D but I'm technically an employee only in office G in region Z - even though it's all the same damn company - again - who gets to tax me? Both countries? One country? No country? Why can't I live in Spain and work for a US company that has European HQ without incredible hassles? And if I could - the US would still like their share of my pie in the form of taxes.

I think a lot of this stems from the simple truth that we are in a new kind of economy, where money and information can flow instantaneously, yet our laws are still bound to archaic nation-state concepts of "physical presence". Which made total sense pre 1950, not so much anymore.

100% agree with the article. When an iPhone is sold in Germany, there is a VAT on that product that definitely goes to the government, right?

So the main question is the corporate tax and not the per unit? Perhaps it would make sense to capture the true tax for in-country sales by adjusting the per unit tax?

It's the customers who pay the VAT, not Apple. That's why electronics bought in US where the sales taxes are generally much lower than VAT rates seem cheaper from the European perspective. A higher VAT also hits more the less privileged and effectively crowds them out of the market. For goods like these you can think of the VAT is 'the price to be able to buy' and corporate tax as 'the price to be able to sell'.

No corporation pays taxes, in reality it’s either customers or shareholders who pay them. The point being Apple still generates maeve taxes for Germany and shouldn’t pay it squat in income tax.

Well, it's more about familiarity with the system than work required to game them. I've met one-man operations paying effectively the same rate as Apple, they just know the legalese well enough to do it on their own.

All companies are supposed to be equals regarding taxes. If a part of them can trick this rule, then it is not fair and must be fixed.

I agree that there is a part of entrepreneurship which include being able to understand the rules and laws and use them efficiently, but all these familiarities used to game the system are only valid if only a minority of the people use them. One people finding this trick is ok, but big companies being able to buy these tricks is another scale.

> One people finding this trick is ok, but big companies being able to buy these tricks is another scale.

Maybe using these tricks was what actually enabled these "one people" to grow into big companies? I don't think it's as simple as "Small companies all pay their taxes, only big companies cheat because the system is unfair".

Imho there's plenty of opportunities to cheat without ever being discovered as a cheater, the vast majority of people simply don't notice them as such or when they do refuse to abuse them, out of a moral obligation to society.

That last part isn't the same for everybody. I dunno which election it was, but I think it was the GOP who ran on this whole "Maker" theme where they pretended people are all living in isolation and nobody uses public infrastructure for any of their success. That pretty much summed up the whole mindset behind "not paying taxes" pretty aptly.

Oh, sorry, I'm not saying it's _good_ that this is the case, just that you'd be surprised by the number of small companies pulling this kind of shit too.

Yes, we were also tempted (suggested) to do the same at some point in our history. Perhaps as suggested elsewhere in this thread, some startup will be able to create an offer to easily outsource some revenues. That will certainly declare the end of the game.

All companies are supposedly equal in doing business, but some manage to compete better than others. Taxes are just another area of competition.

Competition in business is beneficial to society as a whole, by providing better products and services. Competition in tax avoidance has no plausible benefit. It's spending resources to solve an entirely artificial problem. If the problem was removed then the resources could instead be spent on something useful to everybody.

So what you're saying is as a small business owner you'd like to evade taxes too? Seems like a great startup idea- "offshore accounts for everyone!"

> What annoys me the most is that, as a small company, I can't evade from my country tax system. I pay the taxes. All of them, at full rate.

You're like the farmer whose cow has died and is upset that his neighbor's cow has not died. Direct your annoyance at the government that is oppressing you rather than at other people who are not being oppressed as much.

Is this really that difficult for a small company to evade tax? I think you can do it

One day people will realize it. All taxation is theft.

What taxes does Apple, an American company, owe Germany? Are you paying taxes half way across the world from your place of business?

I don't pay taxes half way across the world because I don't do business there. Apple does. They have employees in Germany and sell their products (including in their own stores). Of course the vast majority of value is not created there but in the US. However, it's not like they pay their full share of taxes there because on paper the value is largely created in a place that conveniently doesn't tax that.

They pay huge amounts of taxes to Germany in VAT and employment taxes. Their income taxes should be paid where they are based, Germany is trying to double dip here. Apples accounting for where profits are located has to be approved by tax authorities.

The point is that they don't pay those taxes where they are based either.

Additionally, they create some value in Germany (a small share but still large on Apple scales). Taxing income derived from that is not double-dipping.

They are the largest US taxpayer. They are the worlds largest taxpayer. They absolutely pay taxes where they are based, and where they aren't based. Their worldwide tax rate is 24.6%, one of the highest in the world.

A summary:

Small Business -> Small government tax breaks and benefits

Medium Business -> Token government tax breaks and benefits

Large Business -> Vast government tax breaks and benefits

---

Poor people -> Small government tax breaks and benefits

Middle class -> Token government tax breaks and benefits

The Rich -> Vast government tax breaks and benefits

---

It is quite astonishing that in 2017 that we are still astonished by this.

Apple do pay their taxes just like you for everything they sell in the US. It's what they sell outside of the US that they don't pay, but they do pay in those other countries. The biggest unfair advantage they have against you is if you sell to overseas markets (you're paying US tax, not them) but if your market is US only then Apple isn't paying less than you are.

While I appreciate the sentiment it is time to start taking a more global look at these antics of companies.

I run my own company in the UK and I know for a fact that apple makes a massive amount of money selling in this country.

Now as a small business owner I am taxed at 20% on corporate profit. (19% going forward now due to a tax cut in corporate rates introduced during the last financial year). You then also get taxed on any dividends you pay out to yourself as the owner of that company according to normal income tax rates, (Sure you get a £5000 dividend tax free allowance but after that you are on normal income tax bracket rates).

There is simply NO way for me to change this. I pay my taxes each year diligently, otherwise I end up in jail.

However massive companies that make billion in revenue from countries get to play the tax game and effective pay percentage wise a LOT less than small businesses in the UK while benefiting from the infrastructure provided and paid for by public funds that they contribute very little to. That infrastructure includes the Healthcare and Education system. Both which are under constant stress due to under funding.

I am not for high taxation but I surely am for everyone paying their fare share. The employees working for these companies pay many times more tax on their salaries compared to what the corporation pays on its profits. At some point this vampire squid behaviour of extracting out of a country without helping fund the infrastructure that helped make it be a successful market cannot continue. This behaviour also gives me VERY little hope that AI and Automation will ever lead to the benefit of but a select few. /<rant>

That's an interesting case to bring up. In the UK, it is very common (I'd go as far as to say it's the norm) for software contractors to start a single-person limited company and pay themselves through a mixture of salary and dividend in order to optimise their taxes. I wonder how many of these people consider that they are committing "tax avoidance" and "exploiting legal loopholes" too.

I have been having the exact same argument with a friend on Facebook (I know, I know)... There is something about this whole thing that people seem to rationalize. My friend's ultimate argument was "well they pay more tax than I will in my lifetime anyway so what's the big deal". I had to give up in the end.

>but they do pay in those other countries

No, they do not. That is, they have optimized their rates so well as to pay next to nothing.

Incidentally, this is the problem with repatriating those profits to the US: the IRS actually does recognize taxes that have already been paid and will "deduct" (don't know the exact technical mechanism, but that's the gist) the taxes that have already been paid to foreign tax authorities from the taxes due to the US. However, due to the tax "optimization" that's been happening, the actual tax paid is minuscule, and so the tax due on repatriation is substantial.

So what Apple and other US multinationals would prefer is for the "tax already paid" to be a boolean rather than an amount. As in "we already paid 0.00004% tax on this, therefore it is already taxed and the IRS gets nothing", whereas the IRS says "well you paid 0.00004%, so we get (US rate - 0.00004%)".

Of course, the corps call this "double taxation" and rail against it, but in fact double taxation is not happening, or only in that very warped sense.

> It's what they sell outside of the US that they don't pay, but they do pay in those other countries.

Except they don't. The open letter says "What these filings also show is that since 2010, Apple’s foreign-earned income has been taxed at a rate of between 1 and 7 percent" however in Europe most countries have a corporate tax rate around 20% (cf https://en.wikipedia.org/wiki/Tax_rates_in_Europe).

For Germany it looks like Apple is paying at least ten times less taxes than it should.

I am speaking for the tax rate in EU countries, what is quoted in the related article. Regarding revenues in EU countries and moving expenses/royalties between countries to benefit from the lower rates.

I think that the same cases exists in the US, between states themselves (Delaware ?). Where you create companies in multiple states depending on your activity to split your revenues. Again, a small company can't afford such tricks.

Not true. Apple pays on the profits made in the US. The trick is to move the patents overseas and charge a lot to use those patents. Thus the US profits are small but the overseas patent royalties are huge.

Reply on news.ycombinator.com