Hacker News Reader

Comment by domoritz | Hacker News Reader

It's sickening how large corporations make more and more money but pay almost no taxes because (through the money) they have so much influence on politics.

View on HN

One of the main reasons large corporations pay no tax is that they hide the money in other countries with lower corporate tax rates. You can argue that it is a race to the bottom, or ineffective for other reasons, but the lower corporate tax rate is an attempt to deal with the issue, and get a cut of that money, albeit at a lower rate.

I think we need to talk about this in more detail.

Let's say some company like Google has income all across the world. People click ads in Germany. Some German company pays Google €1. Google doesn't want to pay US taxes on it. It "parks" this money in Germany.

I think that's different from let's say some American company has some income $100 from another American company. But we set up a fake company in a tax free country and says we had to spend $100 in "intellectual property" thus our profit is zero so we don't pay taxes.

I am not an accountant so please correct me if I am wrong in these scenarios.

I don't quite understand tax policy to be honest. For example: tax rate. Is it really just random numbers that people agree on? It just doesn't seem any of this is based on science. More like everyone is trying to get what they can.

Here is another one: if I click an ad on Google for Google Chrome, does Google pay itself for the ad amount? If so, do they owe sales tax on that transaction? How foes this work? Is it possible for us to tax revenue instead of taxing profits (perhaps at a lower rate)?

I think part of our problem is our addiction to deductions and credits. If people want to simplify the tax code, we should try to eliminate deductions and credits.

The New York times walks through an example using Apple and iTunes. It is much worse than example of parking a Euro in the country it was earned.

For instance, one of Apple’s subsidiaries in Luxembourg, named iTunes S.à r.l., has just a few dozen employees, according to corporate documents filed in that nation and a current executive. The only indication of the subsidiary’s presence outside is a letterbox with a lopsided slip of paper reading “ITUNES SARL.”

Luxembourg has just half a million residents. But when customers across Europe, Africa or the Middle East — and potentially elsewhere — download a song, television show or app, the sale is recorded in this small country, according to current and former executives. In 2011, iTunes S.à r.l.’s revenue exceeded $1 billion, according to an Apple executive, representing roughly 20 percent of iTunes’s worldwide sales.

The advantages of Luxembourg are simple, say Apple executives. The country has promised to tax the payments collected by Apple and numerous other tech corporations at low rates if they route transactions through Luxembourg. Taxes that would have otherwise gone to the governments of Britain, France, the United States and dozens of other nations go to Luxembourg instead, at discounted rates.

And that's the simple part, read the "Double Irish" section, which is an even worse tactic.

http://www.nytimes.com/2012/04/29/business/apples-tax-strate...

But if private citizens were able to park their income offshore I am fairly sure the response wouldn't be to lower income taxes.

It is a matter of complexity, and quantity. Wealthy private citizens do park money offshore via trusts and other mechanisms. It wouldn't be a good trade-off to lower tax rates to lure it back, because it is at such a smaller scale than the corporate parking.

Aren't there agreements between the US and other countries that prevents or limits double taxation for private citizens? Is there anything analogous for companies?

I'm coming from a very opposite perspective. All corporate taxes are silly, just tax the people that make income.

And yet corporations have many of the same rights as people do these days.

Reply on news.ycombinator.com