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Comment by saiya-jin | Hacker News Reader

The pattern is apparent - once you become rich, you don't want to donate millions to governments in taxes. Anyway you do, but trying to minimize it. Be it for their lack of any transparency how cash will be used (mostly wasted in very ineffective way). It doesn't matter if it's famous or unknown rich.

Now what to do with this situation... There are too many tax havens out there (Suisse, Monaco, Channel islands, Luxemburg, Malta etc. - this is just good ol' europe). There will always be rich, powerful people no matter what system you come up with (sheep/wolf human nature responsible here). If you tax them too much, they will flee (ie Tina Turner) and you lose all the money for good. Those are clever people, having best financial advisors out there.

Heck, if I had hard earned/inherited millions or more, I wouldn't want to support some war efforts/failing eu social policies either. If feeling generous, you can always give back more directly ie by building some school, avoiding bureaucrats that eat away most of cash. YOu know, the richest man in the world style. There is a good reason why he didn't donate all his money to something existing, but managing investments by himself (maybe not exact description, but you get the point).

All in all, nothing new...

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Paying taxes is not "donating money". You are required by law to pay them. You get certain things in exchange, like laws that protect your property.

If you think that you shouldn't be forced to pay taxes, why do you think that other laws should be enforced? If rich people steal from the state, why shouldn't poor people just take what they want from the rich?

If you avoid taxes, you are stealing from everybody.

Nice textbook phrases, now let's get back to the real world out there for a while.

Do you even understand the simple truth, that most of the times no law is broken in tax optimalizations? Only when it does, it gets highly publitized. Usually, tax systems are full of loopholes and accountants just need to be creative enough (and yes, they are...). Without breaking any specific law, by logic "what is not explicitly forbidden is allowed".

Personally, I do believe in minimal and fair taxation. If you have system where successful people have over 50% tax burden (quite common in progressive tax systems), you can expect many attempts to get away from it. Just human nature. Your textbook phrases won't help much, do they.

Just look at Switzerland itself - most democratic country in the world, one of the richest (and their wealth ain't based on banking secrecy - whole banking industry brings roughly 12% into GDP... tourism and high quality exports are primes here). Low personal and corporate taxation, and the country and system just works. Why cannot rest of europe work this way? How much tax evasion is within Switzerand? Almost none...

Nice textbook phrases. What does it matter whether laws are broken or not if the result is still people not paying their taxes while benefiting massively from society. If the best you can say about someone's behavior is that it's "not technically illegal", that's quite telling.

And don't get me started on Switzerland. I live there. I'm Swiss. We have massive tax evasion. We have special tax deals for foreign nationals living here.

Here in Zurich, where I live, the cantonal (state) finances are under huge strain because all the wealthy people live across the border in other cantons where the taxes are much lower, but commute into Zurich to work. So Zurich gets to pay for the infrastructure, for the poor who live here rather than across the border, etc.

So please don't talk about some imaginary Switzerland that supports your self-serving rhetoric.

This is a perfect example of why taxing income is not the correct way. Things like progressive sales tax and taxing usage is. For example, those commuters should be taxed enough to support their burden each time they come in to the city. And for those companies within the city limits enjoying the infrastructure, protection of law, etc, a sales tax on their products sold should cover that. The point of tax extraction should be consumption, not production. It's more efficient, more market (reality) based and a whole lot less political.

What should the sales tax be progressive on? You don't know the buyer's income when they pay for stuff.

Some usage taxes might work, but unless they specifically target out-of-canton persons, they will just drive more rich people out of Zurich, exacerbating the problem.

At the end of the day having every 20x30 miles plot of your country independently decide on taxation is not be the best idea.

Different tax regimes can only coexist when taxpayers' mobility is limited, otherwise the cheapest tax-land wins.

EDIT: I forgot to mention that standard sales tax is regressive by nature (poor people spend a much higher percent of their income than rich people).

Thanks for that - I was trying to figure out how to respond, and you did it much better than I would have.

Good point, I should clarify:

A progressive sales tax not based on purchasers income, but the type of good. For example, luxury goods should be taxed higher and basic staples very low to none. This the wealthy could not avoid tax by simply shifting money around political jurisdictions. This system would encourage transparency, encourage wealth creation as well as thrift in lower and middle income earners.

Also, a side benefit (not that I entirely agree with it) is this is a way to enforce social policy like healthy eating. Tax unhealthy items like sugary food and tobacco highly (up to a point). This is done already in the United States successfully. And if you want more tube riders and less drivers in a city, have a very high toll and vehicle purchase tax. Singapore does this successfully.

Some countries that have no income tax already employ this to an extent by taxing certain sales and imports. I think this type of system is worth experimenting with at least on the city-state or state level (canton / province / state). If it does not work, you can always go back.

There's been talk of this type of system in the US but it's not likely to gain traction. The real reason for progressive income tax is not good policy, but divide and conquer class politics. Something all sides of the political probably spectrum agree with: governments need to be good stewards of tax revenue no matter the collection method.

https://en.wikipedia.org/wiki/FairTax (note the section on prebates for poor people - similar to basic income).

This kind of proposals tend to ignore how mobile wealthy people are. They might have more than one home - say, one in US, onw in Switzerland, one in Hong Kong, etc - and they might have luxury items here and there. Taxing such things with wildly different percentages is not going to work very well. The rich guys will just shop for that jewellery in Dubai and keep it in Hong Kong. Will you require him/her to declare and pay tax on it if he brings it to Paris for throwing a party there? Not likely going to work out.

Effectively, a country engaging in such tax procedures would be throwing out rich people, and while I can hear the jeers of "good riddance", I'm afraid that it's not really a good thing for tax revenues.

What's the difference between what you brought up and wealthy people just moving their holding companies to jurisdictions with lower capital gains and earnings tax? People should be mobile as they want to be in free societies. Do we believe that the state owns their citizens or a portion of those citizens working lives? The income tax presumes they do.

None, really, I wasn't trying to show such difference. Of course the same thing applies to many kinds of wealth.

Except land, which you cannot very easily move from one jurisdiction to another.

Edit: One recent example of the latter comes to my mind, of course. This is the case of properties in Crimea, now annexed by Russia. This is effectively a jurisdiction change. And it has some practical consequences, of course, although maybe not immediately related to tax; Crimean people need to register their properties into the Russian system, because Ukrainian property ownership is not recognized by the new powers-that-be. And registering is not free, and not even cheap, from what I hear.

That's interesting! Though after reading so many pros & cons of FairTax on wiki, I'm still not convinced it's a good idea. The potential downsides are pretty dramatic:

* Easier tax evasion (first-party reporting, B2B untaxed)

* Discouraging of consumption (encouraging saving, DIY & black markets)

* Income-regressive nature of consumption

That said, some of the upsides are pretty good too. And if we were switching from FairTax to the current system, the latter would seem even more insane.

Yeah, I'm not on board with all the FairTax tenants. For one, the sales tax should be progressive based on product type (range from basic necessities to luxury).

Savings and DYI are a good thing long term. Maybe not so much for the inflationary consumer based system that the banks and megacorporations benefit from.

The pre-bate, which is similar to a basic income should help offset the regressive nature. In fact, I think it could replace most welfare programs.

waaait, you call people living ie in Zug canton and commuting to Zurich "a massive tax evasion"??? People are doing what they want and can, within the swiss law, which is perfectly OK with this scheme of things. If it wouldn't be OK, the could easily pass laws ie for work permit/canton of residence relationships. There is this part of the tax called Federal tax, ya know...

Now that you personally find the already uber-rich Zurich city somehow being on the wrong end of tax deal is your own personal issue.

Personal anecdote - my friend is living in Zurich, commuting daily to Zug for work. But that's another story :)

Is there any interest in a HN meetup in Zurich? (If yes, contact me...)

Swiss tourism is about 1% of the GDP (less than say watches), you're making a big dent in your logic with such a lack of fact checking :-)

The reason why there is no tax evasion in Switzerland is multi-layered and very complicated, but in short they cut down on loopholes and tax actually rich people too with tax on wealth or or capital gains. In most places you have 50% or so of tax that is paid by medium-rich people, with actually rich getting away with lot less because of capital gain taxes being lower or controls being more lax or stuff like that. The "50% for rich" is mostly cannon fodder for voters, noone is really expecting anyone to pay that much.

That said, you can't explain the swiss system in simple words, without looking into their long and complicated history etc. I suggest you do more research and get your own conclusions :-)

Switzerland is a tiny country with most companies being service companies that cater to foreign customers just like in Singapore. Larger countries cannot function on that kind of taxation. The cantons can individually negotiate taxes btw. so there is little need for intricate avoidance schemes.

I'd argue Japan is a good example of a larger well functioning country with fair taxation (up to 40% on income above 150k USD).

Japan has one of the highest corporate tax rates in the world.

There's a common misconception about progressive tax systems. I'm from the Netherlands, and we've got such a system like that.

But it's not true its quite common to pay over 50% taxes. For example, here we got 4 tax-discs, where you pay taxes in a disc until a certain amount of money earned(profits). Disc 1: until €19822,- : 36.50% Disc 2: until €33589,- : 42.00% Disc 3: until €57585,- : 42.00% Disc 4: more €57585,- : 52.00%

That means, you have to pay 52% taxes over the amount you've earned more than €57585.

So in order to pay 50% taxes, one has to make about €300.000,- a year, (either income or profit).

those "discs" are per month? anyway, my comment was on rich people, no real definition but say earning more than 1 mil eur/ear. If I understood your description correctly, they pay around/above 50% of taxes, right?

Rich people get their income typically as capital gains, and I expect the income brackets above are given for earned income, which is a different thing.

It is not really feasible to tax capital gains with a progressive system. You can make a small case for progressive taxes on capital gains by allowing a basic deduction, but the transaction cost of moving the capital gains somewhere else are generally quite small.

(Just for information, I live in a country from where people are leaving as tax refugees to Sweden).

No, these are yearly.

Perhaps the issue isn't so much in "forcing" people, as it is in recognizing that the perceived unfairness of the tax system itself is causing systemic dysfunction.

Because taxes are perceived to be so unfairly high in certain economies, many devote significant time and effort into "innovating" around policy which is completely legal. Transfer pricing, long-term capital gains distinctions and LLC/Trust configurations, to name a few.

It makes sense to do this, because the disincentives of NOT pursuing legal tax minimization strategies are severe. You'll lose almost half your income. The more money you have, the more strategies you get--meaning they are formed in the ranks of industry leaders like Apple or Google, and eventually trickle down throughout private industry (though in the interim this only serves to widen the disparity & narrow the concentration of wealth).

This won't change unless the common psychology changes. If the tax system were more balanced and fair (a more moderate/halfway implementation of a "flat tax?") then less energy would be devoted into the legal arms race that is out-maneuvering the tax code.

... but obviously that's a pipe dream.

the taxes are for the poor, not rich.

Paying more than you are legally obliged to could be considered donating though. I'm not commenting on the specific cases linked to but as I'm sure you're aware there is a massive grey area around tax law. You can't simply claim that not paying is stealing any more than the parent can claim not paying is ok (it didn't). The details are all about the amounts, which methods are legal and which methods are of untested legality. I think parent's claim is that money is both more willingly and better spent elsewhere (perhaps regardless of legality).

Significant numbers of rich people/corporations use methods that are legal to reduce their taxes. Most people consider this wrong despite its legality (probably they also mistakenly believe it to be illegal - because journalism).

There's certainly an argument that this is - in part - a of problem for the creator of a complex tax system, who should respond by reducing complexity (increasing enforcement tends not to go well - complexity also hinders that). It also seems likely that the people who consider it morally wrong would do likewise if their tax bill were 100x larger (in Switzerland, it is not a criminal offence to make an incorrect tax declaration. Many non-rich Swiss compete with the tax office to lower their bill).

It also seems that you are saying laws are by definition correct. Many laws are not uniformly enforced and many laws are changed as a result of disobedience. Perhaps such people are indeed paying proportionally way too little now but perhaps their actions also affect positive change in future (more efficient system overall, but resource allocation, fewer unintended loopholes). This may not even be their intention, but it doesn't matter.

That's ridiculous (the second part, not the "donating money" part)

If you avoid taxes, you are following the law. No one should pay more than is required of him to pay. If you can structure certain transactions in different ways (e.g. 25% tax vs 50% tax), why would one choose the more expensive option?

If you evade taxes, yes, then you are stealing from everybody. That I do not condone. But, there is a clear difference.

Tax laws are complex.

People avoiding, not evading, taxes think they are obeying the laws. But sometimes they are using the laws in weird ways and the tax authorities might not agree. Those tax laws get tested in the courts which is a slow expensive process. Or the tax authorities will enter discussion with people using weird tax schemes to try to get some money before going to court.

Tax avoidance used to mean normal tax planning but it has gained a meaning of people using bizarre interpretations of the law.

The funny thing is that this is exactly the same fallacy programmers tend to run into when trying to game the legal system: that you're not violating the letter of the law, doesn't mean what you're doing is legal or that you can't be sued. It's not just a bunch of code.

The problem with taxation IMO is that it's caught in a vicious circle: companies / "the rich" are dodging taxes so the taxes need to be raised leading to more tax dodging and so on. Part of the problem is that tax fraud is often not punished in proportion to the actual value[0].

I don't think there's an easy solution, especially in a world that is as interconnected as ours is today.

Personally, I think income tax is a broken model because property is no longer a good indicator of wealth (it just encourages "investing" the money where it can't be taxed -- which comes with a threshold so high you end up hitting the middle and lower income households disproportionally).

Taxing the transfer of wealth more instead of its possession seems like a good idea, though. It might "slow the economy down", but with sub-millisecond stock trading being a thing I'm not sure this is a bad thing. It's not as if a huge income would be particularly useful if you aren't going to do anything with it anyway.

[0]: A recent case in Germany was Ulrich Hoeneß, the former president of the football club Bayern Munich, who was found guilty to have withheld nearly 30 million euros in taxes (after repeatedly admitting to much lower sums throughout the trial -- which to me sounds like obstruction, but what do I know). He was sentenced to three and a half years in prison, BUT an early release is extremely likely (so it's doubtful he will spend anywhere close to the full sentence behind bars) and after a mere six months he was already granted day release (meaning he can walk freely outside prison as long as he returns in the evening).

EDIT: Frankly, I'd be happy if income tax was replaced entirely by some form of transaction tax. It's far easier to reason about and far less likely to bite founders in the ass. In Germany most newly founded business go bankrupt in their third year because that's often the first time they not only have to pay tax on the previous years but also make advance payments for the current year, which can be deadly if you didn't make sure to put aside enough of your income to cover taxes (and accountants are expensive).

> You get certain things in exchange, like laws that protect your property.

With the important difference that the price is non-negotiable, and set by the service provider alone. The people highlighted on the website chose to park their property elsewhere, so the government had zero cost in protecting that.

The price is not in proportion to the quality of service at all, it's proportional to the income of the citizen. Which is consistent with what most people understand taxes to be: a wealth redistribution mechanism, rather than a service fee.

> If you avoid taxes, you are stealing from everybody.

If all the people which avoid some taxes currently (basically every large corporation) close down operations in the US and move to a country with more favorable conditions, the theft (under your definition) would stop. Do you think the net gain would be positive?

>With the important difference that the price is non-negotiable, and set by the service provider alone.

Hunh? Most (all) of the states involved have some form of democratic government don't they? I know some of them still have monarchs (why?), but I believe their policy makers are elected by the general population, are they not?

Democracy is a pack of wolves voting on which sheep to have for dinner.

Now, what I'd like to see is each person's vote multiplied by the amount he pays in taxes (all taxes: property, sales, income &c.). That would be fair, and it'd give an incentive to pay up too.

Which is even more cut throat, since you're basically selling political power: rich people would be able to afford way more, than the poor.

Fair point, but it seems relevant to acknowledge that the American campaign finance system as presently organized is exactly isomorphic to the "selling political power" you mention above.

In addition, if "not mentioning 3 mn" is theft, then surely "wasting 3 mn" as government official is theft as well.

However, this type of accountability is somehow not there. So it seems the rules are different, depending on what side you are.

Finally, a fundamental property law states that something is your property unless you voluntarily pass the claim to someone else. This principle certainly holds between private entities. The question is why it doesn't hold for the state?

> the price is non-negotiable, and set by the service provider alone.

Luckily, there are lots of different service providers. If you want to live in the low-tax heaven of Somalia, you're entirely free to do so.

Or Hong Kong, Singapore, Switzerland, Cayman Islands, Dubai, Monaco, Bahamas... just to name a few.

Quite so - but in reality, it turns out that most people don't want to live in those jurisdictions, but prefer to be close to their largest market, or remain in their home countries for non-financial reasons, like family, cultural, or language ties.

Taxation for corporations is a very different thing from taxation for individuals. Companies pay for the privilige of doing business on the territory. I don't really think Apple Inc would be fine if they suddenly can't sell in the US, or can't employ US citizens, or can't benefit from US foreign relations.

True. But the website mainly denounces private individuals, and the argument still applies.

You don't pay taxes for specific services. You pay taxes because it is the law. The money you have to pay for taxes is not your property. It belongs to the state. If you illegally transfer untaxed money out of the country, you aren't "parking your property elsewhere", you are stealing public money.

If you don't want to pay taxes in a country, then don't do business in a country.

Considering that selling in the US is so profitable and the market for buying stuff in the US is so competitive, that's very unlikely to happen. Most US companies would experience a catastrophic fall in income if they stopped doing business in the US.

The problem is one i can sympathise with to some degree. For standard wage levels taxation (whilst still to much in UK) makes sense. Scale that up to millions and it really is out of wack. There is no moral reason why a government deserves 50% of everything you have made.

Its like when you order a more expensive bottle of wine, and the restaurant's service charge is a percentage of it... its ridiculous to charge $100 to open a bottle of wine.

> There is no moral reason why a government deserves 50% of everything you have made.

Why? Personally I think the marginal tax rate should be much higher on the highest earners, for the simple reason that the impact of exact additional percentage point tax is far lower for a higher earner. To me the actual percentage is irrelevant. The relative impact is far more important.

If I had to pay 1 percentage points more tax, I wouldn't notice. I spend more than that on comics and takeaways, and also set aside 15-20 times more than that in savings and investments.

If I had to pay 5 percentage points it would begin to sting a bit, but I could still easily afford it. 10 percentage points more would start to be painful but still doable.

In fact, while I'd be complaining and whining about it at that point, I could manage 50% tax quite easily (I actually pay about 32% combined income tax and national insurance, despite being far into the 40% income tax threshold, and earning enough to be in the top 10% UK earners or so)

Meanwhile I have neighbours that would have to cut down on their food budget if their tax rate went up 1%, despite paying at least 10 percentage points less than I do, and many people in the UK would struggle to keep modest accommodation and food if they paid more than 20%.

I don't find it at all unfair that I pay more than them, not least because the only reason I can make what I do is that there is a functioning society around me that can afford my services.

> Personally I think the marginal tax rate should be much higher on the highest earners, for the simple reason that the impact of exact additional percentage point tax is far lower for a higher earner. To me the actual percentage is irrelevant. The relative impact is far more important.

So, you define a fair tax system as one whose perceived impact is identical across the tax base.

I define it as one where people pay in proportion to the benefits they receive. One can, indeed, argue that a rich man receives more benefits than a poor man, since his larger fortune is protected, and indeed due to his connexions he himself is more likely to be able to call on the protection of his state. I'd bet that it's linear or sublinear, though, and surely not superlinear (which is the case with progressive tax systems).

"I define it as one where people pay in proportion to the benefits they receive"

I believe that countries want to survive as entities, and being fair is not necesarily the best course of action. If rich people pay more, but they don't do anything aggresive in response, that's ok. Surely most of the population will be happier - and, in return, won't rise up and kill the rich. If the amount of capital going out of the country starts being so aggresive that it is dangerous for the country, the country will end up responding.

I find it entirely irrelevant whether or not the tax system is "fair" - fairness is inherently entirely subjective -, as long as it taxes based on income level (rather than e.g. race or other irrelevant factors).

What matters to me is if it optimizes for the welfare of society as a whole. And before you ask, I believe that alone is sufficient to prevent excesses like taxing higher earners to the point where they make less than lower earners, because people would in that case opt to earn less, and so it would in fact not optimize for happiness of society as a whole as it would reduce tax revenue despite increasing the perceived tax burden.

Whether the actual marginal tax rate is 99% or 1% is irrelevant to me in that context, if it achieves that goal (though I believe a marginal tax rate of 99% would be counter-productive, I do believe they could be substantially higher than most places today). I say that as someone who would be likely to deal with the effect if marginal tax rates went up.

As it happens, income/wealth is demonstrably only extremely weakly correlated with personal happiness once very basic needs are met (if you have housing, and food, basically), and as long as things are roughly as they used to or slightly better year over year. Steady improvement has a vastly higher impact on peoples happiness than absolute levels.

That, to me, makes it morally acceptable - pretty much a moral imperative - for a good society to structure taxes to maximize the return from higher earners over lower in order to reduce suffering for those with the least and to maximize the development of society as a whole. Not just because it would help those one the bottom, but because contrary to trickle down, trickle up actually works, and a trickle effect has a far more positive effect on happiness than sitting on a hoard of cash.

Setting marginal tax rates then becomes an optimization problem.

Its like when you order a more expensive bottle of wine, and the restaurant's service charge is a percentage of it... its ridiculous to charge $100 to open a bottle of wine.

Chances are you would be perfectly happy if there were no service charges or tipping, but the prices were all increased by 18% (or whatever the service charge is), and the receipts distributed in identical fashion. When I'm in a restaurant I don't look at the service charge as something additional I pay, it's just information about the split between the restaurant owners and the employees. Admittedly this makes pre-calculating the bill more difficult, but if you're ordering $500 bottles of wine then chances are you're making enough money that that you don't care very much about the actual total amount.

I find it curious that you resent the wait staff getting a chunk of the cash you've decided to spend on a fancy meal/wine selection, even though you presumably have no problem with the restaurant owner making a similar profit.

I don't think you understand what a wine service charge is. The staff do not get the fee, the restaurant does. This is entirely different than a tip.

If you're talking about corkage fees, that's split between the staff, same as tips. But you didn't say anything about it being your own bottle of wine, so I couldn't be sure.

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