How to avoid paying taxes and save billions

[mouser]

Tired of living by the normal rules? Just become a giant corporation!  All of you people who are just living life as normal humans are suckers.

Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes.. Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

http://www.bloomberg...o-tax-loopholes.html

[Renegade]

Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google’s tax disclosures.

Well, if you set up the rules of the game that way, and people take advantage of it, can you really blame them?

On a related topic, if you are a US citizen, there is no hope in Hell for you to get around tax. You must have a company set up. The US expects all income from all sources worldwide to be declared in excess of $75,000 (or something like that). So, if you live overseas, you still need to pay Uncle Sam. Corporations do not need to pay Uncle Sam, but private citizens do.

Now, is that messed up or what? I don't need to rant about it. I'll leave the ranting to some of the Americans here.

[Deozaan]

We definitely need taxes to be simple. Something incredibly simple and stupid such as 10% for EVERYONE would make it so easy to make sure everyone and everything paid properly.

But that's coming from someone who doesn't know much about how the tax system works.

[Renegade]

We definitely need taxes to be simple. Something incredibly simple and stupid such as 10% for EVERYONE would make it so easy to make sure everyone and everything paid properly.

But that's coming from someone who doesn't know much about how the tax system works.

-Deozaan (October 21, 2010, 08:03 PM)

While a flat 10% is probably too simple, I think you're right. I would further extend the need for simplicity to laws and regulations as well.

At the moment laws are so complicated that I truly believe ignorance of the law IS an excuse. There are simply too many laws and they are too complex. It is completely unreasonable to expect people to know and follow them all. Similarly for the tax system, it's just too complex for anyone to reasonably follow. When only corporations with armies of lawyers and accountants are able to benefit from tax laws, there's a serious systemic problem.

[Perry Mowbray]

I don't know if you followed Australia's implementation of a GST a couple of years ago? It was marketed as a GoodSimpleTax, but it turned into a huge fiasco.

The issues that Australia bumped into were about trying to balance the Good and the Simple with the Equitable.

A flat 10% is not equitable as the people with more money have greater responsability and should be contributing more, and what the poor have often doesn't cover their needs.

The cries for Tax Reform often come from the nouveau riche and the people who have some money and want more. There was a very interesting book published in England recently that analysed various contries statistics and determined that the greater disparity between the rich and the poor, or the haves and the have-nots, leads to an unhealthy society.

A groundbreaking work on the root cause of our ills, which is changing the way politicians think. Why do we mistrust people more in the UK than in Japan? Why do Americans have higher rates of teenage pregnancy than the French? What makes the Swedish thinner than the Greeks? The answer: inequality. This groundbreaking book, based on years of research, provides hard evidence to show how almost everything—-from life expectancy to depression levels, violence to illiteracy-—is affected not by how wealthy a society is, but how equal it is. Urgent, provocative and genuinely uplifting, The Spirit Level has been heralded as providing a new way of thinking about ourselves and our communities, and could change the way you see the world

The Spirit Level: Why More Equal Societies Almost Always Do Better

Company Tax is something a bit different, as they give back to society in different ways and although it's not a "tax" providing employment, necessary services and other benefits, and it would be difficult to account for all of those things. Which is why that book is interesting as it looks at the end result to measure the inputs rather than trying to measure the inputs themselves...

[Deozaan]

A flat 10% is not equitable as the people with more money have greater responsability and should be contributing more, and what the poor have often doesn't cover their needs.

-Perry Mowbray (October 21, 2010, 08:46 PM)

I disagree with this statement. 10% is equitable because everyone is paying an equal percentage. Now, obviously if it costs $500 a month to pay for cost of living then 10% is going to dip a lot more into the person's income who makes $500 a month than the person making $50,000/mo.

And I also don't think it's the government's job to take from the "rich" to give to the "poor." Let the rich be charitable to the poor if they choose to. The rich are not necessarily responsible for the poor just because they have more money.

If I happen to have more money than someone else through my own sheer luck, due diligence, etc., why should I be punished and have my money forcibly taken away from me and given to someone else who through their own bad luck, wastefulness, etc., lost (or did not gain) money?

The rich have just as much a right to their own money as the poor. If it is not so, then that is when it becomes an inequitable society.

[Renegade]

A flat 10% is not equitable as the people with more money have greater responsability and should be contributing more, and what the poor have often doesn't cover their needs.

-Perry Mowbray (October 21, 2010, 08:46 PM)

I disagree with this statement. 10% is equitable because everyone is paying an equal percentage. Now, obviously if it costs $500 a month to pay for cost of living then 10% is going to dip a lot more into the person's income who makes $500 a month than the person making $50,000/mo.

And I also don't think it's the government's job to take from the "rich" to give to the "poor." Let the rich be charitable to the poor if they choose to. The rich are not necessarily responsible for the poor just because they have more money.

If I happen to have more money than someone else through my own sheer luck, due diligence, etc., why should I be punished and have my money forcibly taken away from me and given to someone else who through their own bad luck, wastefulness, etc., lost (or did not gain) money?

The rich have just as much a right to their own money as the poor. If it is not so, then that is when it becomes an inequitable society.

-Deozaan (October 21, 2010, 08:58 PM)

Read Karl Marx.

He's got a few good points to make.

[mouser]

I think we might want to skip trying to have a deep debate on taxation rates here.. that's more of a political discussion, which we try to avoid.

What upsets me about reading articles like this is not so much the broad strokes of the particulars of tax rates, but the fact that when you become a big corporation, everything is a game of legal loopholes -- and figuring out ways to have your lawyers find tricks around the law you can take advantage to circumvent the spirit of the law while avoiding prosecution for fraud and tax evasion.  Only the super rich can afford to play games like this with the legal system.

[Renegade]

Only the super rich can afford to play games like this with the legal system.

-mouser (October 21, 2010, 09:15 PM)

100% agreed. It's very much a shame.

...find tricks around the law [so] you can take advantage to circumvent the spirit of the law while avoiding prosecution...

-mouser (October 21, 2010, 09:15 PM)

This points to a deeper problem I think. The law, and American/Western culture, isn't about justice or right and wrong; it's about rules, regulations, and how to use them to your advantage. It's not a question of morality or ethics, which is what I believe we find repugnant.

When they say Lady Justice is blind, they fail to note that she's now also deaf, dumb, a quadriplegic, and chained and shackled to boot.

[Perry Mowbray]

Read Karl Marx.

He's got a few good points to make.

-Renegade (October 21, 2010, 09:04 PM)

The Spirit Level: Why More Equal Societies Almost Always Do Better has a lot of good things to say based on a lot of data over many years...

[Perry Mowbray]

Only the super rich can afford to play games like this with the legal system.

-mouser (October 21, 2010, 09:15 PM)

100% agreed. It's very much a shame.

-Renegade (October 21, 2010, 09:54 PM)

Combined with a general decline of philanthropy, I think it can only point a general increase in selfishness amongst the haves (be they individuals or companies) 

Our economics are so rooted in training our haves to be greedy and buy more (than they need)... was it Carter (when he was President) who said that America would defend their right to maintan the lifestyle they'd become accustomed to with military force (this was during one of the oil crisis I think)? Australia is currently stealing East Timor's Oil and Gas reserves...

[Renegade]

Read Karl Marx.

He's got a few good points to make.

-Renegade (October 21, 2010, 09:04 PM)

The Spirit Level: Why More Equal Societies Almost Always Do Better has a lot of good things to say based on a lot of data over many years...

-Perry Mowbray (October 21, 2010, 09:57 PM)

I so wish that I could just buy a PDF copy...

Found this: The Spirit Level Delusion: Fact-checking the Left's new theory of everything

It would be nice to get both and compare.

OT: I loathe buying books here. The prices are simply through the roof. I went into a book store the other day and just about choked. $50 book going for $120. (Ok, $49.99 going for $117.99.) I hate feeling like I'm getting fleeced.

[Perry Mowbray]

Found this: The Spirit Level Delusion: Fact-checking the Left's new theory of everything

It would be nice to get both and compare.

OT: I loathe buying books here. The prices are simply through the roof. I went into a book store the other day and just about choked. $50 book going for $120. (Ok, $49.99 going for $117.99.) I hate feeling like I'm getting fleeced.

-Renegade (October 21, 2010, 10:23 PM)

Yes, that's an interesting find: but the readers' comments were somewhat disconcerting... concerning the unbiased nature of the book. If you do read it I'd be interested in what you thought.

Certainly the Spirit Level comes with an outstanding pedigree   

[Renegade]

Yes, that's an interesting find: but the readers' comments were somewhat disconcerting... concerning the unbiased nature of the book. If you do read it I'd be interested in what you thought.

Certainly the Spirit Level comes with an outstanding pedigree   

-Perry Mowbray (October 21, 2010, 10:49 PM)

To be honest, I wouldn't expect too much from it. It's pretty easy to destroy. Creation is the difficult part. It would just be interesting to see if they had anything to say that I could actually swallow.

That being said, I really have no clue about either as I've not read them. I'm just sort of more inclined these days to mitigate my skepticism in places, and particularly in more constructive ways.

[4wd]

OT: I loathe buying books here. The prices are simply through the roof. I went into a book store the other day and just about choked. $50 book going for $120. (Ok, $49.99 going for $117.99.) I hate feeling like I'm getting fleeced.

-Renegade (October 21, 2010, 10:23 PM)

Still OT: That's why I don't buy books here

The library, AbeBooks, local Probus book swap, op shops, local book fair (this Melbourne Cup Day), CFA jumble sale and library book sales are the only places I get books these days.

[MilesAhead]

When it comes to taxation and loopholes, my favorite story is Clark Clifford. A big time man of influence, he made a phone call to a contact in the U.S. Senate and saved the owner of a corporation about $3Million in taxes for the year.  He hung up the phone, turned to the head of the company and said, "that will be $25,000 please."  Whereupon the client turned red and propounded that he'd be damned if he was going to pay anyone $25,000 to make a 10 second phone call.  Clifford said "as you wish" and dialed the contact again.  He just said "never mind" and hung up.

I don't know much about how all the stuff would work, accounting and all that.  But I think the reason it took a constitutional amendment in the U S of A to get income taxes is because, once you have income taxes, you have deductions.  Once you have deductions, you have to justify them. Once you have to justify them, then you have "well this amount here, what did you spend that on? You then went here, why did you go there? Was it a business meeting or a vacation?  Who did you talk to and what about?"  yadda' yadda'.  I'd rather just have a 10% sales tax and not keep tabs on my life under pain of perjury.

Perjury should be way more fun than that!

[Renegade]

When it comes to taxation and loopholes, my favorite story is Clark Clifford. A big time man of influence, he made a phone call to a contact in the U.S. Senate and saved the owner of a corporation about $3Million in taxes for the year.  He hung up the phone, turned to the head of the company and said, "that will be $25,000 please."  Whereupon the client turned red and propounded that he'd be damned if he was going to pay anyone $25,000 to make a 10 second phone call.  Clifford said "as you wish" and dialed the contact again.  He just said "never mind" and hung up.

-MilesAhead (October 22, 2010, 01:57 AM)

That's an excellent story. I've never heard it before.

I don't know much about how all the stuff would work, accounting and all that.  But I think the reason it took a constitutional amendment in the U S of A to get income taxes is because, once you have income taxes, you have deductions.  Once you have deductions, you have to justify them. Once you have to justify them, then you have "well this amount here, what did you spend that on? You then went here, why did you go there? Was it a business meeting or a vacation?  Who did you talk to and what about?"  yadda' yadda'.  I'd rather just have a 10% sales tax and not keep tabs on my life under pain of perjury.

Perjury should be way more fun than that!

-MilesAhead (October 22, 2010, 01:57 AM)

Hahahaha~!

But yeah. It's pretty invasive. There's no reason to know every detail.

[Darwin]

Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google’s tax disclosures.

Well, if you set up the rules of the game that way, and people take advantage of it, can you really blame them?

On a related topic, if you are a US citizen, there is no hope in Hell for you to get around tax. You must have a company set up. The US expects all income from all sources worldwide to be declared in excess of $75,000 (or something like that). So, if you live overseas, you still need to pay Uncle Sam. Corporations do not need to pay Uncle Sam, but private citizens do.

Now, is that messed up or what? I don't need to rant about it. I'll leave the ranting to some of the Americans here.

-Renegade (October 21, 2010, 07:15 PM)

Well... unless you declare non-residency (which is a bit of a hassle and an even greater hassle to "un-do" later), Canadians who live overseas are expected to pay income tax on all foreign earned income at the same rate as they'd pay at home (though usually tax agreements between Ottawa and other governements mean that you pay the difference between tax paid in your country of residence and the applicable Canadian tax). Or has this changed in recent years? Anyway, I was rather jealous of the $75k for free thing that Americans enjoyed! But then, I never made anywhere near that when I lived and worked abroad, so...

[jpprater]

There have been a lot of good comments in here, and I respect Mouser's wish to keep this non-political, but I would like to say just a few things with regard to some of what I've read.

1.  Corporate "tax evasion" is not necessarily a matter of selfishness on the part of company owners.  It's a matter of the corporation's owners feeling that they know better about how to spend their own money than the government does.  And so they used their money and influence with the government to try and protect the money that they have earned and their own ability to spend it as they wish.  There are some selfish people running corporations (can you say Enron and Sallie Mae? I knew you could), but not all corporations do this for evil purposes.

2.  It is not automatically necessary for a person to be fabulously rich in order to avoid paying taxes.  It's a matter of understanding the law and the ways that money can work.  Charitable donations and gifts up to US$10K are tax-free.  Money spent on certain types of business expenses is deductible from your taxes, up to a certain percentage.  Money utilized in certain types of investments is tax-free until the time of withdrawal.  Anyone can do it if they know how, although it is definitely true that it is easier to do with more money than with less.

3.  Corporations still pay.  But they definitely pay much less, because of the tax rules that come into play with corporations.  A corporation is not a person or group of people.  It's a stack of legal documents.  The tax laws can't apply to it in the same way that they do to citizens.

4.  What Google and other corporations do in regard to their taxes is not evil.  Money is nothing but a tool; how you use it is what makes it evil or good.

Jon

[Darwin]

BTW, while I agree that a flat 10% tax may be overly simplistic, I have always assumed from arguments that have been advanced advocating a "flat" tax, that there would still exist a base income below which no tax would be payable, so Perry and Deozaan's concerns about the very poor being discriminated against wouldn't, I think, apply. I still dither about whether I agree with the idea, but from my position of ignorance it sounds reasonable  

I don't make very much (never have, never will), but I have no problem paying taxes. Taxation makes possible the society in which I live and the freedoms that I enjoy. I like sleeping at night knowing that there is a police force patrolling the city. Services like sewers and paved roads are nice, too. However, what does get my scrotum in a knot is that fact that I pay a great deal more than 2.4% income tax on the peanuts that I earn, and I'm helping to support a family of four. Ultimately, this is one of those discussions to be avoided because good arguments can be made from both sides of the issue (corporations employ lots of people and must be profitable in order to continue to do so, etc.). If I think too hard about it, my head spins - must be a sign of a circular argument!

Apologies for continuing the discussion about taxation rates, etc. Couldn't resist.

PS I note that Jon (jpprater) posted while I pecked this missive out... he's made some interesting points 

[tomos]

There's lots of fear out there too - dont put too much pressure on the corporations or they'll simply up and go. (Off-topic/ Dont put too much pressure on the banks cause people will lose faith in them.)
I dont know what the solution is but I dont see anyone trying any interesting ideas...

I listened to this video lately 23 Things They Don't Tell You About Capitalism - gotta say I found it difficult to undertand the guy cause of his accent. But anyways, he is a supporter of capitalism, but he points out that this idea of the totally-freemarket economy (which has only come to the fore in the last 30 years or so) hasn't been working and didnt work the last time it was tried (1st half of the 19th century). Watch from about min 25:00 for interesting interview about this.

Me, I dont see why corporations shouldn't be taxed 'normally', and I'm not really persuaded otherwise by anything I've read here.

And I dont know what the taxation levels are in the states and Canada, but in Germany there's already 7% sales-tax/VAT/Mehrwertsteuer on foodstuffs and 19% on everything else. Then there's your income tax. And that's normally a lot higher than 10% too, depending what you earn. (I'm not too well up on the exact income-tax system here.)

A flat 10% is not equitable as the people with more money have greater responsability and should be contributing more, and what the poor have often doesn't cover their needs.

-Perry Mowbray (October 21, 2010, 08:46 PM)

I disagree with this statement. 10% is equitable because everyone is paying an equal percentage. Now, obviously if it costs $500 a month to pay for cost of living then 10% is going to dip a lot more into the person's income who makes $500 a month than the person making $50,000/mo.

-Deozaan (October 21, 2010, 08:58 PM)

Deozaan,
you've disagreed and then you make a statement that agrees... I suspect you've never lived near the poverty line, if you can so casually disagree - and yet agree But as Darwin says, low income earners would ideally be excluded.

[MilesAhead]

Assuming you could collect the sales tax with some reliability, it should be simpler and more equitable than an income tax. Government never keeps up with the cost of living of its citizens who don't work for it. Chances are high that the income level below which you aren't taxed is not sufficient to live on.  Or if it is when the stipulation is enacted, it won't be for long.

Presumably people with a lot of money will buy more stuff and so pay more sales tax.  If you are poor and can't afford to buy steak with the tax, then you may be able to get by with hamburg.. but if they take the money out of you before you even cash your paycheck, you may not have anything to eat.

[f0dder]

I'd like taxes - and the legal system - to be majorly refined, probably in every country around. Some laws are too restrictive, others are too loose... and there's way too many loopholes. Problem is, what the heck can one design that's better? Too few or too loosely defined laws, and there will be trouble. Trying to cover every situation, and you're back at a tangled mess that will still have loopholes. Same goes for taxation.

I really wish it could all be simplified and tons of special cases be weeded out, and we could get a worldwide system that's super liberal (in the freedom sense, allowing you to do pretty much whatever you want as long as it doesn't cause harm to you or others - obviously this still means traffic rules etc, but if people want to boost themselves on chemicals, have weird sex, or whatever, let them) - but still offers a decent social security net, so that everybody will have acceptable living standards. (Let the broadest shoulders carry the biggest burden, but don't rip off hard-working people to support lazy bums; it's a fine balance).

Ah well, that's drifting a bit, and probably too close to being "political"; it's Utopia, anyway, and I believe mankind is greedy and egoistical by nature, and things won't get much better than they currently are.

[Deozaan]

First of all let me say that it's not my intent for this post to be political. While the subject of taxation is by nature political, since some political entity must enforce the taxation, what I write below is just my opinion on a person having a right to keep their own property.

... I suspect you've never lived near the poverty line, if you can so casually disagree - and yet agree

-tomos (October 22, 2010, 11:00 AM)

I don't know what is considered the "poverty line" where I live. I've lived on what I consider very little compared to those in my local area, but I think that's all relative. I think in the USA what is officially considered poverty is still very much a luxury compared to some other parts of the world.

[EDIT]You got me wondering, so I looked it up. According to this chart here I've lived very near the poverty line (including below it) for a few years of the past decade. Thankfully that hasn't been the case for the past couple of years. I guess I'm moving up in the world. [/EDIT]

I've pretty much always had a place to sleep, food to eat, and usually even a junker car to drive. I don't earn much, but I'm frugal and live on what I have. I don't use credit cards, I don't have car payments, and in a few months I'll have my student loan paid off and be completely debt free, which in a manner of thinking will make me one of the richest people in America.

If I continue to live in such a frugal manner and over my lifetime save up a million dollars, why should I have to pay more on taxes and social services than someone who lived lavishly and irresponsibly on credit and debt their whole life? I feel no moral obligation to prevent people from having to face the consequences of their actions and behavior.

On the other hand, I know that life isn't fair and not everyone chooses to live in the circumstances they find themselves in. That's why I personally donate more than 10% of my gross income to charitable causes (of my choice!) every month, even in times when I'm not sure I'll have enough money to make it. I don't say that to brag. What I'm saying is that I am doing what I can (and choose) with what I have, rather than demanding others do what I want with their money. If I had billions of dollars, I could certainly do a lot more. So it's my responsibility to be true to that, and if I ever get a billion dollars (which I'd surely have to earn, mind you) I'd better do a lot more than what I'm doing now.

I suppose my whole point is that individuals are generally much better stewards of their own property (money) they had to work hard for than someone else's that was just given to them. So why not let them keep as much of it as possible to use as they see fit, rather than having someone else lord over them telling them how and when it must be used?

[tomos]

Good post Deo

I was actually thinking of the growing number of people here that work three or even more part time jobs and are still on the bread line (there's no minimum wage, pay is generally very poor for part time work) - working three jobs costs a lot more than one full one (can we afford new winter shoes?)
The whole welfare topic is a can of worms I think and maybe best left closed here.

I would say they could make life easier for the people who are working *and* on the breadline - in most countries.
People with CC debt pay through the nose for that anyway - they're probably paying more than anyone.