This is interesting, but I'd like more detail as to how companies can hide profits in other countries. It has never made any sense to me though I do not doubt it is happening. Doesn't it just mean they are paying taxes in those countries instead of the US? Or are they flat out cheating on their taxes? I have a smart accountant and every time I tell him some rich guru said you can move money here to save money on taxes there he rolls an eye at me and says there is no way to legally hide your income like these people pretend to do.
I worked. for a large international multibillion dollar company.
Generally if you are a US corporation and you open a subsidiary in a country with low taxes, say Ireland with maybe an 11% tax rate, then you pay 11% to Ireland and you pay the difference in that and the US rate to the US Treasury. When I was working on these projects the rate was about 37% so my company would pay a marginal rate of 26% to the US.
There are always people in Congress trying to 'encourage' the market to do certain things by manipulating the tax code. For example, they can encourage investment by giving an immediate tax deduction for investment made in the US. In that case businesses can borrow money and build something, then immediately deduct a large portion of that expenditure from income. If that project is large enough, they might completely eliminate the need to pay any US taxes. They are doing exactly what the Congress had hoped they would do... (Obviously some people in government pretend to be outraged that "XYZ company paid not a dime in taxes last year."
One serious problem that we have in the US is that we charge a lot more in income taxes than many other modern civilized and reasonable countries. If a US company wants to reduce taxes, then a logical move is to have some foreign company buy them so that they are not a US owned company anymore. (Alternatively, they can just move overseas. but that can be complicated.) Say they moved to Ireland and 80% of their business was in countries other than the US. Likely, that 80% of their income would now be taxed at lower rates (international tax is complex, if nothing else.) The 20% that is in the US would likely be taxed at high US rates, but their overall tax bill would be reduced. To counter this, the US has on occasion reduced tax rates on companies to keep them here, keep jobs here, etc. They also have come up with various tax plans that do things like tax income brought back into the US at very low rates (like less than 6%)... and again we find people in Congress complaining that XYZ Company paid a low amount of taxes... even though they are following the rules that Congress itself deemed good and appropriate.
"Hiding profits" in other countries to evade taxes is illegal. There are obviously criminals who do things like that, but probably 99.9% of what you hear about companies not paying their fair share is just political propaganda, most companies follow tax law to the letter. It's just simply that Congress decided to pass som law to give companies a break if they do something that Congress wants, something like building a new factory with 1,000 jobs, or bringing in profits from a foreign owned company to invest in research in the US, etc.
A 'US corporation' isn't going to open a 'subsidiary' in a foreign country just to split their tax burden between two different countries. The way you explained that in the beginning of your comment provides no benefit to them. They will move their headquarters to Ireland or wherever else has the best tax rates and pay that tax rate
I agree with your first comment. My company opened subs all over the world not for tax reasons, but to take advantage of business opportunities in those locations. However, the tax situation in other countries often plays a large role in the selection of which countries had the best business opportunities. Some countries had low tax rates, but then also had laws that were very punitive if earnings were exported, so some situations are complicated. Certainly when it comes to opening up a new business, low tax countries do attract a lot of capital, some of which would have otherwise gone to the US.
If a US corporation moves it's headquarters that doesn't impact the fact that it's still a US corporation and has to pay US taxes... Otherwise we would likely see a lot of US corporations moving their headquarters to places like Ireland.
Since I worked for a US company, I only viewed tax from that perspective. I suspect that in other countries tax situations might be completely different from a US corporation with respect to foreign owned businesses. I know that the US tax code is designed to pull in taxes made in foreign countries, I have no idea if all countries pull that stunt... I suspect not.
Thanks for taking time to explain all of this. This is exactly what I was thinking. And I'm all for being able to immediately write-off as much as possible in investment expenses of new infrastructure instead of depreciating it over time. That type of thing keeps the economy going and encourages natural growth instead of Government subsidized growth. So at the end of the day we need to be a little careful when we say a company is not paying taxes unless they are actually cheating which I am sure some do.
I'm not certain that there is such a thing as "Government subsidized growth." The government only spends what it takes from people either directly through taxes, over time by incurring debt, or by depreciated the currency by printing a. lot of it... But that's another discussion.
I do think that a lot of people miss the point when talking about corporate taxes. People suggest that businesses should pay more tax, but don't realize that those taxes are simply passed on to customers. In reality, business doe not pay tax, thy simply collect it. From a selfish perspective, it would help me if the government taxed business enough to eliminate personal income tax completely. Prices on everything would go up, but a lot more people would be paying taxes that are now... My personal tax bill would go down, and I would not have to mess with filing income tax...
Don't hold your breath waiting for the "evidence" to appear. By the way, hang onto that accountant and recommend him to your friends and family—he's a keeper!
You can’t do it easily as an individual. But wealthy corporations can. It costs a lot of money to set it up and smart tax attorneys and cooperative jurisdictions with favorable tax regulations, but it’s absolutely doable.
Old news. Multinational corps have ALWAYS used the variance of tax, patent, and property laws in the various jurisdictions in which they operate in order to minimize overall taxation of assets and/or income, thereby maximizing corporate profits and acting, as they are legally bound, to the benefit of the corporations' owners, the shareholders. The business strategy is to move expenses to the jurisdiction where they can most effectively offset income and to move income away from jurisdictions where it cannot be shielded to places where it can. Simple, basic, and boring Business 101 stuff that's been around since the East India Company centuries ago.
As long as you can legitimately incur those expenses or create that income in the jurisdiction where you file them, you can move components of your business around to different locations. If you want to claim, for example, that income made in the US was actually made in another country or that expenses incurred in a foreign country should reduce US income... and you are a US company, then I believe that the IRS will not look on that with favor.
My experience has been from a US company perspective. Perhaps there is a country out there that will let you move expenses or income around. I can't imagine why they would allow that just on paper.
The classic example I recall is placing your brand trademarks in a company in a low-tax district (there are various way to accomplish the dirty deed). That company then leases use of those trademarks to your operating company in a high-tax jurisdiction. Income thus flows from high-tax to low-tax and expenses flow the other way from low-tax where they have little value shielding income to high-tax where they are quite valuable in doing so.
If the main company is a US entity paying say a 35% marginal rate and they move that income to a low tax country, say they pay a 10% marginal tax rate, then the IRS charges them an additional 25% to the US treasury on the income so that in the end they pay 35% in total.
If the main company sold the trademark to the foreign company, then you could move some income out of the US company. But then the main company is not really saving taxes, they are giving away income to a different company.
If that foreign company is then conducting business in the US, the IRS will charge them US rates on that business.
Grated they may be able to avoid some sales or property tax, or perhaps the cost of manufacture in another country would be lower than in the US because labor and raw products might be cheaper ...
In the US you can save some state income taxes by moving your business from say California to Texas, although the higher income you get from doing that will be taxed by the Feds. The various states will still want their sales and property taxes paid at their own rates on any sales or property located in their domain.
I believe though, that the US company that sets up a tax operation in a country with a lower tax rate, does not pay that differential US portion of the rate until they actually repatriate the money back into the U.S, right?
Nominal corporate tax rates in the USA have been 21% for the better part of a decade. As far as I know, there are more sophisticated tax avoidance avenues available to multinational corporations than either of the simple cases you and I presented. The point is that differential forms of corporate organization, tax rates, financial definitions, and regulatory processes in various locations around the world are available as tools for businesses to minimize their overall tax payments. While equalization efforts such as the provisions you describe aim to frustrate such schemes, they are less than fully effective given time, motivation, and ingenuity. There has been some movement to "harmonize" tax rates and treatment worldwide which would seem to be a more effective measure in providing a "level playing field" for globalized corporations, although that remains to be seen.
Corporations don’t pay taxes. People pay taxes. Corporations send money to the government by restraining compensation, increasing their prices or paying lower dividends to their shareholders. At the end of the day it is people who pay.
Your point was correct. The non sequitur was "corporations are people," too. Absurd...although corps, qua corps, do possess (and exercise) constitutionally protected free speech rights. Hmm...
No I get your point. Corporation are composed of people for example shareholders employees and vendors as example. They as a collective may share a viewpoint. They as a collective have a right to express that viewpoint. Citizens United as I understand it is about those people and their right to express their views as a collective made up up individuals who not only have an individual right to free speech but also as a collective.
All true, but largely beside your main point that corporations act as uncompensated and well-disguised tax collectors for government, a point the lady missed entirely. A corporation which does not produce profit (income in excess of expenses) cannot remain in business indefinitely. Such profits as are booked are taxed at least once directly at the corporate level and often many times indirectly at the shareholder, bondholder, and other investor levels.
Now that this headline is out the Warrens and the Sanders of the world will scream about how unfair it is. They will be bought off with no show Professor jobs at Harvard or their own cozy corner of South Hero Island (VT) and the cycle will continue to repeat itself. Big business will continue to hire its army of tax lawyers and accountants to ensure this happens until we scrap the current tax code and start over.
I'd love to see your "start from scratch" tax code. If you gave it 5 minutes of thought, you'd understand why the current code is (and has to be) structured the way it is. You would also benefit from looking at other countries with social democratic capitalist political economies.
Congratulations to Pfizer and their brilliant management that allows them to make a fortune from a defective product, which was funded by taxpayers, and then, to avoid paying taxing themselves.
Ah, a collective. No thanks. Poor record of performance over the history I've studied. Perhaps you've found sources of alternative history I might consult. If all you have is promises of future bliss, I've got that covered with my Maker, thanks.
I’m old enough to remember when Congressional Democrats were losing their minds wanting to see President Trump’s income tax return. They were appalled to learn he knew how to take advantage of the tax code yet this story gets no attention??
Yeah...Biden "beat Big Pharma" with an ass-kicking to the teeth of American taxpayers.
The "who's gonna take Trump's vaccine" guy who then later tried to make everyone take it.
This is interesting, but I'd like more detail as to how companies can hide profits in other countries. It has never made any sense to me though I do not doubt it is happening. Doesn't it just mean they are paying taxes in those countries instead of the US? Or are they flat out cheating on their taxes? I have a smart accountant and every time I tell him some rich guru said you can move money here to save money on taxes there he rolls an eye at me and says there is no way to legally hide your income like these people pretend to do.
I worked. for a large international multibillion dollar company.
Generally if you are a US corporation and you open a subsidiary in a country with low taxes, say Ireland with maybe an 11% tax rate, then you pay 11% to Ireland and you pay the difference in that and the US rate to the US Treasury. When I was working on these projects the rate was about 37% so my company would pay a marginal rate of 26% to the US.
There are always people in Congress trying to 'encourage' the market to do certain things by manipulating the tax code. For example, they can encourage investment by giving an immediate tax deduction for investment made in the US. In that case businesses can borrow money and build something, then immediately deduct a large portion of that expenditure from income. If that project is large enough, they might completely eliminate the need to pay any US taxes. They are doing exactly what the Congress had hoped they would do... (Obviously some people in government pretend to be outraged that "XYZ company paid not a dime in taxes last year."
One serious problem that we have in the US is that we charge a lot more in income taxes than many other modern civilized and reasonable countries. If a US company wants to reduce taxes, then a logical move is to have some foreign company buy them so that they are not a US owned company anymore. (Alternatively, they can just move overseas. but that can be complicated.) Say they moved to Ireland and 80% of their business was in countries other than the US. Likely, that 80% of their income would now be taxed at lower rates (international tax is complex, if nothing else.) The 20% that is in the US would likely be taxed at high US rates, but their overall tax bill would be reduced. To counter this, the US has on occasion reduced tax rates on companies to keep them here, keep jobs here, etc. They also have come up with various tax plans that do things like tax income brought back into the US at very low rates (like less than 6%)... and again we find people in Congress complaining that XYZ Company paid a low amount of taxes... even though they are following the rules that Congress itself deemed good and appropriate.
"Hiding profits" in other countries to evade taxes is illegal. There are obviously criminals who do things like that, but probably 99.9% of what you hear about companies not paying their fair share is just political propaganda, most companies follow tax law to the letter. It's just simply that Congress decided to pass som law to give companies a break if they do something that Congress wants, something like building a new factory with 1,000 jobs, or bringing in profits from a foreign owned company to invest in research in the US, etc.
A 'US corporation' isn't going to open a 'subsidiary' in a foreign country just to split their tax burden between two different countries. The way you explained that in the beginning of your comment provides no benefit to them. They will move their headquarters to Ireland or wherever else has the best tax rates and pay that tax rate
I agree with your first comment. My company opened subs all over the world not for tax reasons, but to take advantage of business opportunities in those locations. However, the tax situation in other countries often plays a large role in the selection of which countries had the best business opportunities. Some countries had low tax rates, but then also had laws that were very punitive if earnings were exported, so some situations are complicated. Certainly when it comes to opening up a new business, low tax countries do attract a lot of capital, some of which would have otherwise gone to the US.
If a US corporation moves it's headquarters that doesn't impact the fact that it's still a US corporation and has to pay US taxes... Otherwise we would likely see a lot of US corporations moving their headquarters to places like Ireland.
Since I worked for a US company, I only viewed tax from that perspective. I suspect that in other countries tax situations might be completely different from a US corporation with respect to foreign owned businesses. I know that the US tax code is designed to pull in taxes made in foreign countries, I have no idea if all countries pull that stunt... I suspect not.
This!
Thanks for taking time to explain all of this. This is exactly what I was thinking. And I'm all for being able to immediately write-off as much as possible in investment expenses of new infrastructure instead of depreciating it over time. That type of thing keeps the economy going and encourages natural growth instead of Government subsidized growth. So at the end of the day we need to be a little careful when we say a company is not paying taxes unless they are actually cheating which I am sure some do.
I'm not certain that there is such a thing as "Government subsidized growth." The government only spends what it takes from people either directly through taxes, over time by incurring debt, or by depreciated the currency by printing a. lot of it... But that's another discussion.
I do think that a lot of people miss the point when talking about corporate taxes. People suggest that businesses should pay more tax, but don't realize that those taxes are simply passed on to customers. In reality, business doe not pay tax, thy simply collect it. From a selfish perspective, it would help me if the government taxed business enough to eliminate personal income tax completely. Prices on everything would go up, but a lot more people would be paying taxes that are now... My personal tax bill would go down, and I would not have to mess with filing income tax...
Don't hold your breath waiting for the "evidence" to appear. By the way, hang onto that accountant and recommend him to your friends and family—he's a keeper!
You can’t do it easily as an individual. But wealthy corporations can. It costs a lot of money to set it up and smart tax attorneys and cooperative jurisdictions with favorable tax regulations, but it’s absolutely doable.
If you truly want to know how they do it, you need to do a few things first:
1) Tell your foamily and friends you will be unavailable for a few hoursl hours.
2) Brew a pot of coffee.
3) Get the antacids if you are inclined
...and then read this report from 2015, about how Pfizer does the magic.
https://americansfortaxfairness.org/files/Pfizers-Tax-Dodging-Rx-Stash-Profits-Offshore-Final1.pdf
Enjoy!!
Old news. Multinational corps have ALWAYS used the variance of tax, patent, and property laws in the various jurisdictions in which they operate in order to minimize overall taxation of assets and/or income, thereby maximizing corporate profits and acting, as they are legally bound, to the benefit of the corporations' owners, the shareholders. The business strategy is to move expenses to the jurisdiction where they can most effectively offset income and to move income away from jurisdictions where it cannot be shielded to places where it can. Simple, basic, and boring Business 101 stuff that's been around since the East India Company centuries ago.
As long as you can legitimately incur those expenses or create that income in the jurisdiction where you file them, you can move components of your business around to different locations. If you want to claim, for example, that income made in the US was actually made in another country or that expenses incurred in a foreign country should reduce US income... and you are a US company, then I believe that the IRS will not look on that with favor.
My experience has been from a US company perspective. Perhaps there is a country out there that will let you move expenses or income around. I can't imagine why they would allow that just on paper.
The classic example I recall is placing your brand trademarks in a company in a low-tax district (there are various way to accomplish the dirty deed). That company then leases use of those trademarks to your operating company in a high-tax jurisdiction. Income thus flows from high-tax to low-tax and expenses flow the other way from low-tax where they have little value shielding income to high-tax where they are quite valuable in doing so.
If the main company is a US entity paying say a 35% marginal rate and they move that income to a low tax country, say they pay a 10% marginal tax rate, then the IRS charges them an additional 25% to the US treasury on the income so that in the end they pay 35% in total.
If the main company sold the trademark to the foreign company, then you could move some income out of the US company. But then the main company is not really saving taxes, they are giving away income to a different company.
If that foreign company is then conducting business in the US, the IRS will charge them US rates on that business.
Grated they may be able to avoid some sales or property tax, or perhaps the cost of manufacture in another country would be lower than in the US because labor and raw products might be cheaper ...
In the US you can save some state income taxes by moving your business from say California to Texas, although the higher income you get from doing that will be taxed by the Feds. The various states will still want their sales and property taxes paid at their own rates on any sales or property located in their domain.
I believe though, that the US company that sets up a tax operation in a country with a lower tax rate, does not pay that differential US portion of the rate until they actually repatriate the money back into the U.S, right?
Nominal corporate tax rates in the USA have been 21% for the better part of a decade. As far as I know, there are more sophisticated tax avoidance avenues available to multinational corporations than either of the simple cases you and I presented. The point is that differential forms of corporate organization, tax rates, financial definitions, and regulatory processes in various locations around the world are available as tools for businesses to minimize their overall tax payments. While equalization efforts such as the provisions you describe aim to frustrate such schemes, they are less than fully effective given time, motivation, and ingenuity. There has been some movement to "harmonize" tax rates and treatment worldwide which would seem to be a more effective measure in providing a "level playing field" for globalized corporations, although that remains to be seen.
Corporations don’t pay taxes. People pay taxes. Corporations send money to the government by restraining compensation, increasing their prices or paying lower dividends to their shareholders. At the end of the day it is people who pay.
But according to Citizens United, corporations are people, right? What a farce.
Well they are owned and operated by people. As such they have a right to a view point and to express that viewpoint
Quick, we need a dictionary! Now how do you spell 'non sequitur'?
Just making the point that measuring anything by how much a corporation send to the treasury is not a good metric
Your point was correct. The non sequitur was "corporations are people," too. Absurd...although corps, qua corps, do possess (and exercise) constitutionally protected free speech rights. Hmm...
No I get your point. Corporation are composed of people for example shareholders employees and vendors as example. They as a collective may share a viewpoint. They as a collective have a right to express that viewpoint. Citizens United as I understand it is about those people and their right to express their views as a collective made up up individuals who not only have an individual right to free speech but also as a collective.
All true, but largely beside your main point that corporations act as uncompensated and well-disguised tax collectors for government, a point the lady missed entirely. A corporation which does not produce profit (income in excess of expenses) cannot remain in business indefinitely. Such profits as are booked are taxed at least once directly at the corporate level and often many times indirectly at the shareholder, bondholder, and other investor levels.
Now that this headline is out the Warrens and the Sanders of the world will scream about how unfair it is. They will be bought off with no show Professor jobs at Harvard or their own cozy corner of South Hero Island (VT) and the cycle will continue to repeat itself. Big business will continue to hire its army of tax lawyers and accountants to ensure this happens until we scrap the current tax code and start over.
I'd love to see your "start from scratch" tax code. If you gave it 5 minutes of thought, you'd understand why the current code is (and has to be) structured the way it is. You would also benefit from looking at other countries with social democratic capitalist political economies.
That’s how these big corporations were set up. To prey on the average American whole screwing them over: https://unorthodoxy.substack.com/p/donating-to-a-good-cause-how-billionaires
Pfizer is the cancer.
Congratulations to Pfizer and their brilliant management that allows them to make a fortune from a defective product, which was funded by taxpayers, and then, to avoid paying taxing themselves.
big pharmafia
That's how the elite work conspiring against middle class average citizen and then use the #conspiracytheory as a hoax plot.
Why do you hate grandma?
😡
Pfizer pays NO taxes.
Maybe it's time you started doing the same…
https://actionabletruth.substack.com/p/the-great-tax-strike
You go first, Mike. If you're wearing other than orange in 5 years, I'll be right behind you...
You clearly don't understand. It MUST be a collective move. We must all (or at least enough of us) do it together.
If we don't, we will all die together.
Heck, we might be all already dead with an attitude such as yours!
Ah, a collective. No thanks. Poor record of performance over the history I've studied. Perhaps you've found sources of alternative history I might consult. If all you have is promises of future bliss, I've got that covered with my Maker, thanks.
I am not referring to a collective. Collectivism is what got us in this mess in the first place!
I suggest you read my article and you'll understand (hopefully)
https://actionabletruth.substack.com/p/the-great-tax-strike
Ah, an O-ist. You guys pop up in the strangest places...
"Collective Move" refers to one made by people together to advance a common interest. It does NOT refer to people living in a collectivist society.
I probably should have clarified it better.
I’m old enough to remember when Congressional Democrats were losing their minds wanting to see President Trump’s income tax return. They were appalled to learn he knew how to take advantage of the tax code yet this story gets no attention??
Hey killing hundreds of thousands in an untraceable way has privileges
America should do what China does. Make themselves a partner and take a precentage off THE TOP.
Well they did save the world from Covid. Be nice 🤣