Some Corporations Pay a Lot More Taxes Than Others(bloomberg.com) |
Some Corporations Pay a Lot More Taxes Than Others(bloomberg.com) |
When money is paid to an individual, tax it as income tax. Very simple. Don't give firms an incentive to act as tax shelters or tax avoiders.
Think about all the legal fees that have been spent by the firms on that list to avoid and reduce corporate taxes. It's outlandish.
Not only do the complicated tax avoidance schemes waste lots of money getting created/maintained, they also drastically reduce transparency and make auditing the company (by regulators, shareholders, etc.) far more subjective and complex.
There is no issue of fairness, since all the firms can conceivably do any of the avoidance schemes any of the others are doing if it offers positive ROI. The issue is that so much time, money, and energy is spent on corporate taxation that should be spent on things that benefit society.
Shareholders in Apple want Apple to be able to make big investments or acquisitions and are willing to let the money sit there rather than take it as a dividend. This would not be true for most firms.
I'd be curious to hear someone who knows more accounting's view on this.
I've always thought that the answer was to have wealth taxes, easier to avoid but surely what we should actually aim for.
Oh, I totally think this is where we should be going, too! Income seems like such a weird thing to tax; the wealthiest people don't necessarily have income, and high earners aren't necessarily that wealthy. In terms of "tax the rich", I think wealth taxes are more along the lines of what people envision.
It would simplify things so much, too; you don't have to worry about capital gains vs. ordinary income, or gifts, or the so-called "death tax". Businesses don't need to withhold taxes.
It seems like a simple, low, flat wealth tax, over a certain cut-off, would be best. If would counteract the march to aristocracy and dynastic families, unless the children are similarly able to provide value with their assets. Otherwise their wealth will dwindle over time and others will have a shot.
I think the two negatives I can think of are: 1) dealing with liquidity - you might be "worth" millions, but does that mean you can afford your tax bill? and 2) off-shore havens storing the wealth. But neither seem insurmountable.
I'd love to see any discussions of pros-and-cons of this approach to taxation. I know Islam proscribes a wealth tax, Zakat, but I'm not sure how it works in practice.
You can already avoid paying any corporation tax by taking money out of a company as salary.
In the UK you have dividend tax credit so effectively when you take a dividend you get the tax back that has already been paid (as corporation tax).
So both those reasonable ways of extracting money from a company allow you to not pay any additional tax above what income tax would be.
However if there was no corporation tax then the loophole / incentive would be to move money out of the jurisdiction and extract the dividends in a zero tax country.
This is effectively what the big multinationals do via transfer pricing etc but not having any corporation tax would no doubt make it a lot easier for more companies to do that.
- Corporate taxes reduce the competitiveness of a jurisdiction and create a market for tax havens like the Caymans which add no value.
- Companies' tax avoidance schemes are massively complex and create an incentive to hide earnings and obscure profits, making this information less transparent to markets.
- A company's share price should reflect company performance only, not the performance of the company's accountants in the realm of tax minimization.
- Offshore tax avoidance schemes reduce government revenues. Google avoids taxes by running such a scheme. Why shouldn't Google pay the same fair share as a tiny startup that lacks the budget to set up such a scheme? Why should governments lose out on the revenues?
- By simply taxing the money when it is income or capital gains, governments can get the proper amount of revenue. Suppose Google evaded $10B in taxes via its offshore scheme. This $10B would instead have been collected from shareholders and employees via capital gains and income taxes.
Why don't we switch to a system of zero corporate tax? The firms like Google that have invested heavily to set up an offshore tax avoidance system are quite happy with the result. They get to be insulated from smaller competitors who do not have the budget to set up their own scheme.
Larger firms like WalMart are cash cow businesses that are not doing enough R&D to offset the profits. Investors in WalMart are OK with this and the shares are priced accordingly. If WalMart paid no corporate tax, the dividends would be higher and the revenue could be captured by capital gains tax and income tax.
"Amazon's corporate income tax bill is so small, though, because its corporate income (aka profit) is so small. Wal-Mart's pretax income since 2008 has totaled $209 billion, Amazon's less than $11 billion. So while Amazon's rise to fifth-biggest market cap in the world on the strength of such small earnings is a fascinating and perhaps disturbing phenomenon, it doesn't necessarily signal a problem with our system of corporate taxation."
Bezos decided, "we need to grow, and to grow we need equipment and real estate, so I'm going to spend the profits on those assets, since we will get more bang for our buck than just holding onto after-tax cash."
A corporation doesn't just accidentally conduct business that way lol, for better or worse.
If you make profits you pay tax - Amazon doesn't pay tax because it doesn't make profits. It invests a lot of its operating cashflow true but that is different.
> Wal-Mart's pretax income since 2008 has totaled $209 billion, Amazon's less than $11 billion.
Of course many unprofitable companies invest poorly, but Amazon's massive sustained growth indicates they've invested well.
For most of their early existence, they didn't have bubbly capital markets to ride as Amazon did during the dotcom bubble and presently. What made Amazon possible turned out to be a very short-term fluke of history that Bezos took great advantage of. He needed to thread the needle and did just that. Amazon nearly collapsed into insolvency specifically because rather than rely on a profitable business they were leaning on funding to subsidize their vast red ink (as eg Uber is currently). That's an approach Walmart never had the option of taking, and in the decades since they've also never had the luxury of routinely being valued at 200x earnings. Amazon isn't a special alien organism, they're one part retailer (boring old retail), one part platform for distribution (eg retail and media), one part software company (cloud etc); they are particularly good at what they do.
Walmart pays high taxes because they generate most of their income in the United States market. Which is the same reason that Delta has a high corporate income tax, and the same reason Whole Foods does. It's the reason Foot Locker paid a 34% corporate income tax rate last year.
That's not really the same thing. ISOs are taxed (as income) because you're purchasing something for below-market price, so the difference between the market price and the price you pay is income. If you hold onto it for long enough, you may then be able to qualify for capital gains tax when you sell it, but that's different.
And in addition, that's the individual who's being taxed on it (the value of their own income).
If you think of how this works similarly for publicly-traded companies, it's easier to understand.
Wal-Mart decided to what, I guess keep all the cash on hand or something. I didn't look up their 10K or 10Qs, but that's what I assume is happening.
I'm glad Amazon doesn't pay that much in taxes. 609B in tax money per year goes to the US Military, which has been responsible for more death and destruction on this planet than could ever be imagined previously.
So, thank you Amazon for making sure the warmongers don't get too drunk off of your success.
That's arrant nonsense. Stalin's Holodomor killed 7-10 million people, more than the U.S. military has ever killed, and it starved millions more almost to death. Mao's Great Leap Forward resulted in the deaths of 15-30 million people, more still.
Moreover, the U.S. military is not currently responsible for wanton death and destruction. It has spent the last decade and a half trying to support civilian government and the rule of law both at home & abroad.
So over a few years they have paid tens of billions in dividends (and have done share buybacks in addition to that).
Edit: Seems very much cutting off your nose to spite your face, if one is 'happy' a corporation isn't paying taxes
So, if you exclude those two things from the budget [0], you'll see that military expenses and interest on debt greatly outweigh education and NASA and etc.
Now I personally think Amazon is a great source of good in this world, compared to Lockheed Martin or Halliburton [1]. So if those guys aren't paying anything in taxes, I am biased, they should be paying more, not Amazon.
[0] https://media.nationalpriorities.org/uploads/total_spending_...
[1] they make missiles and weapons that kill people wholesale.
Energy, Environment, and Science take a combined 2%.
Social Security and Medicare take a combined 60% (!), which are funded by entirely separate taxes (payroll taxes). Amazon still pays those.
Trust me, you don't want a corporation paying income taxes.
It just results in dead Iraqis and global surveillance.
Justice != Lawfulness - contested
Justice ≈ Fairness - contested, but developed world's post-war political-economies are based upon this either explicitly or implicitly. A lately weakened norm (post-Thatcher/Reagan) that Amazon and others are breaking further.
https://plato.stanford.edu/entries/justice/
Number 1 in particular creates a huge intervention in the details of an economy. Any government would want to fine tune this, and not create a tax aimed mostly on revenue collection. In particular, you do not want to go out of your way to bankrupt people when they make productive investments.
Wealth is not a zero sum game, it's the opposite. Wealth creates more wealth for the society around us.
Amazon is expanding really heavily into so many verticals. It is crazy to see. I don't think they will stop the spending, but maybe they felt like showing a small profit for some kind of "investor confidence" strategy :)
You could then extend the existing international double taxation agreements to cover these dividends. So, for example, if a dividend is paid to a Dutch taxpayer, it is not taxed at source, but as income. You might want to retain the current UK arrangement in this situation, though, so as to keep some of that tax revenue in the UK. You wouldn't extend these arrangements to tax havens.
Manoeuvres like the Double Irish or whatever would still get around this, and would still need to be attacked in the way they are (or at least should be) now.
You would need to extend the spirit of this rule to share repurchases, which might be tricky.
Yea, that needs to stop. This idea of being "taxed twice" is ridiculous because companies are not people. If they were then yes they would be taxed twice and it would be "unfair" but then they'd also be taxed at the proper rate.
So for instance instead of the 25%ish that you would expect to pay in tax on your income you pay 7.5% on your dividends which is more or less the income tax rate minus the corporation tax already paid.
Not any more, that got shelved a few years back AFAICT.
I'd pay myself a very basic salary, and if I needed emergency cash I could always borrow against my holdings in Jib Inc until I could adjust my salary appropriately.
That would let me defer paying tax indefinitely on anything that I don't need for day to day living, and I would be able to play the margins on a number of major expenses as well, with very little overhead work, since I dont need to worry about taxes for corporate income anymore.
