Monday, May 12, 2014

How Apple And Google Dodge Billions In Taxes

This report on Apple and Google comes via Business Insider, which means the video has a pro-government, pro-taxes bias and not a libertarian anti-tax view, which would view the tax dodge as a positive. However, the facts in this video are informative.


  1. If only it were so easy for me to set up branches of my natural person in various jurisdictions to move my income in a manner that reduced my tax bills. But alas, this sort of maneuver is only available to the "legal person" and not us real people. Some libertarians and anarchists would call this a tax code-based corporate welfare program. RW calls it a "positive."

    1. Well then some libertarians and anarchists are idiotic. You seem to be against Wenzel for calling this a positive.

      Corporations are legal fictions. So who pays "corporate" taxes? PEOPLE (the shareholders). You want to be able to set up a similar structure? Start a business and do the same. Is anyone stopping you?

      I agree that it should be easier for everyone to reduce (preferably eliminate) tax liabilities without owning a corporation. But do not hate on the businessmen who structure their corporations to avoid taxes. How dare you call that corporate welfare.

      Welfare is the act of stealing from Peter to pay Paul. Its not like the IRS is stealing from you and I and the government is writing a check to Facebook and Apple. No no. These companies have organized so that the IRS may steal less from them. That is not welfare at all.

      You should cheer these moves, not complain that you aren't capable of the same (even though you are, you just fail to see it). Seems to me your attitude is "I'm being stolen from, so everybody else should be stolen from too."

      How childish is that notion?

    2. The benefit of the corporate welfare inherent in the tax code is built on the notion of legal personhood, which creates a barrier for a normal--natural--person such as myself from creating the structures necessary to reap the rewards of being a legal fiction.

      Take a walk with me for a moment:

      Licensing and permitting is widely recognized as a method to create barriers to entry and thus
      protect established interests against new comers. This raises the cost for new comers and reduces competition for the established interests--a true boon for business! Using this tried and true method, doctors, lawyers and assorted corporations have kept themselves insulated from pure free market conditions for decades. I'm sure that we can all agree that the implementation of a necessity for a license in order to operate is a gift to the established interests at the expense of potential competitors, yes?

      Now, if you would like to define welfare in a strict manner and say that it is only government taking money from one and giving money to another (the money is key here), then I grant you, licensing/permitting is not inherently a form of welfare. However, if you can take your eyes off the nominal nature of money and replace "money" with the more fluid, amorphous, and subjective concept of "value" then you can see that a licensing regime is a form of welfare. It is so because it imposes costs on one group while transferring those costs as benefits to another group. The potential competitor pays the cost of getting a license, while the established interest reaps the benefit of less competition.

      And we now arrive back to the subject of tax code-based corporate welfare. I, as a natural and real person, am put at a disadvantage because of the barriers to entry that are required to be paid in order to be granted this tax liability reducing fictitious standing with the State. Meanwhile, the cost imposed on me is transferred to the corporation (through the tax code, of course, and not in a nominal amount of dollars, but rather an unquantifiable amount of value) which now reaps the benefits. This creates a two tiered citizenry where the wealthy--rather, the fictitious "legal persons"--are able to shelter their wealth and income from the tax man with the government supplied welfare of the legal system and the tax code. Simultaneously, I, a natural and normal person, am required to pay the going rate of tax. This is corporate welfare, plain and simple.

      Furthermore, my attitude is certainly not, as you put it, "I'm being stolen from, so everybody else should be stolen from too." But rather, my attitude is that libertarians such as yourself and RW should be a little more sophisticated about your understanding of the government's ability to take and redistribute value without the necessity of stealing dollars. If one group of persons is paying a lower tax rate than another group of persons, the former group is receiving benefits that the latter group is paying. The concept is familiar to anyone who understands the purported reason for a progressive tax. The same applies to your darlings of capitalist society, the corporation.

    3. Let me guess.... you think you have a property right in this amorphic "value" that is floating around out there, so you believe your property rights have been violated?

    4. And another point, I am right there with you in being against people that advocate a gigantic web of laws to hinder competition. However, I will applaud anyone who finds the loopholes.

      Got any evidence of Facebook or Apple lobbying for a gigantic regulatory and tax system?

    5. Hardly. I just know when government policies are transferring value from one group to another, and I don't think it is a positive--no matter who it is from or whom it is going to.

    6. "The benefit of the corporate welfare inherent in the tax code..."

      Are you completely stupid? Seeking lower taxation is NOT welfare you idiot.

    7. Holy cow, Mr. Martin, you are as confused as you are energetic.

      First you say: my attitude is certainly not, as you put it, "I'm being stolen from, so everybody else should be stolen from too."

      But then, only one sentence later say: If one group of persons is paying a lower tax rate than another group of persons, the former group is receiving benefits that the latter group is paying."

      Now,, take a walk with me for a moment.

      If you replace the word "tax" with "theft", you might begin to see where you've gone wrong.

      Second; your example only works for firms who've been grandfathered in to the new regulations (ie exempt). Barriers to entry, to be sure, are disincentives for starting a (competitive) business. But, if taxes are SO much lower for the average business (vs the average laborer) than it seems this would be an incentive to start a business.


      Well, yes and no.

      Yes, in theory, all being equal.

      No, in practice, because all is not equal.

      For example: if there's a whiskey distillery tax of a million bucks, then jack Daniels can afford it and small timer jones can't. But, then this is also a barrier to entry, and jack Daniels is paying the full million.

      So, you see, it's the opposite of what you think. Companies actually having to pay a tax is a barrier to entry (disincentive for you and me) and companies being able to avoid taxes, and keep/make more money is an incentive (opposite of a barrier to entry) for you and me.

      Also, your distinction between nominal money and value is pretty useless. Since the companies use barriers of entry to make money (which is valuable).

    8. SteveZ, You misunderstand the basic characteristics of barriers to entry.

      In your example, Jack Daniels can pay the million dollars of the tax because they're the already established interest in the whiskey producing sector. If there was a million dollar tax to begin a whiskey distillery when JD began operations as a one man show, he would have been priced right out of business before the business was even established. I cannot start a whiskey distillery because I do not have the million dollars to pay the tax for authorization... hence, JD is not affected by the barrier (tax) and I am. It does not matter if companies are grandfathered in or not as the companies that have already been in the field will have higher amounts of capital to spend to get the protection of the government via license. I am still priced out of even attempting to compete. You see, for JD, the million dollars is nothing (remember, value is subjective), but the ability to keep competitors, who could ruin JD's stranglehold on the market by producing a better whiskey is worth much much more than the nominal tax. Of course it is rational for JD to pay the tax, but it is not a barrier to entry for JD.

      As we know, the more complex the tax code, the more beneficial it is for large corporations because they have the capital to spend on accountants/lawyers to lower their effective tax rate. As an individual, or labourer, I do not have the capital to blow on accountants to lower mine. It's quite simple, government bureaucracy always benefits the big boy on the block and injures the little guy trying to compete. The tax code is the same as the farcical 'legal persons' (with RIGHTS no less!) bull shit that has infected the entirety of western civilisation.

      The main problem, and it is not a new one, is that rightist libertarians believe that corporations are somehow the natural enemies of government--that corporations are 'clever' for finding the loopholes in the tax-code. Never mind that those loopholes are built in precisely to give corporations an advantage against other smaller competitors. Beyond risible, this wholly inaccurate conception of the political battlefield makes the majority of rightist libertarian commentary little more than excrement spewed from otherwise educated mouths.

    9. Many words, little sense. You've just repeated what I pointed out: taxes which must be paid act as barriers to entry, while being allowed tax loopholes acts as an incentive.

      But the real issue is that you want everyone else to be stolen from because you are being stolen from.

      You are blaming crony capitalism, and you're half right. Corporations will never be run by angles who want their competition to have a fair shot. Which is why, as libertarians, we advocate the destruction of the large crony's greatest weapon: the state.

    10. No SteveZ. For a person reading EPJ, you really have a limited understanding of the subjective nature of value. The imposition of a tax only acts as a barrier of entry to those with little or no capital.

      One more time.

      A company worth $100 million will not find a $1 million tax to continue operations to be a barrier to entry. $1 million is not of great value to a legal person who is worth 100x that amount. $1 million for a small entrepreneur trying to compete with large legal person IS a barrier to entry. These things are relative due to the subjective nature of value. That is to say, $1 million is not $1 million. The VALUE of $1 million depends on who owns the $1 million.

      In the same way, legal person tax loopholes allow large companies to pay less tax which in turn allows them to pursue happiness (whatever that may be) in a less fettered manner than I am able to because I do not have the resources to create a legal person and employ lawyers and accountants to find various loopholes etc.

      This is corporate or legal person welfare in so much as it restrains me more than the legal person as we strive to find happiness through our property. The legal entity (and the natural people behind it) will be able to bid up the prices for goods and services because they are less-fettered by the government than I, and subsequently price me out of the goods and services I desire to create my happiness. It's really not rocket science.

    11. Again Philip, can you prove that Facebook or apple actually promoted such a system?

    12. Whether or not those companies promoted the system or not is meaningless. This is not a moral argument--it is an economic argument.

    13. LOL. So answer me already, do you have a property right in this "value" you talk about?

    14. And your reasoning is pathetic. You're mad at people for making the best of a situation. Be mad at the government for setting up this system. Don't be mad at apple, Facebook, etc for finding a way through the maze

    15. If its an economic argument why are you butthurt that these companies are having less stolen from them?

      Do you think that you have a right to their money via government theft?

    16. If you look back at my original comment, you'll see that I expressed no condemnation of Apple/Facebook or any other corporate entity. I did moan about not having the same opportunity to reduce my tax liability as a natural person, rather than a legal (read: fictitious) person. I then continued on to call this system a form of corporate welfare and explained in detail why I believe it to be so--never once mentioning or decrying the corporates who use it as evil entities.

      My reasoning has yet to be refuted, except by SteveZ. My argument is very close to the same that Ron Paul and others use when describing inflation as a tax because those who receive the government largess first are able to buy goods prior to the rise of price levels caused by the newly printed money. Because corporations are less fettered than I, as a natural person, by the tax man, they are able to bid up the goods and services available in the economy in the same way a government contractor can do with freshly printed $100 bills. Would you argue that inflation is not, in essence, a tax simply because you have no property right in the newly printed money?

      Your simplistic focus on 'property rights' and a lack of violent force used by corporations obscures your capacity to peer deeply into the system and see the tangled web of effects that are caused by the notion of legal personhood.

    17. Ok, Mr. Martin, you say "you (me) really have a limited understanding of the subjective nature of value". But then, only three sentences later, you say: "$1 million is not of great value to a legal person who is worth 100x that amount."

      Now, with the "subjective nature of value" in mind, how can you tell me how much another person values something? (Although I agree with you, of course, 1mill is nothing to Jack D. But, then again, it was my example).

      No, your entire take on this issue if way off, and very leftish in nature.

      Let's review.

      You said: "Some libertarians and anarchists would call this a tax code-based corporate welfare program. RW calls it a "positive.""

      This is argument #1 (if I might be so bold as to condense your roundabout blathering into single arguments).

      Argument #2 (of 2) is: "If one group of persons is paying a lower tax rate than another group of persons, the former group is receiving benefits that the latter group is paying."

      Argument #2 is the most outlandish. Taxes are theft. I assume you agree? Let's use an analogy. Pretend I beat you into a coma, but I beat jerry Wolfgang to death. Is the former person benefitting from what the latter had to pay?

      In the case of these mega corporations (which I agree, probably couldn't survive in a free market, as they currently exist) they are still paying way more, nominally than you or I. Goods and services are priced in dollar amounts, not income percentage. So, even if $100million company pays 1%, they're still being deprived of $1million worth of goods and services. Much more than you are coughing up. That million could have been 20 middle class jobs. Now it's what? A couple bombs to be dropped, creating our next generation of enemies.

      Is your solution to tax businesses more, or to tax us less? If the latter, we all agree.

      I understand what you're trying to say with argument #1: corporations set up barriers to entry, guarding their tax heavens from average Phil Martins, like yourself.

      Sounds plausible on the surface (to a lefty). And this is a double punch; the first (barriers to entry) we agree on. The second punch is the tax loophole part, which you think was made purposely difficult, to act as another barrier to entry, by crony capitalists, to shaft businesses who can't afford lawyers.

      You say: "(T)he more complex the tax code, the more beneficial it is for large corporations because they have the capital to spend on accountants/lawyers to lower their effective tax rate. As an individual, or labourer, I do not have the capital to blow on accountants to lower mine."

      But, it makes no economic sense.

      Those who do not use accountants and lawyers, refrain from doing so because it costs them more to hire them. It's not like the other barriers we talked about (million$ distillery tax). I don't use a tax specialist, because it costs more than its worth for me.

      You might say: "company X can afford lawyers but company Y can't." That's nonsense. If company Y stood to save more in taxes than the price of the lawyers/accountants, it would do so. (Again, if it's a matter of regulation or un libertarian litigation, that is an actual barrier to entry.)

      Of course the proper libertarian position is to abolish all taxes and non contracted barriers to entry.

  2. The envy driven fools that think that the US is missing out on all this revenue better be careful what they push for because the alternative is far worse and unstoppable. I'm a former Big 6 tax guy and can tell you the alternative to what these companies do is to move their HQ out of the US and setup a foreign parent corp and then make their US operations a foreign sub. Taxes avoided. There is no way to stop this as any thing done would apply to other foreign companies doing business in the US. Since capital markets are global, it makes almost no sense for your shareholders to keep your HQ in the US where all of your global profits are taxed at an exceptional high rate.

  3. You mean, they do everything that is the state allows, to avoid having the state take their money? SCANDAL! Next you're going to tell me that they go to great lengths to avoid being imprisoned or murdered. The gall of some people!

  4. "Tax dodging" is ethically required in order to fulfill your fiduciary duties to your shareholders. To pay a bunch of taxes you can easily avoid with company profits is to short-change your shareholders for no good reason whatsoever. Every company who is NOT engaged in these sorts of taxes should be investigated, not the other way around!

  5. Texas' Wyly brothers committed fraud with offshore trusts: jury

    (Reuters) - A jury on Monday found that Texas business brothers Samuel and Charles Wyly committed fraud by creating a secret scheme involving offshore trusts that netted them $550 million in illegal trading profits.

    Jurors in Manhattan federal court found Samuel Wyly and the estate of his brother liable on all claims brought by the U.S. Securities and Exchange Commission, in the regulator's largest case to go to trial in recent years.

    Samuel Wyly, 79, last appeared on Forbes' list of the 400 richest Americans in 2010 with a net worth of $1 billion. Charles Wyly died in a car crash in 2011, and an executor for his estate was substituted as a defendant.

    The trial followed years of litigation and investigation by the SEC and other authorities of the Wylys, who acknowledged creating a maze of trusts in the Isle of Man in an effort to obtain tax benefits.

    The case was seen as a test of the SEC's trial capabilities following losses in some of its recent cases, including a verdict in which billionaire Mark Cuban was found not liable last October on insider trading charges.