-Not the OP, but my impression is s/he implied that the big corporations performed tax shenanigans to ensure their taxable profit ended up very near zero - say, buying expensive services from subsidiaries in tax havens &c.

Say I run a company out of the US called 'Paraná' (Seeing as the other big river is already taken), turning $1B/year profit.

I promptly spend the profit buying consulting services from 'Paraná Consulting and Tax Shenanigans LLC' based out of a Panama mailbox for $1.05B, for instance - then I even run my US business at a loss.

(I don't know anything about US or international tax codes, but the above basically sums up the methods described in X stories I've read about tax planning over the years.)

I feel like this be addressed by simply banning all trade with tax haven countries.

Define tax haven countries. The UK is a tax haven for a lot of Russians, Switzerland is a tax haven for anyone not American, the UAE is a tax haven that the US does 18B in trade with, and that invests roughly 25B annually in the US directly, Singapore is a tax haven that the US actually has a surplus with. So yeah, it's not simple.

Would you also ban trade with tax haven states? There are states that have no income tax, low worker protections that offer lower costs, or did not choose to pay government employees 40 years ago with unfunded retirement benefits.

> all trade with tax haven countries.

UK, Netherlands and others countries have their own tax havens like Cayman Island, Curacao Island. Are you really going to ban trade with such big financial powerhouses?

You need a big enough bloc to make the decision together. Ideally the US + the EU + UK/EEA countries. But then yes, if countries outside the bloc decide not to comply then that's on them.

I'm growing increasingly weary about the cult of "reinvestment", which is also visible in some new corporate tax complications in my country. As sibling comments point out, this "reinvestment" can be phony IP purchases in tax havens. On the other hand, even if reinvestment is genuine, there's a question whether further concentration of capital and power in that one corporation is good for society. People say: wow, Amazon got people stuff delivered during lockdown. Truth is, even in a region where e-commerce and delivery markets are far more fragmented, it somehow happened.

Pay the damn wages and dividends, I'd say. The former will go into consumption, the latter will go probably into other companies, especially if we discourage less productive uses of capital (like real estate). And also getting taxes from these is more straightforward. Maybe they don't even have to be that high percentage-wise, if there is less possibility of avoidance.

> Pay the damn wages and dividends, I'd say.

If the goal is to increase wages, then government should lower the supply of labor and increase the demand for labor. Provide minimum x weeks of vacation, parental leave, maximum 8 hours per day until overtime rates kick in, free higher education, etc.

As for forcing companies to pay dividends, I’d rather the government not be able to tell me what to do with my company’s funds. If the government wants control of the funds, they should raise the tax rates.

My comment was more about popular mindset than specific policy solutions. I was trying to say that maybe reinvestment is not always an unquestionably good/best thing.

> As for forcing companies to pay dividends, I’d rather the government not be able to tell me what to do with my company’s funds

I don't want to digress too much, but limited liability corporation and more complex structures with shareholders are creations of the government. You used to have to obtain a specific charter from the sovereign for each one of them. So unless you're an individual doing business with unlimited liability, it's debatable whether government (or the lawgiver, to be more specific) shouldn't get to make the rules for you.

The government can make rules, but I don’t see why it has to do with how a company chooses to spend money. If the government wants more funds, then increase the taxes. Government can remove deductions for business expenses, raise tax rates, etc. But there’s no reason for government to tell a company what to do with its excess cash.

The corporation is a creation of the state. The state has obligations to humans, not to corporations. If the lives of humans to whom the state is obligated would be improved by any number of onerous requirements imposed on corporations, the state certainly should impose those onerous requirements.

Of course, the idea that states are created for the benefit of humans is bullshit, but it's nice to dream of something better...

> If the lives of humans to whom the state is obligated would be improved by any number of onerous requirements imposed on corporations, the state certainly should impose those onerous requirements.

I agree with this. Which is why I wrote the state can choose to increase taxes. I have yet to be shown how requiring a company to pay dividends accomplishes the goal of improving the lives of humans.

Dividends are taxable, and they're often paid to entities that are unable to structure "profits" as carefully as the largest corporations can. So, in this discussion in which everyone (even Jeff B!) seems to agree that more taxes should be collected, dividend requirements would be a way to do that.

Of course, that's too tame. We'd be better off eliminating the most common forms of incorporation, or severely curtailing them e.g. maximum revenue limits. All the things that corporations can do, individuals, partnerships, mutual-benefit firms, etc. can also do, except often more carefully.

Hmm. Let's see how they do it in practise: funnel all money to another entity for 'licensing' their own brand. Net effect: no profit == no tax. Benefits for society: zero. Sure you don't want to change that?

How does the other entity get out of taxes? If the answer is offshore tax havens, I agree that they're a problem, but domestic tax policy isn't the greatest lever for fixing this. But in general, just moving your money around doesn't let you entirely evade taxes.

Moving your revenue to a place with low taxes, lets you escape taxes

> doesn't let you entirely evade taxes

"Entirely"?

It's not about evading taxes to 100%, but maybe 90% (not sure about the numbers).

Also, the taxes get paid in a different country, doesn't benefit the people in, say, the US.

Simply using licensing fees to shift revenue is a simple trick but countries can legislate against it if they want. Example:

https://www.kwm.com/en/au/knowledge/insights/australian-soft...

In that example they found that the 'licensing fee' was a royalty meaning there is a 30% withholding depending on double tax treaties and rates between the two locations. Which for a zero tax foreign licensor would mean a 30% local tax on however much you send overseas.

Thanks, interesting example.

I wonder how much the company saved on avoiding taxes in that way, until it didn't work any more. (Didn't see any numbers, having had a look at the linked page)

I wonder if there's any table of all different methods companies use, to avoid taxes, and how much they typically save, and what could be ways to stop it

Maybe could be helpful for lawmakers

> required to pay 30% withholding tax

That's quite a lot is it? Compared to company taxes. Seems like a strong incentive to stop cheating

Company taxes are also 30% over here typically, flat rate. It is quite a lot I think, for small businesses at least. They don't have economies of scale or fancy setups and owners will pay a tax on profits then income taxes for themselves (I think dividends can work around this with franking credits), it can hurt margins, not to mention compliance overheads for GST etc.

Why? I'd rather the Gov the spend money on programs than corporations on RND.

Uh, in that case we'll have to disagree. I think corporations in general do a better job of spending money than the government, but I don't have hard evidence for that view.

> I think corporations in general do a better job of spending money than the government

Agreed. To add perspective, I don't believe corporations will give a crap about the people (extreme example, Amazon) like we believe our respective governments should. I'd rather have bad spending on keeping people alive than no spending at all.

In my experience, corporations are great at finding ways to get "innovation grants" and "R&D tax incentives" for things that involve no real research or innovation.

Instead of actually promoting innovation, they tend to become a subsidy for the tech industry.

historically, the Government is by far the worst spender of money. they have the greatest power, and the worst track record.

What's the data here? Didn't "the government" create the internet, tons of medical research, the interstate highway system, etc?

Meanwhile Joe Schmoe bought yet another iPad (which wouldn't exist without the government inventing much of computer tech) to go in a landfill in two years. But at least he funded Apple's ability to make a brand new, basically identical model, next year.

How do we measure who has a "good" track record on spending money?

Just ask anyone who has worked for the US Government, Military, or contractors.

To avoid pure anecdotes, the Government Accountability Office actually studies this every year: https://www.gao.gov/products/gao-20-440sp ...

That's not to say I don't believe in government spending. I don't know that there is a much better solution, and any conglomeration of humans is going to have roughly equal capacity for doing the right thing and doing the wrong thing, hopefully weighted more towards the "right" thing with solid leadership...

I don't think that supports your premise. That's like a company report showing where it wasn't spending its money optimally. All institutions, public and private, waste money in some way.

"Why? I'd rather corporations spend money on RND than the Gov on programs."

R&D would get us fastest nice things like space colonization, longevity, megastructures, the next step on the Kardashev scale.

As far as I know, it was Nasa that put a man on the moon, not some coorporation. Also: the internet was invented by the government. What nice things have corporations given you?

NASA was the program manager for the Apollo program. You don’t think NASA actually built the rockets or the various modules, do you?

NASA doled out public money to prime contractors for various pieces of the program (North American, Grumman, Rocketdyne, Douglas, IBM...) and the primes subcontracted various pieces as they always do.

This is not to understate the tremendous engineering effort of organizing such a huge program, but it’s not like this achievement was done by a bunch of government workers alone.

I'm not agreeing with either you or the OP but in answer to your question: Being able to watch reusable space rockets.

Yeah, and now they "reinvest" in stock buybacks to pump up the share prices. And the people at the top get... tons of shares.

Thank you, loopholes!