The code is not written *specifically* to allow for it, in the way that legislators slip perks in for their supporters. It's more a bug in the concept of taxing income when applied to a multinational entity.
Standard accounting practice makes it easy to create fictitious expenses and income. This is a feature, not a bug; it enables you do do things like charge back departmental services for example to justify the money spent on them. It's a management tool. But doing this necessarily creates fictitious
Neh, the concept is even simpler than this and it really cannot be fixed. Imagine you make a product which costs you a dollar, and you can sell it for $10. You can sell it yourself and book $9 revenue, or you buy a company in a low tax jurisdiction, and that company strikes a massive volume discount price of $1.50, then you book $0.50 revenue per product, while the other company, which you own 100% but is abroad, books $8.50. Your revenue is low, but your stock value goes up because your company owns 100% s
When you say "sale takes place" do you mean where the seller is or where the buyer is? Remember, we're talking revenue, not sales tax here. When a California (USA) company sells something to the Ireland customer, where did the revenue get taxed, USA or Ireland? Notice whether you answer "where the seller is" or "where the buyer is", it almost doesn't matter, as method of pushing sales through an intermediary company in different tax jurisdictions will always save on taxes - the goal is simply to move the sales transactions in the chain with majority of profit to the lowest tax jurisdiction.
Really? (Score:5, Insightful)
"lawmaker claimed that it and other large corporations 'exploit loopholes"
Loopholes that said 'lawmakers' left in the tax legislation either by accident (incompetent) or by design (corrupt).
Just change the laws to close the loopholes but don't ask people to pay more than YOUR laws expect them to.
Re: (Score:2, Interesting)
In some cases, sure, but offshoring profits to tax havens isn't a legislative loophole, but an accounting trick that multinational companies can use.
Re: (Score:4, Informative)
offshoring profits to tax havens isn't a legislative loophole
Yes it is.
The tax code is written to allow the offshoring of profits.
The most obvious way to fix it would be to tax revenue, payroll, or dividends rather than profits.
Re: (Score:4, Informative)
The code is not written *specifically* to allow for it, in the way that legislators slip perks in for their supporters. It's more a bug in the concept of taxing income when applied to a multinational entity.
Standard accounting practice makes it easy to create fictitious expenses and income. This is a feature, not a bug; it enables you do do things like charge back departmental services for example to justify the money spent on them. It's a management tool. But doing this necessarily creates fictitious
Re: (Score:3)
Neh, the concept is even simpler than this and it really cannot be fixed. Imagine you make a product which costs you a dollar, and you can sell it for $10. You can sell it yourself and book $9 revenue, or you buy a company in a low tax jurisdiction, and that company strikes a massive volume discount price of $1.50, then you book $0.50 revenue per product, while the other company, which you own 100% but is abroad, books $8.50. Your revenue is low, but your stock value goes up because your company owns 100% s
Re: (Score:2)
Revenue is taxed where the sale takes place, not where the selling company is domiciled.
Re:Really? (Score:2)
When you say "sale takes place" do you mean where the seller is or where the buyer is? Remember, we're talking revenue, not sales tax here. When a California (USA) company sells something to the Ireland customer, where did the revenue get taxed, USA or Ireland? Notice whether you answer "where the seller is" or "where the buyer is", it almost doesn't matter, as method of pushing sales through an intermediary company in different tax jurisdictions will always save on taxes - the goal is simply to move the sales transactions in the chain with majority of profit to the lowest tax jurisdiction.