Corporate Tax Question (1 Viewer)

Optimus Prime

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We've seen stories about companies that have 100 million in revenue yet pay a ridiculously small amount in taxes.

Politicians have said for years (Hillary is saying it now) that they're going to close the tax loopholes so that big corporations pay their fair share in taxes.

My question is, if all those loopholes were closed and all these businesses were paying a lot more in taxes, what's to stop them from simply jacking up the prices on all their goods and services to cover the extra money they'd be paying in higher taxes?
 

gwballin

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We've seen stories about companies that have 100 million in revenue yet pay a ridiculously small amount in taxes.

Politicians have said for years (Hillary is saying it now) that they're going to close the tax loopholes so that big corporations pay their fair share in taxes.

My question is, if all those loopholes were closed and all these businesses were paying a lot more in taxes, what's to stop them from simply jacking up the prices on all their goods and services to cover the extra money they'd be paying in higher taxes?
Most of the "loopholes" are not loopholes since that word (to me, at least) suggests an unintended result.

The reason seemingly profitable companies are not paying current tax is because those profits being cited are measured in accordance with Generally Accepted Accounting Principles (GAAP) while the taxes paid are calculated according to tax law. GAAP is required when these very large, publicly traded companies report to the SEC but in congress' wisdom they pass tax laws that specifically deviate from GAAP creating both permanent and temporary (timing) differences.

The reporting of these instances is not helped by the fact that terms like "effective tax rate" are applied incorrectly. These companies are often cited as having 0.00% or near 0.00% effective tax rates, however if calculated correctly the rate would be approaching the statutory rate. Reporters ought to know this, since the same SEC filings that are the source for the revenue amounts also include an income tax rate reconciliation schedule.

But I digress...
 

tomwaits

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We've seen stories about companies that have 100 million in revenue yet pay a ridiculously small amount in taxes.

Politicians have said for years (Hillary is saying it now) that they're going to close the tax loopholes so that big corporations pay their fair share in taxes.

My question is, if all those loopholes were closed and all these businesses were paying a lot more in taxes, what's to stop them from simply jacking up the prices on all their goods and services to cover the extra money they'd be paying in higher taxes?
Nothing really, the money has to come from somewhere.
I don't think people understand how intense companies examine their processes to save literally every penny. A large part of my job is battling over these cost cutting measures to maintain quality and serviceability.

My friends that work in supply chain tell me that the main reason we have stuff built over in China is not cheap labor, but the decades long tax holidays that are given to locate manufacturing over there with the promise that we will employ x amount of people for the duration.

I saw a Hillary commercial that she also wants an exit tax for companies that just decide to leave the US for more tax friendly countries.
 

WhoDatPhan78

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Nothing really, the money has to come from somewhere.
I don't think people understand how intense companies examine their processes to save literally every penny. A large part of my job is battling over these cost cutting measures to maintain quality and serviceability.

My friends that work in supply chain tell me that the main reason we have stuff built over in China is not cheap labor, but the decades long tax holidays that are given to locate manufacturing over there with the promise that we will employ x amount of people for the duration.

I saw a Hillary commercial that she also wants an exit tax for companies that just decide to leave the US for more tax friendly countries.
US citizens have to pay taxes even if they move out of the US.

If corporations are people then I think we should treat them like people.
 

Saint by the Bay

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At some point we have to make a choice between what is best for the nation and the ridiculously low prices we want to pay for everything. The offshoring and tax structure that helps keep prices low and fuel our massive consumption problem is, frankly, hurting us long term in regards to jobs and debt.

Now if you'll excuse me I'm going to go sit in one of my two leather recliners and watch one of my 4 big screen LED TV's while using one of the 11 tablets we have in the house to surf the PTB and complain about how bad things are in America.
 

Hedon James

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A consumption tax would greatly alleviate this issue. It's no secret that Apple (and other large conglomerates) have setup "inversions" and park their cash in the most favorable places. Apple says they'll repatriate the cash when/if the corporate tax rate is adjusted to a "more appropriate" level. Not sure what "more appropriate" means, or who decides that...but here's a way to solve that dilemma:

Eliminate the income tax (or greatly reduce it) and effectuate a consumption tax on the goods they sell and tada....appropriate taxes are paid in the country they are doing business in. If businesses are opposed to that, feel free to remove your goods/services from our American marketplace. If you wanna do business in one of the greatest consumer markets in the world, you gotta do your part to keep that market churning and earning. It's a give & take proposition. If all you do is take, eventually there is nothing for others to give, as you have already taken all of it...
 

darkhornet

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A consumption tax would greatly alleviate this issue. It's no secret that Apple (and other large conglomerates) have setup "inversions" and park their cash in the most favorable places. Apple says they'll repatriate the cash when/if the corporate tax rate is adjusted to a "more appropriate" level. Not sure what "more appropriate" means, or who decides that...but here's a way to solve that dilemma:

Eliminate the income tax (or greatly reduce it) and effectuate a consumption tax on the goods they sell and tada....appropriate taxes are paid in the country they are doing business in. If businesses are opposed to that, feel free to remove your goods/services from our American marketplace. If you wanna do business in one of the greatest consumer markets in the world, you gotta do your part to keep that market churning and earning. It's a give & take proposition. If all you do is take, eventually there is nothing for others to give, as you have already taken all of it...
I want to make sure I'm clear on what you're saying. Is a consumption tax another word for sales tax, or are you talking about something different here?
 

Galbreath34

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Consumption = VAT more than sales probably. Sales tax is notoriously bad because it places the burden on a guy at a register for deciding to let business customers off the hook and thus the tax is undercollected. The US is to my knowledge the only country in the world that uses a sales tax instead of a VAT at the state and local level. VAT, on the other hand, which is used worldwide, makes everyone pay at every stage, and if they resell they eventually get a refund.
 

Saint_Ward

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At some point we have to make a choice between what is best for the nation and the ridiculously low prices we want to pay for everything. The offshoring and tax structure that helps keep prices low and fuel our massive consumption problem is, frankly, hurting us long term in regards to jobs and debt.

Now if you'll excuse me I'm going to go sit in one of my two leather recliners and watch one of my 4 big screen LED TV's while using one of the 11 tablets we have in the house to surf the PTB and complain about how bad things are in America.
Jealous.. I only have 3 Flat screens, 3 phones, and 4 tablets....

We just bought a second car and I suddenly feel inadequate... We need more international trade to lower prices more so I can buy more crap I don't have space for!
 

Saint by the Bay

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Jealous.. I only have 3 Flat screens, 3 phones, and 4 tablets....
I have 4 kids who all have at least one tablet, I have two and my wife has to get one of what anyone else in the house gets. :hihi:
 

dtc

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We've seen stories about companies that have 100 million in revenue yet pay a ridiculously small amount in taxes.

Politicians have said for years (Hillary is saying it now) that they're going to close the tax loopholes so that big corporations pay their fair share in taxes.

My question is, if all those loopholes were closed and all these businesses were paying a lot more in taxes, what's to stop them from simply jacking up the prices on all their goods and services to cover the extra money they'd be paying in higher taxes?
The invisible hand or market.
 

TechDawg09

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Most of the "loopholes" are not loopholes since that word (to me, at least) suggests an unintended result.

The reason seemingly profitable companies are not paying current tax is because those profits being cited are measured in accordance with Generally Accepted Accounting Principles (GAAP) while the taxes paid are calculated according to tax law. GAAP is required when these very large, publicly traded companies report to the SEC but in congress' wisdom they pass tax laws that specifically deviate from GAAP creating both permanent and temporary (timing) differences.

The reporting of these instances is not helped by the fact that terms like "effective tax rate" are applied incorrectly. These companies are often cited as having 0.00% or near 0.00% effective tax rates, however if calculated correctly the rate would be approaching the statutory rate. Reporters ought to know this, since the same SEC filings that are the source for the revenue amounts also include an income tax rate reconciliation schedule.

But I digress...
So I should leave Big 4 and go into journalism?

But more deadlines though...
 

lapaz

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Most of the "loopholes" are not loopholes since that word (to me, at least) suggests an unintended result.

The reason seemingly profitable companies are not paying current tax is because those profits being cited are measured in accordance with Generally Accepted Accounting Principles (GAAP) while the taxes paid are calculated according to tax law. GAAP is required when these very large, publicly traded companies report to the SEC but in congress' wisdom they pass tax laws that specifically deviate from GAAP creating both permanent and temporary (timing) differences.

The reporting of these instances is not helped by the fact that terms like "effective tax rate" are applied incorrectly. These companies are often cited as having 0.00% or near 0.00% effective tax rates, however if calculated correctly the rate would be approaching the statutory rate. Reporters ought to know this, since the same SEC filings that are the source for the revenue amounts also include an income tax rate reconciliation schedule.

But I digress...
You seem to understand taxes pretty well, so I'd like to learn more. Aren't these companies taking deductions that is lowering the rate of taxes they pay on their income as calculated using GAAP? I thought that was effective tax rate? So if they earned 1B, but deduct 1B, then wouldn't their effective tax rate be 0%? I know that I use this to lower my taxes every year, and while I can't get mine down to 0%, I think big corporations have a lot more deduction options. Doesn't GAAP tell you how much a company actually earned, but tax law allows corporations to deduct so much as to show a loss? I assume that corporations use GAAP to calculate their earnings, so I don't understand how GAAP affects the taxes paid.
 

superchuck500

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US citizens have to pay taxes even if they move out of the US.

If corporations are people then I think we should treat them like people.

I think that the difference is that the corporation effectively changes citizenship. The location of incorporation (and domicile) is what bestows corporate citizenship . . . it's not a birth/nationalization thing like with people.

The real problem with inversion, as I understand it, is that it allows companies that were domiciled in the US to avoid US tax on money earned abroad - tax that they would have paid if they brought the income into the US - by avoiding bringing the income into the US in the first place. Basically, US law allows a corporation with more than 20% of its ownership is abroad to be considered a foreign company if it's incorporation and headquarters are abroad. So US companies with high foreign earnings can avoid the tax by acquiring or merging with a foreign company (as long as to resulting company is at least 20% foreign-owned) - and then "inverting" to where the smaller but foreign company is now the parent corporation and the US operation is the subsidiary.

Inversion is challenging because we generally support fairly open markets and market-participation by foreign companies doing business in the US. Apart from lowering our tax rates to make them more competitive with those in the nations where the businesses invert, there really aren't any measures to combat inversion that don't have significant consequences.

Our schedule corporate tax rates are among the highest in the world. Yes, there are "loopholes" - a myriad of tax credits and other kinds of incentives that can substantially impact a company's effective tax rate. And the whole thing is just a mess and requires highly skilled professional accountants and tax counsel.

The tax analyst and business community is almost unanimous in the view that the way to fix this is to reform our tax code. Simplify it, remove the targeted credits and specialized tax treatment and lower the scheduled rates significantly. The savings from removing the loophole and making enforcement more efficient (simpler codes are easier to enforce) will pay for the reduction in rates.
 

gwballin

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So I should leave Big 4 and go into journalism?

But more deadlines though...
After 6 years with a Big 4 firm, I left a few years ago and while I didn't go in journalism it was still the right move for me :9:
 

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