The World's First Trillionaire

[overthere]

You have a bad case of selective memory. Martin also cut taxes including capital gains taxes which I am sure you would have railed against if Harper had done it. The recent deficits were a result of the downturn. If the economy had dived shortly after one of Martin big tax cuts people would have whined about the 'lost revenue' but Martin was lucky. If Martin had survived his deficits would likely have even been larger given the love of spending he seemed to have acquired once he was in charge.

And lest we forget: Martin also lucked out with a dramatic downturn in the interest rates the govt of Canuckistan paid on the whopping national debt. He had no influence on the rate, but it saved billions per year and did not cost him a nickel. Sometimes ya just get lucky.

[overthere]

I'd suggest a good starting point might be giving the CRA adequate staff and implementing extremely serious financial penalties would be good starting points. Cameco Uranium is clearly not concerned about going to court with CRA over this; they appear to view losing the court case as an acceptable business risk. The penalties should be severe enough to make it an unacceptable business risk.

CRA is perhaps the only govt department that has weathered the frequent storms of recessions and cutbacks for 20+ years in the form of more money and more staff than other departments. And how do you define 'adequate staff?". My very good friend, a very competent auditor who exceeded her annual clawback quotas easily and repeatedly, was courted by many of the accounting and legal firms she faced daily. The existing penalties for tax fraud are already severe, what is lacking is complete clarity in application of simple rules. The tax code intepretative literature c/w precedents occupies several rooms and is so complex no human can cope. I'd suggest a flat tax, but would be unable to withstand the avalanche of whining here that would surely begin.

Oh, and the Cameco example is not a good one as they are not a typical corporation.

Cameco mines a strategic product, and Canada has something like 40% of the world supply and Australia has about 40% more. The rules of supply and demand are skewed, Cameco is not going to move their operations to China, India or anywhere that does not have a whole lot of uranium in the ground. Avoid potash too. Ta.

[TimG]

My point is that despite your insistence to the contrary, "the cost of doing business" can and does include losses and expenses that are completely fictional.

You have provided no evidence to support this assertion. In fact, the evidence you have provided supports my view that "fictional expenses" are impossible without fraud. e.g. in the UK Starbucks example UK Starbucks had real expenses for trademarks, loan interest and goods that resulted in money leaving the company.

Of course, the issue is you believe these real expenses are unreasonable deductions because, in your opinion, they are "too much". But on that point you have offered little evidence support your opinion other than the opinion of the Reuters article writer about "normal" trademark licensing charges. Your claim that interest rate was too high was a result of you misunderstanding what the LIBOR is. That said we have no data on the cost of goods sold so it is possible that these charges are excessive but they are still real expenses.

Bermuda can offer a 1% tax rate, or a 0.1% tax rate if they want, because they don't have any people.

Except companies, for the most part, are not going to these havens. They are going to Switzerland, Ireland or The Netherlands - all modern economies with the expenses you claim.

How is it possible to "compete" with that? Create a true libertarian paradise where the government doesn't spend anything on anything?

You tax money leaving corporations instead of trying to tax profits. Company pays money in dividends - tax it before it leaves, company pays money on salary - tax the employee, company pays money on goods or services - apply GST. Company wants to "invest" in an offshore company - tax the investment (a reasonable thing to do if a company pays no taxes on profits). It is much easier to track transactions rather than profits.

In the UK Starbucks case the UK could collect GST on the trademark fees and goods bought. The interest payments could be taxed too if the rate is higher than some well established benchmark. I believe such a system would resolve most of your objections.

How many engineers and programmers does Bermuda contribute to Apple and Google?

Most of the engineers and programmers employed by Apple and Google pay taxes in the US. If you want to add up what companies contribute back to the society that allowed them grow then you have to look at the taxes paid by employees. A company that pays taxes but has no local employees is less valuable to a government than a company that pays no taxes but has a lot of local employees.

A side note: a big part of the problem is created by US tax law which tries to tax companies on their global profits which is means the US is trying to steal taxes that rightfully belong to the government where the profits were made. Canada and most other countries in the world only tax on profits made in the country. The US law means US companies often face double taxes: one from the local government and and more from the US. If US companies could not dodge these rules with the games you described they would likely relocate outside of the US. This rule is why Burger King is thinking of relocating to Canada - the differences in the corporate tax rate is not the biggest factor.

Edited August 30, 2014 by TimG

[kimmy]

CRA is perhaps the only govt department that has weathered the frequent storms of recessions and cutbacks for 20+ years in the form of more money and more staff than other departments. And how do you define 'adequate staff?".

Argus indicated earlier that money spent investigating tax cheats yields a huge return on investment. CRA has suffered staff cutbacks, contrary to your claim. What is "adequate staff"? Every article I read regarding CRA and tax havens made the same point: CRA doesn't have enough resources to adequately investigate tax havens. So clearly "adequate staff" clearly means "more than they have right now."

Oh, and the Cameco example is not a good one as they are not a typical corporation.

Cameco mines a strategic product, and Canada has something like 40% of the world supply and Australia has about 40% more. The rules of supply and demand are skewed, Cameco is not going to move their operations to China, India or anywhere that does not have a whole lot of uranium in the ground. Avoid potash too. Ta.

And?

What about that, exactly, mitigates their practice of selling their product to a holdings company in Switzerland at 7% of market value?

The law often uses a "reasonable guy" principle. This was discussed in the Starbucks article: in Britain the standard for whether Starbucks is complying with the law in their licensing fees is "would a reasonable businessman pay that fee if he wasn't paying it to himself?"

In the case of Starbucks, they're paying 6% of gross sales in royalties for the trademark. Is that number reasonable? The article indicated that McDonalds franchises pay 4% for arguably the most recognizable trademark in the world. So, 6% seems a little high, but pretty comparable. It's possible that maybe a reasonable businessman might make that agreement even if he weren't paying the fees to his own offshore company. It seems very likely that Starbucks could go into a court of law and defend that as a legitimate business decision. It could easily be argued to stand on its own merits.

Now bring that "reasonable guy" standard to Cameco. Would a "reasonable businessman" enter into an agreement to sell his company's main product at 7% of its market value? NO FREAKING WAY.

-k

[TimG]

Now bring that "reasonable guy" standard to Cameco. Would a "reasonable businessman" enter into an agreement to sell his company's main product at 7% of its market value? NO FREAKING WAY.

FWIW - I agree - but the real question is why hasn't/can't the CRA already flagged this practice as tax evasion? I believe current laws would allow it to do so.

[kimmy]

You have provided no evidence to support this assertion. In fact, the evidence you have provided supports my view that "fictional expenses" are impossible without fraud. e.g. in the UK Starbucks example UK Starbucks had real expenses for trademarks, loan interest and goods that resulted in money leaving the company.

I also provided examples of companies inventing losses out of thin air, like Son Of B.O.S.S. or the current Greene-King tax case ongoing in the UK.

Of course, the issue is you believe these real expenses are unreasonable deductions because, in your opinion, they are "too much". But on that point you have offered little evidence support your opinion other than the opinion of the Reuters article writer about "normal" trademark licensing charges. Your claim that interest rate was too high was a result of you misunderstanding what the LIBOR is. That said we have no data on the cost of goods sold so it is possible that these charges are excessive but they are still real expenses.

The article indicated that McDonald's charges LIBOR or lower-than-LIBOR rates on intercompany loans. Said before and will repeat: the bank doesn't even charge me LIBOR + 4% on my mortgage. Having now looked up the current LIBOR rate, I admit that I was wrong in that I do pay barely more than LIBOR + 4% on my line of credit. I pay LIBOR + 4.43%.

Except companies, for the most part, are not going to these havens. They are going to Switzerland, Ireland or The Netherlands - all modern economies with the expenses you claim.

They are going to all of these places simultaneously. They go to Ireland because of a peculiarity of Irish law that allows them to simultaneously be considered an Irish company by America but a foreign company by Ireland. They go to the Netherlands because they can exploit another loophole there that allows them to shuffle money to their broom-closet in Bermuda or the Caymans without being taxed. They go to Switzerland because of the low tax on commodities and the shadowy banking system. They go to countries like Bermuda and the Cayman Islands because of the low overall corporate tax rate. The largest corporations are all using these strategies to avoid taxes, structuring their corporations to mix and match the best loopholes from each.

You tax money leaving corporations instead of trying to tax profits. Company pays money in dividends - tax it before it leaves, company pays money on salary - tax the employee, company pays money on goods or services - apply GST. Company wants to "invest" in an offshore company - tax the investment (a reasonable thing to do if a company pays no taxes on profits). It is much easier to track transactions rather than profits.

That's certainly an interesting idea. Has it been attempted to any degree?

Regarding dividends, once the money is out of the country, it's not coming back-- at least not in the form of dividends. This is another area where corporate accountants are too smart for government auditors to keep up with. The term "synthetic repatriation" is what they call finding ways to use these foreign-held profits to enrich shareholders without bringing money into the country in a way that can be taxed. Two things they are doing is intercompany "loans", which is why many large corporations have large levels of debt, as well as using their foreign-held companies to perform stock buy-backs to raise the share price.

Most of the engineers and programmers employed by Apple and Google pay taxes in the US. If you want to add up what companies contribute back to the society that allowed them grow then you have to look at the taxes paid by employees. A company that pays taxes but has no local employees is less valuable than a company that pays no taxes but has a lot of local employees.

I agree with that much, but allowing the most successful companies to shift billions of dollars of profits out of the country without paying any taxes is still evasion of their responsibilities.

Apple sure likes going to court to defend their patents, yet they don't want to help fund the legal system that makes it possible for them to do so. That's simply wrong. The United States, and to varying degrees other western nations as well, have spawned all of this technological innovation because they have an environment that provides necessary elements. That environment costs money to maintain.

-k

[kimmy]

FWIW - I agree - but the real question is why hasn't/can't the CRA already flagged this practice as tax evasion? I believe current laws would allow it to do so.

They have, and it has been in court for years.

-k

[cybercoma]

I agree with that much, but allowing the most successful companies to shift billions of dollars of profits out of the country without paying any taxes is still evasion of their responsibilities.

-k

You're trying to explain social responsibility to a libertarian-minded individual. The problem with libertarians is that they don't believe in society. They believe we're all just individuals floating about doing our own things. So to say companies need to have some responsibility for the society that allows them to operate just doesn't compute. There is no society and can be no responsibility to it when you're firmly grounded in libertarian ideological nonsense.

Edited September 8, 2014 by cybercoma

[August1991]

You're trying to explain social responsibility to a libertarian-minded individual. The problem with libertarians is that they don't believe in society. They believe we're all just individuals floating about doing our own things.

Of course, co-operation can achieve more than individual effort - but when an individual uses the term "social responsibility", I put a hand on my wallet.

I suspect the individual wants person gain, and not overall benefit.

Edited September 12, 2014 by August1991

[cybercoma]

Because you can't think past the individual.

[eyeball]

And more to the point you don't want too.

[August1991]

Because you can't think past the individual.

Cybercoma, who are you to ask me to think beyond the individual?

[August1991]

And more to the point you don't want too.

I don't want to?

====

I'm perfectly aware that co-operation achieves far more than competition. At the same time, I understand that individuals are wily.

[cybercoma]

Cybercoma, who are you to ask me to think beyond the individual?

I didn't ask you to. I'm simply pointing out a demonstrated flaw in your character.

Edited September 14, 2014 by cybercoma

[August1991]

I didn't ask you to. I'm simply pointing out a demonstrated flaw in your character.

In all honesty, I see life from the viewpoint of an individual - me.

Cybercoma (and I suppose, eyeball), how do you two view life?

Edited September 16, 2014 by August1991

[Bonam]

In all honesty, I see life from the viewpoint of an individual - me.

Cybercoma (and I suppose, eyeball), how do you two view life?

Eyeball views life with his eyeballs, that much is clear.

[August1991]

Eyeball views life with his eyeballs, that much is clear.

IME, eyeball is also wily.

[SpankyMcFarland]

When I listened to Bowie's 'The man who sold the world' over the decades, many interpretations of the lyrics occured to me. Now, I'm thinking there will one day be a man who owns the world and its contents and who sells it to somebody else. We will reach that concentration of wealth if we keep on the current path.

Edited October 4, 2015 by SpankyMcFarland

[Michael Hardner]

We will reach that concentration of wealth if we keep on the current path.

There's nothing stopping people from passing a 100% taxation law, or declaring past money illegal tender. Power comes at the behest of the people, fair or not.

[Scott Mayers]

So, who will be the world's first trillionaire?

Here's my guess: Anyone who invents a new/better way to transfer knowledge.

Hey, ...you read my mind! Can you patent mind-reading?