The Hidden Wealth of Nations: Tax Havens | Hacker News Reader

The Hidden Wealth of Nations: Tax Havens

qz.com

43 pointsSimplyUseless38 comments

I read a fascinating book on tax havens and their pernicious influence on global affairs. I thoroughly recommend it to anyone who wants to understand more about how such systems work -- especially those who don't think tax havens are an issue.

http://treasureislands.org/

It's weird how the article cuts off at "And after this, they became subject to the French tax law—which makes sense." and then suddenly you're reading about gaming energy ratings on TVs thanks to infinite scroll... It started out interesting, but there's no conclusion.

The world needs a WTO type organisation to set minimum tax benchmarks in key areas. Then if a country wants to do an Ireland/Luxembourg etc they are welcome to but this comes with other trade/visa type restrictions. Without this it's simply going to be a race to the bottom for countries and tax rates.

Another other option is to get rid of company taxes and raise revenue purely at the personal level. Though this will only increase the cost of labor and skew the market in other negative ways.

Without this it's simply going to be a race to the bottom for countries and tax rates.

I don't understand this concern about a "race to the bottom". This "race to the bottom" is why you can buy a computer for $200 that would have cost $10,000 fives years ago. Manufacturers were in a race to provide the most value for the least money.

There should be pressure on gov'ts to keep tax rates low. I consider each country as it's own business where the price is what you pay in taxes and the product are the gov't services you recieve.

Do you really wants gov'ts banding together to collude and keep tax rates high? What do you think that will look like in the end? I assume massively inefficient gov'ts and crushingly high tax rates.

One mans consumer is anothers employee.

Races to bottom only benefit the independently wealth in the long run.

A more efficient government catering to the needs of the citizens is a good thing for everybody. Only competition can ensure that.

No, increasing competition for labor is good for everybody in the long run.

It depends on whether you think competition is _always, indisputably_ good, and cooperation _always, indisputably_ inferior and/or suspicious.

Forced cooperation is always, indisputably, inferior.

'Forced' is a loaded term, I think. Strongly 'incentivized' cooperation can have lots of merits in certain cases, eg. situations derived from prisoner's dilemma.

If a 'player' wants to break out of the cooperation, he can (so this is not 'forced' stricto sensus), but there would presumably be costs from the defection--the other cooperating players might refrain from doing business with the former.

The fundamental problem with your argument is the assumption that government services are offered in exchange for tax in the same way that you pay for other goods or services. They're not. The very nature of western society is that it doesn't offer value for money to the richest. This is by design. We've built progressive taxation systems as a way of redistributing wealth downwards, providing benefit to the whole of society rather than just the few with the most.

How many countries have you lived in? Why did you choose the place you live now? Presumably you have a spreadsheet somewhere with the tax to service ratio for all the countries you considered?

Well, maybe you do. Most people don't. Most people live in the country they were born in, or perhaps emigrate once to a country they perceive to have more opportunities (or family, or a more stable government). The only people who are shopping around for the cheapest tax regime are already exceptionally wealthy and looking to keep more of that wealth for themselves. They're not looking for any governmental services, just a way to stop paying for those that help other people.

Maybe that's OK for you if you're heartless sociopath. It's very easy to forget just how reliant we are on the hard work of other people, even those who earn far less than us.

Most wealthy people who acquire their wealth (i.e. not inherit) have contributed by paying a ton of tax during the acquisition of that wealth.

If it takes me five or ten years to build out a successful company, I will have paid: - Some corporate tax - Income tax (your director salary, your employees salaries) - Dividend taxes - Capital gains tax (when I sell the company) - Various other smaller levies

And you will have created some jobs. When you sell the company, those jobs also usually won't seize to exist. In a way, you will have paid off your debt to society.

If at that point, should you decide to move to some low tax country and live off of investment gains, what's wrong with that? Given (for example) a massive amount of US taxpayers dollars is spent on military and defence spending, I find it hypocritical to call people who actually want to keep their earned wealth "heartless sociopaths".

"Another other option is to get rid of company taxes and raise revenue purely at the personal level. Though this will only increase the cost of labor and skew the market in other negative ways."

I don't get why this is a problem. You can tax income from dividends, and income from capital gains -- why do you need to tax the corporation's profits, too? Those taxes all hit the same person (the investor) so why not just eliminate corporate taxes and raise capital gains and dividend taxes?

In that case, why would anyone remove money from a corporate entity? All those who could afford it would just act through corporate avatars. I think this already happens to some degree.

A person might still enjoy certain (taxable) benefits. I can buy a castle through a company. This is possible and not a problem.

However, if I want to go live in said castle, I usually have to pay some tax on the benefit received. Or pay market rate rent to the company. If I just want to hold the castle as an investment, then obviously I wouldn't have to pay personal tax on that.

What you are suggesting is that the company could provide compensation while declaring it as a cost of doing business.

If they do that (legally or not), it wouldn't count as profit for the business anyway, so a tax on profit doesn't help the situation.

> so why not just eliminate corporate taxes and raise capital gains and dividend taxes

This doesn't make sense.

Tax corporations for their income/profit and then zero dividend taxes (since this money paid tax in the form of corporate taxes).

Capital gains is another issue entirely, while it applies to buying/selling stock it also applies to a lot of other things, so most likely it can't/won't be eliminated.

Can you explain why my idea doesn't make sense? (Real question, not a challenge.)

Well, to be fair I can see the point of a dividend tax

Corporate profits usually become either investments or dividends.

It could be said that by removing corporate taxes you would increase corporate investments or more dividends payment (which would be taxed more, but probably would still be smaller than the tax you would have gotten with corporate taxation)

Also see dilthomas and charlesdm comments

Double taxation is the price you pay as a shareholder for protection from liability for the corporate debts. If you don't want double taxation, you're free to choose a structure that doesn't shield you from liability (i.e., a partnership), though in the US and most of Europe you can now get the best of both worlds (liability protection and no double-taxation) though the LLC or limited company forms.

But why? Double taxation of the same group of people with the same behaviors is equivalent to a higher tax. So why complicate matters?

I guess you're suggesting that it's a means to tax the special privilege of incorporation (and the protection it offers to investors). But that seems like a bad reason. Again, why not just tax the investors directly for the privilege?

"Double taxation" is actually taxing two different - though related - events:

The first is when the company makes profit, whether it is distributed to shareholders or not.

The second is when the shareholders receive their income.

If we did away with the first of these and raised the rate of the second, companies would no longer be paying any taxes on money they accumulate without disbursing. This would make them comparatively less likely to invest it in the short term in ways they can write off. I'm not going to make any particular case here as to whether that's good or bad (and for whom) but it's clearly a change.

Allowing companies to count disbursal of profits as an expense and raising the income tax on those receiving those funds would, I think, leave things more-or-less unchanged but that means there's also no particular reason to do it. It wouldn't simplify paperwork any - both corporations and individuals would still need to be accounting for their income and paying taxes.

Is a "race to the bottom" supposed to be a bad thing? It's called competition.

Competition is good. We need _more_ competition between governments, not a cartel. If a government is more efficient and can lower taxes, than others are incentivised to be competitive and more efficient as well, or risk losing their revenue sources to other more efficient states.

Competition between governments would be a good thing if we had free movement of individuals/labor. So far we only have free movement of capital.

Wealthy people usually have free movement. In most countries, there are investor type residence visas, if you invest a few $100k in a new company.

It's not clear to me what a "more efficient state" is.

Is it the state that give more life quality to all their citizens?

For example. But with a focus on a budget as well. The problem now is governments overspending because in a way it helps the current politicians to be re-elected. But in the long term debts are not good. I think Greece is a very good example how things can go wrong that way.

Greece has been sacked by a bunch of oligarchs and, then, sacked again by their European partners trying to save the European banks but, their real problem, is that they are not a sovereign state anymore. You can't be a sovereign state if you have not control of your money.

States are not households. The debt of a country is a very different animal that the debt of firm or an individual.

Countries like Ireland and Luxembourg are doing pretty well. So why is it wrong what they are doing ?

Also: once there is a minimum tax level it will only go up. And there will be a lot of governments pushing for that.

What the world really need is a mechanism to prevent governments from overspending. Now there is none.

They are doing well by leeching off other countries. If the other countries adopted the tax policies of Ireland then there would be no point in a multi national creating a sham shell corporation in Ireland.

If "high tax" countries have a genuine problem with this then they should reduce their corporate tax. Don't blame the solution, blame the problem.

If corporate tax is 30-35%, people are going to try and optimise as much as humanly possible. If corporate tax is between 10 and 20%, it becomes a lot less of an issue.

Its has very little to do with the tax rate (although the low corp rate does help) it is to do with arbitraging tax law that effectively makes all profits in the EU bar those made in Ireland untaxed.

Just to be clear, it is not that all EU profits are getting taxed at Ireland rates, it is that almost all EU profits are not being taxed at all.

Why won't they (adopt), then? Ireland is not some third-world country with no public services, their government is probably more efficient, creating competition for other governments.

Ireland is not more efficient a government; it was simply leeching off of the rest of Europe through a tax-evasive taxation regime that is now illegal. The gist of it was that companies could locate their European headquarters in Ireland for tax purposes, but then Ireland wouldn't actually tax the companies if they legally headquartered themselves in Bermuda. The latter part of this was the tax-evasive portion deemed illegal. Furthermore, Ireland didn't require the companies to actually move their management to Bermuda--it was sufficient to hold a board meeting once a year in Bermuda, and many of these companies were for practical purposes managed from London or New York.

"What the world really need is a mechanism to prevent governments from overspending."

If governments run a supply the private sector has to run a deficit. Mathematics don't lie.

https://en.wikipedia.org/wiki/Sectoral_balances

>The world needs a WTO type organisation to set minimum tax benchmarks in key areas.

Nope. There's no reason for countries to meddle with the tax rates in their neighbors.

If you go out of the western developed world, you'll find out that tax rates don't effectively exist in much of the developing world. Officially or unofficially. For example saudi arabia and dubai have %0 income tax for example. Not great places to live permanently for other reasons, but they exist. I don't think they will let go of their %0 income tax rates any time soon either.

Panama and the HK only tax Panama and HK source income. They are far nicer places to live. This tax nature is unlikely to change any time soon.

Switzerland has no capital gains tax on share sales. The UK has a horrible tax law called non-domiciled resident that has created the housing affordability apocalypse of london. The wealthy can just pay a flat tax of 30k pounds per year after 7 years of the status. Those 7 years before they do not pay tax on their world wide foreign income.

All of the mentioned nations above are not small micro-states that can be easily bullied, and have too many power players in their country that benefit from the status quo to allow those changes to happen. The only reason why they will change is from higher power players who would benefit from their taxation.

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