Facebook Tax Bill Over Ireland Move Could Cost $5B(bloomberg.com)
bloomberg.com
Facebook Tax Bill Over Ireland Move Could Cost $5B
https://www.bloomberg.com/news/articles/2016-07-28/facebook-gets-3-5-billion-irs-tax-notice-over-ireland-move
127 comments
Yes, but without those developers there would be no facebook :) (pat yourself on the back)
E&Y denies yet another country tax income. When are govts going to blacklist these guys from govt contracts?
The UK was supposed to be excluding such companies.
The UK was supposed to be excluding such companies.
Ireland has nothing to do with the UK.
Accountants and Lawyers end up doing value addition because government regulations are far too complex.
Nope. Accountants and Lawyers end up doing value addition because corporations like Facebook take things to the legal gray border of the regulations. The whole double irish is barely useful if you give your assets fair market value. Don't be so gullible to believe this needed to be complex.
Accounting and law firms hire lobbyists to persuade the government to make the law more complex. This is value destruction.
The only reason for Facebook to move assets to Ireland is to take advantage of more complexity in the interactions of multiple legal systems instead of sticking with the relative simplicity of one.
I'm not sure why you put value in scare quotes. By avoiding excessive US taxes, Facebook is now a more efficient company.
That is how taxes work. The government introduces friction into economic transactions, which sucks up some amount of productivity from those who produce value, which the government can then use for its own ends. By moving to a country with more reasonable taxes, Facebook's economic interactions now have less friction and higher efficiency.
That is how taxes work. The government introduces friction into economic transactions, which sucks up some amount of productivity from those who produce value, which the government can then use for its own ends. By moving to a country with more reasonable taxes, Facebook's economic interactions now have less friction and higher efficiency.
This has nothing to do with taxes or business efficiency. The IRS is saying that Facebook undervalued their assets when transferring them to Ireland. It's the implications of that deal that are being discussed
This is 100% about taxes. The only reason the IRS cares about valuing assets is for the amount of tax they can levy on them. And saving $5B sounds darn efficient to me.
I know for sure that if I underdeclare the value of my holdings or my income, I'll be punished when caught, and I don't consider that unfair. I might disagree with the amount I'm taxed, but I don't disagree that I should contribute something to society through paying tax.
The difference as I see it is that companies usually operate as if they believe they shouldn't pay any tax. I realise that minimising tax burden is a form of efficiency, but the challenging part here is deciding where 'efficient' ends and 'dishonest' starts. I honestly don't know, but I'd say it's pretty clear that, at some point, underdeclaring the value of corporate holdings starts being dishonest.
The difference as I see it is that companies usually operate as if they believe they shouldn't pay any tax. I realise that minimising tax burden is a form of efficiency, but the challenging part here is deciding where 'efficient' ends and 'dishonest' starts. I honestly don't know, but I'd say it's pretty clear that, at some point, underdeclaring the value of corporate holdings starts being dishonest.
> where 'efficient' ends and 'dishonest' starts
Companies don't know from 'dishonest.' The only question is where 'efficient' ends and illegal starts. Other than that, companies don't care.
(...and even then, in countries with corporate liability protection and simple fines for most corporate crimes, "illegal" is just another name for an economic cost going into the efficiency calculus.)
Companies don't know from 'dishonest.' The only question is where 'efficient' ends and illegal starts. Other than that, companies don't care.
(...and even then, in countries with corporate liability protection and simple fines for most corporate crimes, "illegal" is just another name for an economic cost going into the efficiency calculus.)
People think of these issues too much in terms of black and white.
You should think of it as a negotiation. Many transactions, even on a smaller scale, are complex, and deciding on the "true value" is often impossible. So the tax authorities are negotiating with Facebook, and Facebook's report is simply its opening offer. You wouldn't consider a salesmen who overpriced his product to be doing something necessarily unethical (assuming they weren't outright committing fraud or otherwise doing something illegal).
Disclaimer: Not a lawyer or accountant, and I'm totally generalizing here from other transactions I know more about. I actually know almost nothing specific about the US tax system or this situation with Facebook, I'm trying to convey the general attitude that most companies have.
You should think of it as a negotiation. Many transactions, even on a smaller scale, are complex, and deciding on the "true value" is often impossible. So the tax authorities are negotiating with Facebook, and Facebook's report is simply its opening offer. You wouldn't consider a salesmen who overpriced his product to be doing something necessarily unethical (assuming they weren't outright committing fraud or otherwise doing something illegal).
Disclaimer: Not a lawyer or accountant, and I'm totally generalizing here from other transactions I know more about. I actually know almost nothing specific about the US tax system or this situation with Facebook, I'm trying to convey the general attitude that most companies have.
Oh, I absolutely realise I'm oversimplifying it, but the point stands that, in most cases, it's in Facebook's interest to massively underreport value as part of that negotiation.
For example, say they invent a new way of compressing jpegs which saves them bandwidth and storage costs. Facebook could report that as costing them money: "Oh, that cost us $120,000 in programmer time to devise and implement".
It's entirely possible that this is true, but it's only half the picture: that new compression algorithm might have saved them twice that or more in bandwidth costs.
In this instance, it's 'efficient' for Facebook to report one part and then conveniently ignore the other. But the question remains is it honest? Surely the value of that technology is somewhere between the cost to create and the costs it's saved?
For example, say they invent a new way of compressing jpegs which saves them bandwidth and storage costs. Facebook could report that as costing them money: "Oh, that cost us $120,000 in programmer time to devise and implement".
It's entirely possible that this is true, but it's only half the picture: that new compression algorithm might have saved them twice that or more in bandwidth costs.
In this instance, it's 'efficient' for Facebook to report one part and then conveniently ignore the other. But the question remains is it honest? Surely the value of that technology is somewhere between the cost to create and the costs it's saved?
[deleted]
Corporate income taxes should be eliminated. Instead of focusing on building a company and good products, companies have to dedicate resources to figure out how to escape the taxation.
Taxation should be done when profit is distributed to shareholders (similar to Estonia). There is also unfair double taxation - paying taxes after company pays them.
Taxation should be done when profit is distributed to shareholders (similar to Estonia). There is also unfair double taxation - paying taxes after company pays them.
Wow.
I mean, if you're going to argue that corporate tax rates should be lower, just make that argument.
But the argument that corporations should be able to pay fewer taxes because they (and/or other corporations) lobbied to create a byzantine tax law that they then exploited is... a special kind of argument.
I mean, if you're going to argue that corporate tax rates should be lower, just make that argument.
But the argument that corporations should be able to pay fewer taxes because they (and/or other corporations) lobbied to create a byzantine tax law that they then exploited is... a special kind of argument.
The argument is that income tax for companies is a terrible idea and it's better to move taxation to different places. Places where you can be both more efficient and more fair at collecting.
It's impossible to make income tax fair. The simplest example is selling rights to trademark or some licensing to friendly company located in tax heaven. You will never be able to assess fair value of a trademark and you will always be left with litigation hell. It's just the worst possible tax.
It's impossible to make income tax fair. The simplest example is selling rights to trademark or some licensing to friendly company located in tax heaven. You will never be able to assess fair value of a trademark and you will always be left with litigation hell. It's just the worst possible tax.
Out of curiosity, what's a better idea than income tax for corporations? Assuming we do away with it, what's the more efficient and fairer way you'd propose?
Taxing the owners (as in a subchapter S corporation in the US). It's a pass-through. Then you don't have the incentive to do things like the double-Irish or similar unnatural acts.
That's one way of doing it, but means that if the majority of your stock is held by foreign nationals residing abroad, the U.S. gets much less income, even though the majority of the value is being generated in the U.S. using U.S. infrastructure and services.
Suggestion: create "proxy individuals"—paper people that legally own all of a foreign national's U.S. assets, including their bank accounts and their corporate interests. Then tax those proxies at all the points you'd tax regular citizens, including capital-gains time. Disallow foreign capital ownership without proper "taxability insurance backing"—i.e. seizable assets—existing in the proxy bank accounts.
That's a reasonable point, but it turns out nonresident aliens are subject to a flat 30% tax on dividends (could be lower depending on various treaties).
Is your argument that tax law is only complex because of lobbying. That seems like a ridiculous statement.
The gov't is more than capable of coming up with complex regulations.
The gov't is more than capable of coming up with complex regulations.
Unless the parent commenter was the one who did that lobbying, the argument stands.
Actually this is not as bad as most people assume. Companies should mostly re-invest, so should have no income. They should only have growth.
Taxing profit is taxing the reward (a delusion of money produced after all operations), which is what's suppose to justify it. But taxing growth is taxing the company itself (taxing the operations). Taxing shares or dividends would be taxing rewards.
Apple has generated a boatload of income tax and sales tax and capital gains tax, and these numbers are usually left out of corporate tax news pieces.
That said, Amazon being able to escape sales tax early was bad. Also individuals avoiding income tax through shell companies in tax havens is also bad. At least worse than global corporations escaping the US corporate tax...
Taxing profit is taxing the reward (a delusion of money produced after all operations), which is what's suppose to justify it. But taxing growth is taxing the company itself (taxing the operations). Taxing shares or dividends would be taxing rewards.
Apple has generated a boatload of income tax and sales tax and capital gains tax, and these numbers are usually left out of corporate tax news pieces.
That said, Amazon being able to escape sales tax early was bad. Also individuals avoiding income tax through shell companies in tax havens is also bad. At least worse than global corporations escaping the US corporate tax...
> Amazon being able to escape sales tax early was bad.
They didn't "escape" it; states attempted to charge it for inter-state transactions, which they can't legally do in the absence of federal law allowing that. Amazon only became obligated to pay it when they started conducting intra-state commerce, which states are allowed to regulate and tax.
They didn't "escape" it; states attempted to charge it for inter-state transactions, which they can't legally do in the absence of federal law allowing that. Amazon only became obligated to pay it when they started conducting intra-state commerce, which states are allowed to regulate and tax.
"Amazon being able to escape sales tax early was bad" - they didn't escape it. In fact, they were following the law and acting exactly as traditional catalog retailers did; they charged sales tax to customers located in states in which Amazon has a physical presence. It only became a real political hot button issue when they started getting so big that they became a target.
Following the law doesn't make it not bad. Tax havens are legal and so are corporate tax loopholes. That's why they're holes, not crimes.
It was bad because 1) it was bad for small businesses that had to collect and had a hard time competing on price alone to begin with -- making it impossible to compete. And 2) because sales tax is a huge tax contribution which otherwise the government would have counted on.
And regarding escaping, it was an integral part of their business plan, and they fully intended to fight for it.
> the State of California agreed to a delay of one year before requiring online retailers to begin collecting sales tax on sales to California addresses (Read the whole part on California [1])
Worse yet, Amazon wasn't even profiting in the process. Making Jeff either Satan or a genius (you'll find plenty of stories proclaiming both).
Amazon created jobs and shareholder value. I'll give them that.
---- [1] https://en.wikipedia.org/wiki/Amazon_tax
It was bad because 1) it was bad for small businesses that had to collect and had a hard time competing on price alone to begin with -- making it impossible to compete. And 2) because sales tax is a huge tax contribution which otherwise the government would have counted on.
And regarding escaping, it was an integral part of their business plan, and they fully intended to fight for it.
> the State of California agreed to a delay of one year before requiring online retailers to begin collecting sales tax on sales to California addresses (Read the whole part on California [1])
Worse yet, Amazon wasn't even profiting in the process. Making Jeff either Satan or a genius (you'll find plenty of stories proclaiming both).
Amazon created jobs and shareholder value. I'll give them that.
---- [1] https://en.wikipedia.org/wiki/Amazon_tax
Then we'd have companies like Amazon that refuse to pay a dividend indefinitely.
Tax capital gains as income.
And watch participation in the stock market fall off a cliff.
Probably not. Assuming your goal was to leave the tax level about the same, you'd just have it all coming out as income tax on an individual rather than taxing it twice.
Millions of retirees have carefully worked out the point at which they can retire based on capital gains, and increasing taxes on it would break that.
Perhaps tax income like capital gains, if you want them to match.
Perhaps tax income like capital gains, if you want them to match.
It would definitely need a lot of careful though to get the balance right. As it stands, the UK's maximum capital gains tax rate is 28% vs. 45% for the top rate of income tax.
This leads to the situation, not at all uncommon or illegal, where a lot of highly paid professionals are the directors of their own limited companies, take no salary, and get all of their remuneration in the form of dividends taxed a maximum rate of 28%.
For reference, anything over £31,786 per year is taxed at 40% -- before that it's 20% (national insurance is extra). It's usually the case that freelancers or contractors are able to invoice via their own limited companies, whereas employees are not normally able to do it this way and have to go the income tax route.
Doing this is entirely legal, and many people argue that it's perfectly 'fair', but it definitely doesn't look fair to those unable to take advantage of that setup who earn, say, £60,000.
Some figures, very rough and rounded to whole pounds:
(Edited to remove duplicated calculations at top of comment.)
This leads to the situation, not at all uncommon or illegal, where a lot of highly paid professionals are the directors of their own limited companies, take no salary, and get all of their remuneration in the form of dividends taxed a maximum rate of 28%.
For reference, anything over £31,786 per year is taxed at 40% -- before that it's 20% (national insurance is extra). It's usually the case that freelancers or contractors are able to invoice via their own limited companies, whereas employees are not normally able to do it this way and have to go the income tax route.
Doing this is entirely legal, and many people argue that it's perfectly 'fair', but it definitely doesn't look fair to those unable to take advantage of that setup who earn, say, £60,000.
Some figures, very rough and rounded to whole pounds:
Earning £60,000 and paying
income tax:
---------------------------
£10,800 - 0% = £10,800 Tax free allowance
£31,700 - 20% = £25,360 'Basic Rate' tax
£17,500 - 40% = £10,500 'Higher Rate' tax
===========================
£60,000 gross = £37,210 net
(before national insurance
contributions are taken)
Earning £60,000 and paying
capital gains tax:
---------------------------
£11,000 - 0% = £11,000 Tax free allowance
£49,000 - 28% = £35,280 Highest CGT rate
===========================
£60,000 gross = £46,280 net
(before national insurance
contributions are taken)
(Edited to remove duplicated calculations at top of comment.)
I was specifically thinking of the US capital gains structure (see https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite... ); this varies wildly by country. US capital gains taxes are always lower than the corresponding income tax bracket, hence my comment; it looks like UK capital gains are potentially higher than the corresponding income tax bracket for the same amount.
Or tax wealth.
Even if that were the case you could tax gains from selling their stock as income. If they were hoarding cash the value of that cash would increase their stock price.
You don't have to invest in Amazon if it doesn't meet your expectations.
You'd have to come up with a reasonable way to tax the gains of foreign investors, but otherwise I think it makes sense to just get rid of both capital gains and corporate income taxes and just roll everything into the personal income tax system.
Then most of the upper and middle class would incorporate, leaving the poor to pay income tax.
Even if you did this you would still need to pay yourself a salary or dividends, either of which would then be taxed as income. So there's some wiggle room to avoid paying tax on business expenses, and I'm sure that would be abused to an extent, but given that the tax system would likely still be progressive there's on reason the poor would be paying a larger share of the tax.
Under current law, if you live rent free in a house provided by a corporation that you owned, you anyway have to recognize an appropriate amount of personal income for that. Same with the use of a vehicle.
Compliance in such situations would probably be lower with no corporate tax, by incorporating isn't some magic process that makes income disappear.
Compliance in such situations would probably be lower with no corporate tax, by incorporating isn't some magic process that makes income disappear.
My view is that corporate income tax is just a very bad idea. It will always introduce a lot of judgement problems and you will always need to assess every single transaction.
Is it "fair price" or is it done to funnel money somewhere?
Those questions are impossible to answer objectively and we shouldn't really care. Tax owners of the corporation. Tax people for living in a nice place (land tax, real estate tax, all kinds of consumption taxes). If you really want you can tax companies' revenue (not profits). Some taxes for polluting the environment, using the infrastructure would be great as well. Try to understand what makes your country an attractive place to operate from and charge for those things.
Taxing income is just a recipe for problems and unfair treatment (companies with access to top lawyers pay less, small companies pay more).
Those questions are impossible to answer objectively and we shouldn't really care. Tax owners of the corporation. Tax people for living in a nice place (land tax, real estate tax, all kinds of consumption taxes). If you really want you can tax companies' revenue (not profits). Some taxes for polluting the environment, using the infrastructure would be great as well. Try to understand what makes your country an attractive place to operate from and charge for those things.
Taxing income is just a recipe for problems and unfair treatment (companies with access to top lawyers pay less, small companies pay more).
I agree with your post and you list a number of good ideas. Except...
> If you really want you can tax companies' revenue (not profits).
That one doesn't really work.
Some industries are very low margin and capital intensive. There is, realistically, no level of revenue based tax that a supermarket chain can pay. Maaaaybe 1%. Max. Same goes for airlines, steel mills, and a thousand other old-school bricks and mortar industries where a lot of money may come in the door, but then in goes right back out again as a cost of doing business.
Other industries are very high margin, including a lot of tech businesses that were all familiar with. A 1% revenue tax would represent a massive decrease in their total tax bill, but if you charge them a more realistic tax rate you've bankrupted everything that's not a highly profitable tech company, which is basically your entire economy.
(Yes, they'll try to pass it on, but a supermarket chain isn't going to be able to pass on a 20% tax on revenue. They're already making no profits, paying crap wages, and bargaining their supliers down to the wire; the only thing they could do is raise prices 20%, and people who aren't working at the aforementioned high-margin tech companies can't remotely afford a 20% surcharge on their food bill with no offsetting changes to their tax or benefits. Plus, if that's actually the policy result you wanted...maybe just enact a 20% VAT?)
Of course, you could adjust the tax rate based on how capital intensive the industry is and how high your margins are at which point...it's a tax on profit again. :)
The more you dig into it, the more it becomes clear (in my view) that revenue based taxation isn't the right lever to pull. Whatever policy outcome you want can be more easily gained via other methods.
> If you really want you can tax companies' revenue (not profits).
That one doesn't really work.
Some industries are very low margin and capital intensive. There is, realistically, no level of revenue based tax that a supermarket chain can pay. Maaaaybe 1%. Max. Same goes for airlines, steel mills, and a thousand other old-school bricks and mortar industries where a lot of money may come in the door, but then in goes right back out again as a cost of doing business.
Other industries are very high margin, including a lot of tech businesses that were all familiar with. A 1% revenue tax would represent a massive decrease in their total tax bill, but if you charge them a more realistic tax rate you've bankrupted everything that's not a highly profitable tech company, which is basically your entire economy.
(Yes, they'll try to pass it on, but a supermarket chain isn't going to be able to pass on a 20% tax on revenue. They're already making no profits, paying crap wages, and bargaining their supliers down to the wire; the only thing they could do is raise prices 20%, and people who aren't working at the aforementioned high-margin tech companies can't remotely afford a 20% surcharge on their food bill with no offsetting changes to their tax or benefits. Plus, if that's actually the policy result you wanted...maybe just enact a 20% VAT?)
Of course, you could adjust the tax rate based on how capital intensive the industry is and how high your margins are at which point...it's a tax on profit again. :)
The more you dig into it, the more it becomes clear (in my view) that revenue based taxation isn't the right lever to pull. Whatever policy outcome you want can be more easily gained via other methods.
I agree about revenue tax - it's problematic.
My issues with VAT are:
1)It's very easy to go around - VAT cheating in EU is rampant, for example in my country it's estimated to be about 10% of total yearly budget (not only VAT, total)
2)It's impossible to collect from businesses operating abroad which don't ship physical goods. There is no way EU is going to go after a guy in Thailand for selling software unless he becomes a big fish. Until then he is unfairly competing with all EU developers who pay-up ~20% on every license sold to EU countries.
The idea of consumption tax appeals to me in general (if land/real estate taxes aren't enough) but it would need to be somehow collected from the buyer (for example for using a currency) and that's not going to happen.
1)It's very easy to go around - VAT cheating in EU is rampant, for example in my country it's estimated to be about 10% of total yearly budget (not only VAT, total)
2)It's impossible to collect from businesses operating abroad which don't ship physical goods. There is no way EU is going to go after a guy in Thailand for selling software unless he becomes a big fish. Until then he is unfairly competing with all EU developers who pay-up ~20% on every license sold to EU countries.
The idea of consumption tax appeals to me in general (if land/real estate taxes aren't enough) but it would need to be somehow collected from the buyer (for example for using a currency) and that's not going to happen.
[deleted]
I've always wondered if you could combine corporate income taxes with a law against "passing on" those taxes. As in—by law, the company would have to do its accounting and business model analysis as if it wasn't paying that tax. The individual employees would be fully aware that the company is days away from bankruptcy, but by law they wouldn't be allowed to charge more, because—in the magical legal-fiction alternate reality that the board of directors would, by charter, have to think in terms of—the company wouldn't be days away from bankruptcy. (Even as it was going into bankruptcy, and purchased by a private-equity firm, that firm wouldn't be allowed to raise prices to save it, because that would still be acknowledging the effect of the tax.)
> could [you] combine corporate income taxes with a law against "passing on" those taxes.
Short answer: No. Tax incidence doesn't work that way.
Long answer: The concept doesn't even make sense; a company can pay taxes in an accounting sense, but not in an economic one. Since a corporation is not a real person, every dollar of tax is by definition passed on; all we can do is try and figure out if it's being passed on to customers (via higher prices), employees (via lower wages), or investors (via lower returns). But, obviously, every dollar going into the treasury is a dollar not going into some real person's pocket. Unless we start letting companies cover their tax bills by printing money. :)
Of course, what you probably meant was "a law against passing on those taxes to specific groups"; you're looking for a way to force the tax to be passed on to investors and not employees (or whatever). In which case the answer is...
...still no. Because tax incidence (which is the technical name for this) isn't just a matter of deciding how to divy up a tax bill. If investors face lower returns, they'll invest less money (both because they'll have less money to invest, because they'll decide to invest in other areas where taxes are lower, and because they'll decide to consume more and invest less). Investment, at an industry level, is strongly correlated with productivity (eg, build a new factory and your employees can make more widgets), and productivity (again at an industry level) is strongly correlated with wages. Or in other words: If you tax investment in an industry heavily, you'll end up with decrepit plant and poorly paid workers. That's how taxes on investment end up being born by workers, not by some sort of conscious decision to cut wages to free up more money for dividends.
And no law is going to stop it either. Is a union supposed to bargain with a company as if there were other employers in the industry paying high wages, even though there aren't, because there's been industry-wide under-investment for the past 10 years? Does your law force investors to invest as if they were receiving dividends, even though they're not? Does this law apply to foreign investors? Are you going to try and order round some massive Middle Eastern sovereign wealth fund and tell them how much they would have invested without the tax, and send them an invoice for the balance?
In short: The issue has been well studied. It might work in a world without trade, globalization, and the free-ish movement of labour, capital, and goods. It doesn't work in our world.
Short answer: No. Tax incidence doesn't work that way.
Long answer: The concept doesn't even make sense; a company can pay taxes in an accounting sense, but not in an economic one. Since a corporation is not a real person, every dollar of tax is by definition passed on; all we can do is try and figure out if it's being passed on to customers (via higher prices), employees (via lower wages), or investors (via lower returns). But, obviously, every dollar going into the treasury is a dollar not going into some real person's pocket. Unless we start letting companies cover their tax bills by printing money. :)
Of course, what you probably meant was "a law against passing on those taxes to specific groups"; you're looking for a way to force the tax to be passed on to investors and not employees (or whatever). In which case the answer is...
...still no. Because tax incidence (which is the technical name for this) isn't just a matter of deciding how to divy up a tax bill. If investors face lower returns, they'll invest less money (both because they'll have less money to invest, because they'll decide to invest in other areas where taxes are lower, and because they'll decide to consume more and invest less). Investment, at an industry level, is strongly correlated with productivity (eg, build a new factory and your employees can make more widgets), and productivity (again at an industry level) is strongly correlated with wages. Or in other words: If you tax investment in an industry heavily, you'll end up with decrepit plant and poorly paid workers. That's how taxes on investment end up being born by workers, not by some sort of conscious decision to cut wages to free up more money for dividends.
And no law is going to stop it either. Is a union supposed to bargain with a company as if there were other employers in the industry paying high wages, even though there aren't, because there's been industry-wide under-investment for the past 10 years? Does your law force investors to invest as if they were receiving dividends, even though they're not? Does this law apply to foreign investors? Are you going to try and order round some massive Middle Eastern sovereign wealth fund and tell them how much they would have invested without the tax, and send them an invoice for the balance?
In short: The issue has been well studied. It might work in a world without trade, globalization, and the free-ish movement of labour, capital, and goods. It doesn't work in our world.
>(companies with access to top lawyers pay less, small companies pay more).
That is a problem of the law being easier to circumvent if you've got resources to do so. From abusing how complicated the tax code is, to actively lobbying to pass laws that make it easy for you to do so. Simplifying the tax code, removing loopholes is one step, but that would require a total rewrite of it, which is a long process.
Corporate income tax is necessary in our society. Corporations use government built infrastructure, whether it is roads, copper cables, etc. They use government services and plethora of government funded things. It is absolutely normal they contribute back to society. Sadly, in an increasingly globalized world, it is much easier for a company to hide its profits in a fiscal paradise.
That is a problem of the law being easier to circumvent if you've got resources to do so. From abusing how complicated the tax code is, to actively lobbying to pass laws that make it easy for you to do so. Simplifying the tax code, removing loopholes is one step, but that would require a total rewrite of it, which is a long process.
Corporate income tax is necessary in our society. Corporations use government built infrastructure, whether it is roads, copper cables, etc. They use government services and plethora of government funded things. It is absolutely normal they contribute back to society. Sadly, in an increasingly globalized world, it is much easier for a company to hide its profits in a fiscal paradise.
"It is absolutely normal they contribute back to society."
OP never said that companies shouldn't contribute back to society, only that it not be done in the form of an income tax.
OP never said that companies shouldn't contribute back to society, only that it not be done in the form of an income tax.
>(companies with access to top lawyers pay less, small companies pay more)
I think this is one reason why the system doesn't get reformed in general. The tax system's complexity gives a competitive advantage to large corporations who then lobby the government to gain further advantages.
I think this is one reason why the system doesn't get reformed in general. The tax system's complexity gives a competitive advantage to large corporations who then lobby the government to gain further advantages.
"If you really want you can tax companies' revenue (not profits)."
How would that work if a company isn't profitable? Sounds like taxing profit makes more sense, although I agree that it does give ambiguity. But then, it also allows the government to incentivize certain kinds of spending over others by allowing it to be counted (or not) towards the tax bill.
How would that work if a company isn't profitable? Sounds like taxing profit makes more sense, although I agree that it does give ambiguity. But then, it also allows the government to incentivize certain kinds of spending over others by allowing it to be counted (or not) towards the tax bill.
That's prime argument for taxing revenue actually.
Imagine you have two companies doing the same thing. They have the same product, use the same amount of resources, infrastructure, pollute at the same rate etc.
The only difference is that one operates under famous trademark from country X which it licenses for 100M/year and brings 0$ profits while the other one developed its own trademark which it owns therefore making 100M/year in profit.
What kind of justification (moral, utilitarian, economic) do you see for charging 2nd company 100M * tax rate more than the first company?
The only difference is that one operates under famous trademark from country X which it licenses for 100M/year and brings 0$ profits while the other one developed its own trademark which it owns therefore making 100M/year in profit.
What kind of justification (moral, utilitarian, economic) do you see for charging 2nd company 100M * tax rate more than the first company?
While I find the idea of killing unprofitable commodity suppliers by taxing them to death aesthetically pleasing, it's probably not good for GDP.
Tacking on: sales tax is essentially a tax on revenue, just such that it only applies to retailers and is transparent to the consumer at the point of sale.
How can countries avoid the spiral of death with taxing? I hate how google, facebook etc. makes hundreds of millions in my country, but barely pay taxes. While local companies do.
> I hate how google, facebook etc. makes hundreds of millions in my country, but barely pay taxes.
Figuring out how much a large company makes is complex, which is why we have a very complex system of rules and laws to let us calculate it. And according to those laws, Google, Facebook, etc. don't actually make hundreds of millions in profit in your country.
That's why they don't pay taxes, and it's what the linked article is about: Because your country (and mine) has passed laws which say that they aren't making money despite what your intuition tells you.
If you want to fix it, the starting point would be those laws. Except...we've been trying to improve those laws for a long, long time. Many are now many decades old. Transfer pricing rules exist for a reason; simply abolishing them would cause other problems and greater imbalances.
At some point maybe we need to step back and focus on taxing the consumption of real people (which is, in comparison, much easier). Facebook may be inherently hard to tax; but those profits flow into the pockets of real people, and they are (in comparison!) easy to tax.
Figuring out how much a large company makes is complex, which is why we have a very complex system of rules and laws to let us calculate it. And according to those laws, Google, Facebook, etc. don't actually make hundreds of millions in profit in your country.
That's why they don't pay taxes, and it's what the linked article is about: Because your country (and mine) has passed laws which say that they aren't making money despite what your intuition tells you.
If you want to fix it, the starting point would be those laws. Except...we've been trying to improve those laws for a long, long time. Many are now many decades old. Transfer pricing rules exist for a reason; simply abolishing them would cause other problems and greater imbalances.
At some point maybe we need to step back and focus on taxing the consumption of real people (which is, in comparison, much easier). Facebook may be inherently hard to tax; but those profits flow into the pockets of real people, and they are (in comparison!) easy to tax.
Real people disproportionately situated in the US. I'm not sure if that helps any of those other countries.
The basic problem is companies using public resources of a country but not paying back into the system.
The basic problem is companies using public resources of a country but not paying back into the system.
If you're taking about resources which have usage which is measurable and excludable (postal service, road network, legal system) then charge for use. Amazon relies heavily on the road network to deliver goods; it's trivial (and a good idea in any case) to charge commercial vehicles a fee to cover their wear and tear on the roads, carbon emissions, etc. Similarly, if they're filing legal cases, charge them a fee, etc.
If you're talking not so much about them using actual resources, but benefiting in some vague sense from a country having a functioning police system, even if they don't actually use it, then no, you can't charge them fees. But if they're making sales in your country, you can charge GST/VAT.
But if they're not using actual resources, not making sales in your country, and not making profits...
...then they're not going to be paying back into the system. Even if you really need them too, even if it would be highly immoral for them not to. The existence of a problem doesn't imply the existence of a solution.
If you're talking not so much about them using actual resources, but benefiting in some vague sense from a country having a functioning police system, even if they don't actually use it, then no, you can't charge them fees. But if they're making sales in your country, you can charge GST/VAT.
But if they're not using actual resources, not making sales in your country, and not making profits...
...then they're not going to be paying back into the system. Even if you really need them too, even if it would be highly immoral for them not to. The existence of a problem doesn't imply the existence of a solution.
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Companies want to pay no taxes, but they want protection from the legal system infrastructure etc. that allows a company to be successful.
You can't have cake and eat cake. Without taxes there would be no system at all. It's a shame that small companies pay for this system and big corporations use this system but evade paying. No justice in this.
There is so much inefficieny in gov't spending that your statement is meaningless. The biggest line items in the gov't budgets have nothing to do with the legal system or infrastructure.
Government, by definition, can be more efficient than any private entity because it never needs to produce a profit. Businesses need to be able to skim a little off for the owners. Government can provide services at cost, no mark up.
If you're unhappy with the implementation of a specific program, like Medicare (which is, of course, more efficient than private health insurance in the US), let's talk about that.
My pick is the military--very wasteful. We could fold 90% of that budget into university and health care and live in heaven on earth.
If you're unhappy with the implementation of a specific program, like Medicare (which is, of course, more efficient than private health insurance in the US), let's talk about that.
My pick is the military--very wasteful. We could fold 90% of that budget into university and health care and live in heaven on earth.
But profit creates an incentive for efficiency. Sell the same thing for 1% lower than your competitor and that goes right into your pocket.
Our current gov't system provide very little incentive for efficient use of funds.
I'm not arguing that all of these programs need to just disappear. I'm arguing a "race to the bottom" in terms of efficiency is a good thing, not a bad thing for gov'ts.
Our current gov't system provide very little incentive for efficient use of funds.
I'm not arguing that all of these programs need to just disappear. I'm arguing a "race to the bottom" in terms of efficiency is a good thing, not a bad thing for gov'ts.
I think the kind of constant oversight and worrying over how our tax dollars are spent creates an incentive for efficiency. And the ability to vote regularly on elected officials who guide our programs, that too creates an incentive for efficiency.
Having seen what races to the bottom do in various other industries, I shudder to think of how government works would suffer under the same pressure. Not the kind of society I'd want to aspire to live in.
Having seen what races to the bottom do in various other industries, I shudder to think of how government works would suffer under the same pressure. Not the kind of society I'd want to aspire to live in.
Medicare and social security pays for the millions of people who have help build this country. Yes the government might be inefficient. How many google, Facebook, and apples are coming out of Ireland or India?
Seems like he only long term answer is somehow to make global companies beholden to a global tax authority, but no idea how that would work on a planet with sovereign nations.
It would be additional global tax from capital. If you are interested more read "Capital in the Twenty-First Century" by Thomas Piketty.
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They should isolate countries like Ireland who are allowing countries to wash profits through their territory to "allow investment".
Ireland is 5m people. Just hang them out to dry. Either they consume as much as they add in value or their standard of living has to drop until this is held to be correct.
Ireland is 5m people. Just hang them out to dry. Either they consume as much as they add in value or their standard of living has to drop until this is held to be correct.
Why do you think paying taxes is a virtue ? Why does US government need 40% of our hard earned money ?
May be American politicians should stop the war on drugs, wars in far off countries and medicare and reduce tax levels to 20%.
Facebook, Google, Apple and push the frontiers of human knowledge at rapid rate if they can spend that money themselves. In case of government it will be used to by some junk airforce planes that dont fly.
May be American politicians should stop the war on drugs, wars in far off countries and medicare and reduce tax levels to 20%.
Facebook, Google, Apple and push the frontiers of human knowledge at rapid rate if they can spend that money themselves. In case of government it will be used to by some junk airforce planes that dont fly.
> Facebook Google and apple shouldnt be taxed BC theyre r and d
Lol. Most real frontier level r and d is funded by the gov with tax money, especially the not for profit r and d focused on energy and health sectors. The only r and d the tech cos you named do is targeted to make profit for themselves which is why they pay taxes. I agree that a lot of tax money is wasted but some of it is used for critical research.
When facebook starts a non profit division researching better nuclear storage containers and cancer treatments then, maybe that division shouldnt be taxed. I mean these are essentially advertising based businesses, so that's not really pushing the frontiers of human knowledge in a uniformly positive direction.
Lol. Most real frontier level r and d is funded by the gov with tax money, especially the not for profit r and d focused on energy and health sectors. The only r and d the tech cos you named do is targeted to make profit for themselves which is why they pay taxes. I agree that a lot of tax money is wasted but some of it is used for critical research.
When facebook starts a non profit division researching better nuclear storage containers and cancer treatments then, maybe that division shouldnt be taxed. I mean these are essentially advertising based businesses, so that's not really pushing the frontiers of human knowledge in a uniformly positive direction.
Government barely spends and money on research and most of it is on subjects that have 0 impact on anything for example giving heroine to monkeys.
Paying taxes isn't a virtue, it's fair trade for services and security, which all of these companies benefit from within the U.S., and without which they would likely have never come to be.
Your taxes would be a lot lower if the biggest corporations were paying their fair share.
Because unless you never use government built infrastructure, contributing back to society is kind of your duty.
I live in France, my employer pays my raw salary in taxes, and approximately 30% of this raw salary that I get is paid in taxes too. And I am happy to pay those because it contributes to a system that gives me and everyone free healthcare, unemployment benefits if needed as well as many other things. If you're unhappy with the 40% you pay to your government, ask to fix inefficiencies, not to stop paying them.
I live in France, my employer pays my raw salary in taxes, and approximately 30% of this raw salary that I get is paid in taxes too. And I am happy to pay those because it contributes to a system that gives me and everyone free healthcare, unemployment benefits if needed as well as many other things. If you're unhappy with the 40% you pay to your government, ask to fix inefficiencies, not to stop paying them.
Serious question: who pays an effective rate of 40 percent? Many of these huge corporate entities are in the single or negative digits.
They hire very expensive lawyers and accountants to pay less or simply bribe politicians (read speech money) to keep loopholes that will benefit them. As a result a lot of money is wasted to totally unproductive efforts while increasing corruption and lowering respect of the tax system.
That's because they are deferring the taxes on the ex-US money.
It's a 401k in the US. It's a tax deferment, not a tax break. If your effective rate went from 35% to 25% due to your 401k contribution, you still end up paying 35%, just not right now.
It's a 401k in the US. It's a tax deferment, not a tax break. If your effective rate went from 35% to 25% due to your 401k contribution, you still end up paying 35%, just not right now.
No, you don't end up paying 35%. Part of the advantages of a 401k come from distributing dollars being taxed at a high marginal rate to another year when they are taxed at a lower marginal rate.
It all depends. Sure, if you put almost nothing in a 401k, then when you pull it out, you'd be in a lower margin tax bracket (and living on very little money).
But if you put a lot in, the fact you HAVE to start taking money out at a certain again AND it all gets taxed before you die means you pretty much end up paying the taxes anyways (or more if rates have gone up).
But if you put a lot in, the fact you HAVE to start taking money out at a certain again AND it all gets taxed before you die means you pretty much end up paying the taxes anyways (or more if rates have gone up).
It's slightly different here, but effectively the same. Individuals get sold on the idea of "tax-back" from the taxation authority at the end of the year... They get bombarded by financial consultants that tell them they have to put up to 30% of their post-tax earnings into 401k-type accounts because they are "maximizing" their "tax-benefits".
A lot of them even have no idea that they will be taxed anyways when they withdraw.
A lot of them even have no idea that they will be taxed anyways when they withdraw.
Which, not coincidentally, is also what the companies stashing profits overseas hope to accomplish through future changes in the tax law.
I often wonder about a tax system that just works on inflation. Why does a govt go out of its way to collect taxes if it's also going to print money? To me it's so that you can tax different entities at different rates. But if we're willing to adopt a flat tax of X% I wonder if it could be collected through inflating everyone's dollar?
This is a very good way of making the poor even more poor
Perhaps if you were to only use the created money for welfare etc?
(Not that I'm optimistic that such a system could come about in practice, or that I'm an economist.)
(Not that I'm optimistic that such a system could come about in practice, or that I'm an economist.)
What are US treasury bonds going to be valued at by foreign investors under this scheme? Inflation can do whatever you like if your country's economy is a closed system; it can't give you money to pay debts to other countries with.
People should actually read up on the tax structure Facebook used: http://www.bloomberg.com/news/articles/2016-07-28/facebook-g.... It's not reliant on some crazy lobbied-for loopholes in the tax code. It actually relies on some fairly mundane provisions of various countries' tax laws.
Just getting rid of, say, transfer pricing rules wouldn't make tax avoidance harder, it would make it easier. Say you do all your R&D in the U.S. But you set up a subsidiary in a low-tax jurisdiction, and license the U.S.-made IP to that subsidiary for $0. Boom the U.S. company now has no profits to show and all profits are in the low-tax jurisdiction.
Just getting rid of, say, transfer pricing rules wouldn't make tax avoidance harder, it would make it easier. Say you do all your R&D in the U.S. But you set up a subsidiary in a low-tax jurisdiction, and license the U.S.-made IP to that subsidiary for $0. Boom the U.S. company now has no profits to show and all profits are in the low-tax jurisdiction.
> license the U.S.-made IP to that subsidiary for $0.
> Boom the U.S. company now has no profits to show and
> all profits are in the low-tax jurisdiction
Remember just a couple of days ago all the people praising Facebook over its "profits"? Not paying taxes can get you that.
I just think it's terrible how Facebook wants to have its cake and eat it, too - profit from low European taxes, but transfer all of Europe's data to the U.S. for maximum amount of mining.
I just think it's terrible how Facebook wants to have its cake and eat it, too - profit from low European taxes, but transfer all of Europe's data to the U.S. for maximum amount of mining.
'Facebook said in the filing that the liability “could have a material adverse impact” on its finances, results or cash flows.' - that's a funny defense, that forcing a company or person to pay taxes that they don't plan to pay, affects their finances.
And Facebook COO Just endorsed Hillary publicly on FB, the day after WSJ reported that Hillary has taken $48.5 Million from hedgefunds/Wall Street vs $19,000 for Donald Trump.
We know who is on the little people's side in this election.
We know who is on the little people's side in this election.
Incase you're wondering, your comment is kinda tinfoily-hat and it's off-topic from the main discussion of company valuation and tax strategies.
I'd also add the caveat-- are you sure who is buying who here? The next President has some power to make Wall Street's life difficult. I suspect that the donations that Wall Street gives is more of a Clinton-shake-down than it is a bribe from Wall Street.
Additionally, these analyses simply group individual donations in with whatever company the individual works at. Does this mean that the company I work for is schemeing to make /R(?:on|and) Paul/ president? Hell no. It's the individual's money to donate, and just because they have a successful career in the finance industry their political donations come into question. Do you have any idea how insulting you're being to the true Clinton supporters who work in finance?
It just feels very conspiratorial and small-minded. With a dash of wealth envy.
IDK. I could easily be accused of being a shill, but I've never heard a solid argument presented from your camp. It's always "look at this coincidence!! What else could it mean?!?!"
I'd also add the caveat-- are you sure who is buying who here? The next President has some power to make Wall Street's life difficult. I suspect that the donations that Wall Street gives is more of a Clinton-shake-down than it is a bribe from Wall Street.
Additionally, these analyses simply group individual donations in with whatever company the individual works at. Does this mean that the company I work for is schemeing to make /R(?:on|and) Paul/ president? Hell no. It's the individual's money to donate, and just because they have a successful career in the finance industry their political donations come into question. Do you have any idea how insulting you're being to the true Clinton supporters who work in finance?
It just feels very conspiratorial and small-minded. With a dash of wealth envy.
IDK. I could easily be accused of being a shill, but I've never heard a solid argument presented from your camp. It's always "look at this coincidence!! What else could it mean?!?!"
Rather then pay taxes he will have a direct line to the White House to Corrupt Hillary that is for sure.
I cannot understand the indignation, the system is working exactly as designed- board members have responsibilities to the shareholders to maximise profits, it would be imprudent if they didn't move to reduce tax burden. The miles of column inches written on this topic is being tediuos.
Solutions are simple, anyone telling you otherwise are the same people who hold economists in high regard-
1. Reduce your local tax to compete with the lowest one. Or-
2. Stop the company from trading in your country. Or-
3. Tax profits derived from local business if they are earning them in your country.
Solutions are simple, anyone telling you otherwise are the same people who hold economists in high regard-
1. Reduce your local tax to compete with the lowest one. Or-
2. Stop the company from trading in your country. Or-
3. Tax profits derived from local business if they are earning them in your country.
No, it's not that simple.
1. What if you can't ? You have your budget that can't go lower.
2. And what if it employs 100 000 people in your country? Good luck with that.
3. You know what costs are ? Because they can have 0 earning in your country when mother company will take all for licensing.
1. What if you can't ? You have your budget that can't go lower.
2. And what if it employs 100 000 people in your country? Good luck with that.
3. You know what costs are ? Because they can have 0 earning in your country when mother company will take all for licensing.
I don't know of anyone choosing #2, but #1 and #3 are extremely common. The US surprisingly has one of the highest corporate tax rates in the OECD and is one of very very few countries with a worldwide rather than territorial tax system. Those two points taken together are why US tech firms transfer their IP to Ireland in the first place. It's also why so many US companies (at least pre-Brexit) would merge with European countries and establish new headquarters in London rather than the US. The American corporate tax system strongly incentivizes US companies to move.
But this whole game is inherently one where some governments will lose. If countries are free to set their own corporate tax rates, you'll get some with high rates and some with lower, and corporations - which can relocate in a way that a state cannot - will just gravitate from the high end to the low end, screwing over those at the high end.
That is the problem: we live in a world where business can be global, but our states are regional. It's asymmetric warfare: because of the structure of the game, the corporations always have the upper hand.
That is the problem: we live in a world where business can be global, but our states are regional. It's asymmetric warfare: because of the structure of the game, the corporations always have the upper hand.
will just gravitate from the high end to the low end, screwing over those at the high end
Gov'ts are providing a service. Competition is a good thing.
If one company was charging $1K for a computer and another charging $500k for the exact same thing, would you say consumers are screwing over the first company when they buy from the 2nd company?
Gov'ts are providing a service. Competition is a good thing.
If one company was charging $1K for a computer and another charging $500k for the exact same thing, would you say consumers are screwing over the first company when they buy from the 2nd company?
So you propose we have no social services, schools, etc?
Where did you get that from? Am I suggesting companies don't produce any computers any more?
I'm suggesting having gov'ts compete on spending efficiency is a good thing.
If I get the same level of services from country A and B and country A's tax rate is 25% lower, then guess where I'm going?
I'm suggesting having gov'ts compete on spending efficiency is a good thing.
If I get the same level of services from country A and B and country A's tax rate is 25% lower, then guess where I'm going?
Companies do not care about long-term spending, that’s the thing.
Education only makes an effect 30+years out.
Most companies care about the next quartal, if you’re lucky.
Education only makes an effect 30+years out.
Most companies care about the next quartal, if you’re lucky.
Really? Total private R&D budgets are greater than $100B per year. I'd say that's long term focus.
Lol. That's nothing. Alone the German government spends more than that on publicly funded research, and there's about 200 countries more on the planet.
If companies would be so long-term focused, have you ever seen one lobby for higher corporate taxes in exchange for free public colleges and schools of highest quality, to ensure they get the best possibly educated workers? No? Exactly.
Have you seen companies spend their money with plans of how the world will look like in 50 or 100 years?
The most ambitious projects are from Musk, who is doing them with lots of subsidies because even he couldn't fund them otherwise, and they're about 5 years out in the future.
Have you seen a private company spend hundreds of billions every year into fusion research, because it might have results in decades?
Have you seen private companies focus on building transit networks and cities of the next century, slowly, part by part?
No.
The most ambitious private project ever planned was Walt Disneys epcot, but it was never built, and the name just reused for a themepark attraction.
Private companies have more available funds combined than most governments, yet still soend orders of magnitudes less on education for the next generation, on optimizing cities for the future.
You see companies actively destroy cities so they can get a little cheaper results for themselves this quarter.
Saying "private companies will be willing to pay twice the tax if they get more profit in 100 years" is just wrong, because no private company has ever planned like that, and will ever plan like that.
Except for the German Mittelstand and a handful of Japanese medium businesses, most comoanies haven't even existed for a century or longer.
If companies would be so long-term focused, have you ever seen one lobby for higher corporate taxes in exchange for free public colleges and schools of highest quality, to ensure they get the best possibly educated workers? No? Exactly.
Have you seen companies spend their money with plans of how the world will look like in 50 or 100 years?
The most ambitious projects are from Musk, who is doing them with lots of subsidies because even he couldn't fund them otherwise, and they're about 5 years out in the future.
Have you seen a private company spend hundreds of billions every year into fusion research, because it might have results in decades?
Have you seen private companies focus on building transit networks and cities of the next century, slowly, part by part?
No.
The most ambitious private project ever planned was Walt Disneys epcot, but it was never built, and the name just reused for a themepark attraction.
Private companies have more available funds combined than most governments, yet still soend orders of magnitudes less on education for the next generation, on optimizing cities for the future.
You see companies actively destroy cities so they can get a little cheaper results for themselves this quarter.
Saying "private companies will be willing to pay twice the tax if they get more profit in 100 years" is just wrong, because no private company has ever planned like that, and will ever plan like that.
Except for the German Mittelstand and a handful of Japanese medium businesses, most comoanies haven't even existed for a century or longer.
Wouldn't #1 result in a race to the bottom? Why wouldn't a foreign country use tax policy to lower their corp rates towards zero in order to attract foreign tax revenue? After all, some tax is better than no tax.
Well, they do that, the trick is doing it in a foreign country that has access to a market that matters. Sure you get zero tax on some island state but what good is that if you then pay prohibitive taxes to buy/sell something to the EU because it becomes foreign trade, for example.
So they use Ireland, where they can get a special deal:
http://www.wsj.com/articles/eu-may-decide-on-apple-tax-probe...
So they use Ireland, where they can get a special deal:
http://www.wsj.com/articles/eu-may-decide-on-apple-tax-probe...
You'd end up with a country like Singapore, where the taxes are lower, but more wisely spent.
In Singapore it only works because of so little expenses.
If Germany would, tomorrow, decide to not provide any services outside of the cities, we could save a lot more taxes, too – and reduce them even further.
But there’s some running costs countries have, which you can’t go below.
If you want public schools and universities for free that can rival US private elite unis, if you want first-class public transit everywhere, if you want a social net, you end up with high taxes around 25% corporate and 30% private.
There’s not much of a way around that, except for going deeper and deeper into debt.
Yet if you want a country with a minor tax surplus, and good services, you need high tax rates.
If Germany would, tomorrow, decide to not provide any services outside of the cities, we could save a lot more taxes, too – and reduce them even further.
But there’s some running costs countries have, which you can’t go below.
If you want public schools and universities for free that can rival US private elite unis, if you want first-class public transit everywhere, if you want a social net, you end up with high taxes around 25% corporate and 30% private.
There’s not much of a way around that, except for going deeper and deeper into debt.
Yet if you want a country with a minor tax surplus, and good services, you need high tax rates.
I would argue Singapore has a significant safety net, good schools and healthcare. Hell, most of the housing is gov't owned.
Yes, but they don’t need to provide healthcare for people living 100km from the next city within of 20 minutes – they don’t have the extreme cost of suburban or rural areas. (which other nations might want to copy)
Singapore would be overrun by poorer neighbors in a week if not for the blue-water navies that other nations "waste" their money on
Most EU countries spend at most a few percent on defense, yet they have high taxes!
It's kind of sad that a team of E&Y accountants and lawyers have probably added more "value" to Facebook by playing this legal tax evasion game with the IRS than an entire team of developers and product managers adding a big new feature.