
Dear Sam, What Are You Doing About This? - andrewbhaley
For reference:<p>http:&#x2F;&#x2F;theundercurrent.com&#x2F;the-guide-to-legal-tax-evasion&#x2F;<p>http:&#x2F;&#x2F;theundercurrent.com&#x2F;global-tax-evasion-you-cant-trust-white-people&#x2F;<p>How many of Y-Combinator stable of Unicorns are headquartered in the US but incorporated in Ireland or engage in other &quot;legal&quot; forms of tax dodgery?<p>Some of the biggest &quot;legal&quot; tax dodgers are former Silicon Valley startups (including Dropbox), and actively continue to contribute to a culture and a practice of global corporatocracy. When are we putting our foot down?  Corporations can solve many of the worlds problems, but only democratically elected governments of, for and by the people can represent or act on the people&#x27;s behalf. And to do that, they need people and corporations to actually pay taxes.
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patio11
Speaking of startups generally rather than YC specifically:

1) Essentially no startups on the VC trajectory are incorporated anywhere but
Delaware. This is largely because investor confidence in the enforceability of
their rights to what they're purchasing trumps every other factor in
incorporation. For companies which have substantial business dealings outside
of the US, they typically have foreign subsidiaries which are owned lock-
stock-and-barrel by the US entity. That is not a tax optimization.

2) The overwhelming majority of startups pay no corporate income tax. They use
an old, old strategy to avoid it: _don 't make profits_. If you have no
profits, you pay no income taxes, and instead book an asset for all the taxes
you'll get to offset after you finally start making money some years after
IPO.

Startups don't simply avoid making profits because they've got creative
international structuring going on where they're charged $15 million a year
for their own IP by an entity in Ireland. They don't make profits because
their revenues are far lower than their expenses. They run a substantial risk
of running out of money and folding catastrophically _and this often happens._

Startups, like all businesses, generate substantial tax revenue outside of
their corporate income tax returns. California, for example, will hit every
company doing business there with a franchise tax, which is basically "welcome
to California, for the privilege of doing business here please remit $800+."
Startups are also filled with highly compensated employees when they're doing
well, and these highly compensated employees both pay substantial income taxes
and have substantial FICA/etc taxes paid incident to their employ by the
company.

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andrewbhaley
1) Agreed, in fact I believe YC requires incorporation in Delaware. So it is
probably important to distinguish between early-stage/growth-stage startups
and companies that are profitable or have exited to IPO. Dropbox is a good
example... I assume it was a Delaware company, until it became an Irish
company. In fact, its probably a similar story with Apple, Microsoft, and
many, many more...

2) Again, yes, this would apply to companies not making profits which are
primarily early stage and growth-stage (although, even massive companies like
Amazon can be "growth-stage" as long as they re-invest all their profits). But
I think you are missing the purpose of this post, which is not to argue that
most startups are avoiding taxes... but which YC ones that shouldn't be are?
If the eventual life cycle for successful YC/VC backed companies IS to dodge
taxes, wtf?

3) The $800 franchise tax is substantial when multiplied by the 2.2+ million
taxable business in California... but not when compared to $59.9 Billion
Apple, just Apple is currently estimated to owe in US taxes? Here's a fun
little article show the crux of the conflict -
[https://www.theguardian.com/technology/2016/may/05/apple-
tax...](https://www.theguardian.com/technology/2016/may/05/apple-taxes-
cupertino-mayor-infrastructure-plan)

I don't think JUST corporations should take a haircut... investors and capital
funds are going to have to as well since it is their demand for returns that
pressure companies that want to "do good" into becoming tax dodgers. It's a
cultural problem as well as a structural one. The point, again, is when is YC
(and the investors and individuals who make up YC) going to start making a
change? I'm a fan of YC, and the companies they invest in... but in this I see
a blindspot, albeit one that is shared by most of the global business
community.

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rmc
> _incorporated in Ireland or engage in other "legal" forms of tax dodgery?_

Ireland has a low corporate tax rate, and a slightly compliant Data Protection
regime. But the UK is, IMO, a much bigger tax haven than Ireland. All those
little crown dependencies, like the Channel Islands, Isle of Mann, etc are
massive tax havens. One channel island has 24 company directors for every
person! Yes, they aren't part of the UK proper, but they are close.

