
Biggest companies pay the least tax, shows new research - grecy
https://theconversation.com/biggest-companies-pay-the-least-tax-leaving-society-more-vulnerable-to-pandemic-new-research-132143
======
projektfu
The simple solution is presented here:

[https://cepr.net/book/rigged-how-globalization-and-the-
rules...](https://cepr.net/book/rigged-how-globalization-and-the-rules-of-the-
modern-economy-were-structured-to-make-the-rich-richer/)

Select a corporate tax rate and require nonvoting shares given to a government
fund equivalent to the tax rate percentage of the company. If you buy back
shares, you buy back the same percent in government shares. If you give a
dividend, it goes to the government fund in the same proportion. If you issue
new shares to your executives, the government participates at its rate. For
companies like Abbott which return a lot of profits, the people benefit the
same way. For companies like amazon, the people continue to own shares in a
company that investors think will eventually return those profits.

A large part of trying to hide profits will go away because the shareholders
will be incentivized to have proper accounting and the public will benefit.

~~~
snarf21
I don't know how this solves anything. Governments can't do everything so
companies have incentives to create jobs and produce goods. To solve the
issues, you need to incentivize the companies to do what you want. Even if you
pass a law like this, companies will offshore their profit making entities
which makes this worthless even if it could be passed.

Today, we want stock market growth above all else and that is what we have.
People complain Amazon pays no taxes (corporate) but they pay lots of payroll
and property taxes and employ tons of others and enable other companies to
thrive. This isn't strictly good or bad. We want our 401k going up 20% a year
but also want companies to not make profits. These things are interconnected.

~~~
specialist
Amazon's absolute tax burden ain't the only problem.

Every other retailer, employer also pays payroll, property, sales taxes too.

Superior tax avoidance as a competitive advantage is a serious problem. Would
Amazon be so dominant today if they had had to play by the same rules as
everyone else?

~~~
pas
There would be some monstrosity anyway. Just like there's just one Google-like
search engine, one Facebook-like social network, one LinkedIn-like job-
network, etc. Network effects lead to having a very steep distribution between
market participants in each sector.

Taxes or no taxes Amazon got big because they relentlessly pursued these
effects, and after reaching critical mass, there was not much anyone else
could have done.

Now, of course these advantages should be taxed.

~~~
RugnirViking
At least some portion of those network effects are to do with economies of
scale as relates to tax avoidance and creative accounting. Levelling the
playing field can only increase competition in the marketplace.

~~~
pas
Just competition is not enough on the long term, some technological change is
needed too to push prices down. (If there are a lot of small vendors all just
on the verge of bankruptcy that doesn't really help anyone.)

The typical case is small shops in all the cities around the world that are in
very efficient markets. For example here anyone can start a hairdressing salon
and can employ anyone. No qualifications needed at all. Only the venue has to
pass some basic cleanness inspection. Consequently there is no big
hairdressing chain, there's not much going on in hairdressing for the past
decades. There's not an Amazon of hairdressing, and no one is investing
billions into hairdressing R&D to become more profitable. It might change if
automation reaches that level.

~~~
RugnirViking
I'm not sure that's true though, If large hairdressing technological
advancement was indeed possible then why hasn't somebody done it yet?

It's not like there is any shortage of people pivoting to entirely disrupt new
industries when technology allows.

As for whether competition in that market is effective, I find that
hairdressing is a great healthy market. No price gouging, plenty of options
for the consumer. The price reflects the amount of time of individual
attention spent by a trained professional with little to nothing on top.
(Don't like your barber? literally just go for a walk and you can probably
find a new one)

~~~
pas
Of course it's possible. You can always do something better, faster, cheaper,
with more accuracy, precision, style, etc.

There is R&D in the tools used for hairdressing (scissors, chemicals,
hairdriers, chairs, hairwasher chair), just as there is R&D in shaving tools
(even if it's just adding one more blade, or using a better battery for
electric ones).

Automation will eventually eat the world, why would hairdressing and shaving
be the exceptions? Maybe that doesn't count as technological advancement
strictly in those fields, but it'll certainly have an effect on those markets.

> If large hairdressing technological advancement was indeed possible then why
> hasn't somebody done it yet?

There's always a first. And likely it will come from some unexpected place,
enabled by either some very general change (automation) or from some obscure
thing.

------
dboreham
Imho "companies" should not pay income tax (they can pay sales taxes, asset
taxes like property tax, payroll taxes). Companies should be able to retain
profits to either reinvest in their business or to save for a downturn. Taxes
should be paid by the recipient (shareholders, management) on distributed
profits.

I suspect the only reason we have corporate income tax at all is because
clever financial engineers find ways to make what is really personal income to
shareholders and management look like retained corporate income.

(I would add "windfall taxes" to the set of ok corporate taxes since those aim
to redress a monopoly profit situation).

~~~
nouveaux
"Companies should be able to retain profits to either reinvest in their
business or to save for a downturn."

Sure except profits end up as dividends or stock buy back. Companies end up
with limited cash and will still need a bail out.

~~~
nightski
Sure, if you eliminate corporate income taxes you'd need to increase capital
gains taxes as well. But I am having a hard time seeing the disadvantage of
that (although I'm not an expert by any means).

------
erentz
Consolidation of our economy has been disastrous. Is this a good argument for
a straight revenue tax on companies over a certain market cap? Incentivize
then to break themselves up?

E.g. companies over $100b pay a 5% revenue tax. Over $500b pay a 10% revenue
tax.

~~~
missedthecue
"Consolidation of our economy has been disastrous."

Disastrous? Were we better off in the days of Sears and Barnes and Noble?
Companies like Walmart with $500 billion in revenue have margins of about 3%.
A 10% revenue tax must increase prices, or Walmart would lose money on each
transaction.

What you're promoting is a tariff on goods bought from big companies.

Tariffs are bad. They are regressive and anti-consumer

~~~
JMTQp8lwXL
Walmart's margins are low, but their employees aren't in great shape. They
usually live off of state benefits and presumably have worse education and
health outcomes than the average American. What kind of society do we want to
be?

~~~
missedthecue
Walmart pays a minimum of $11 an hour. It's impossible to be on benefits
making $11 hour full time unless you are a single mother or disabled. If you
tax companies extra for each employee on public benefits, they'll just stop
hiring single mothers and disabled people. What kind of society is that where
short sighted government policies force the disabled and single mothers into a
life poverty?

------
aantix
Big companies have more levers to pull.

I’m not sure why everyone gets hung up on the tax number.

Employing people, providing service, all contribute. And if a state sees a
deal where they can keep X citizens busy, contributing and Y services for
their people, that’s part of the aggregate result.

“Taxes” is one of many chips on the table for the deal making.

If there’s not a net gain, then don’t take the deal.

~~~
jjoonathan
Being _able_ to negotiate (or lobby, or coerce, or bribe -- pick your term)
lower taxes does not _justify_ lower taxes.

Economies of scale create value when leveraged to, say, produce more goods
with less effort, but they do not create value when they are leveraged in zero
sum games against customers, workers, or society.

> If there’s not a net gain, then don’t take the deal.

The thing about deals is that what happens between deals is always more
important than the deal itself. Focusing on the value flow exclusively at the
point of exchange is a terrible mistake. Otherwise highway robbery would be a
value-creating activity: "Hey, I'm offering you your life in exchange for
everything you own, that's a great deal! If you don't like the deal, don't
take the deal!"

~~~
aantix
>Being able to negotiate (or lobby, or coerce, or bribe -- pick your term)
lower taxes does not justify lower taxes

Agree.

>Economies of scale create value when leveraged to, say, produce more goods
with less effort, but they do not create value when they are leveraged in zero
sum games against customers, workers, or society.

Both sides have to arrive at a value where it makes sense for them to move
forward. Subjective value judgements have to occur.

>"Hey, I'm offering you your life in exchange for everything you own"

Sounds like a bad deal. Don't take it.

------
Consultant32452
It's getting tiresome how such seemingly banal headlines are pushing a
narrative. Compare this alternative headline: "Small companies pay the most
taxes, shows new research." See how that subtle change creates a whole
different implication? Written this new way, the feeling is we need to solve
the problem of high taxes on small business.

~~~
cornishpixels
Except we don't need to "solve the problem of high taxes on small business".
We need to solve the problem of low taxes on big business.

~~~
afiori
More than low taxes the problem should be tax avoidance.

The most simple reason why a big business could pay little taxes would be to
be at loss. The intention should be to accurately and reasonably determine a
correct measure for loss/income.

------
whatshisface
Amazon pays little tax because of all the losses it posts. One potential
explanation for this might be that small cap companies have higher profits
than large caps. If that was true they would pay more tax collectively. I have
heard before that small caps tend to grow more but are higher-risk, and since
there is a selection bias against companies that collapsed last year, I
imagine you would find that of the companies paying tax this season small caps
would be showing more growth. So, the causal chain I'm proposing would be:

Small caps have higher variance than large caps + Companies that go out of
business aren't included in statistics -> Year-end statistics show small caps
doing better than large caps.

Then,

Companies that do better on paper pay more tax + Small-caps do better on paper
at year end -> small caps pay more tax than large caps.

------
listenallyall
Why is this a surprise to anyone? The bigger the company, the more incentive
it has to create a tax-avoidance strategy, and the more resources it has to do
so successfully.

Avoiding taxes by legal means, is neither illegal nor immoral.

~~~
mLuby
Legality doesn't imply morality, as in this case where avoiding taxes is legal
but immoral.

~~~
kube-system
I'm just about ready to file my taxes -- which deductions are the immoral
ones?

~~~
z3t4
Move (on paper) to a country that doesn't tax offshore, then base your company
on some island. Have offices in every major city, then send all net income to
your offshore company. Make max tax reduction in the countries you operate and
get financial aid from the tax money others pay.

~~~
kube-system
Avoiding taxes by relocating is not just for big businesses. It’s super easy
to do today in the golden age of remote work.

Plenty of people have left CA for UT/NV to do the same.

~~~
ivalm
But then that’s a physical move. Plenty of companies have their
executives/leadership in a location that is different from the taxable entity.
If all the headquarters and executives physically resided in Caiman islands or
Ireland or even Delaware, it would be different.

~~~
kube-system
Yes, it’s easier for businesses to relocate than people. This is an issue of
physicality, not morality. If we drive into the specifics, it’s not hard to
illustrate that businesses are fundamentally different in nature than people.
My point is that tax avoidance is commonplace for individual returns as well.

The solution to all of this is to fix the tax code to represent what we
actually intended, not blame those who are following the rules.

Tax is simply math, calling tax avoidance immoral is as silly as calling
encryption immoral.

~~~
z3t4
It's not like the law makers are unaware of the loop-holes, but by making the
rules more complicated you increase the cost of doing business, to the degree
that you benefit from economy of scale, meaning the big companies still wins.

------
WalterBright
This reminds me of the blaring headlines a few years ago that claimed 40% of
US corporations paid no income tax. The headlines were true, but not mentioned
was that 40% of US corporations lost money that year.

Income tax is based on profits, not gross revenue, not market cap.

~~~
erichocean
As a private citizen, I took would like to only pay "income tax" on my
profits—the amount of cash I have left over at the end of the year.

Corporations are people too!

/sarc, but only slightly...

~~~
cheez
The secret is that you should incorporate yourself as a business.

------
ksec
Aren't there different type of Tax-avoidance? I am not extremely familiar with
Amazon, but AFAIK, Amazon invest most of their profits, if not more ( which
can be deducted the following year ) into investment for the company. That
could be R&D, benefits its employees, etc. And since they made little to no
profits, they paid very little tax.

That is perfectly fine to me, especially when Interest rate is ridiculously
low it is simpler to borrow than to sit on cash.

Buying Back Stock in order to avoid tax is wrong to me. Especially if they are
borrowing money in doing so. Since its incentive is only to its shareholder (
and its executive ) at the expense of Tax. And as far as I know it was illegal
pre 1982.

Correct me if I am wrong, but it seems people often mixed up the two.

------
unreal37
Perhaps the difference is not in the "donations to politicians" that the
cynical like to say, but in the "ability to afford expensive tax consultants."

Small companies pay what the government tells them to pay. Big companies hire
someone who figures they can save 5% on their taxes by having their factory in
Tennessee instead of Kentucky.

It's just the ability (and scale) to afford to employ any advanced tax
strategies.

I have friends who live in Hawaii. A high tax state. Another friend moved to
Puerto Rico, a low tax one. You don't have to be big to save on taxes.

~~~
harimau777
I think that one issue is that there is a significant difference in the
ability of a corporation to shop around for favorable differences compared to
an individual or small business.

~~~
unreal37
Yeah absolutely.

We rarely think that countries are "competitive" with each other when it comes
to tax deals and tax rates. But they are.

Just like people shopping around for the best deal on a car, why do we expect
companies to NOT shop around for the best deal on taxes?

------
mbar84
Companies. Don't. Exist.

We made these things up because they are a convenient and useful abstraction,
but let's not forget that they are a legal fiction. So guess what you call a
company that pays taxes? Fiction! Companies can't pay taxes because they don't
exist, only people can pay taxes. So when you tax a company, it ultimately
comes from the pocket either of an owner, an employee, a supplier or a
customer.

If we were honest about this and not just looking for a boogeyman that we can
pretend to stick the bill to, then we'd switch to a conversation about capital
gains, income and consumption taxes.

~~~
Spivak
Which is all well and good but a group of people organized in a company create
an entity that is separate from that of any member or subset of the group. It
has its own finances, a collective will, assets, debts, income.

I see no contradiction in taxing companies in a manner generally consistent
with that of a person and treating employees of the company as a type of
laborer paid by this entity.

Families. Don't. Exist. apparently either. The only fiction is that we
anthropomorphize the group like it's singular. That doesn't mean that the
group isn't a thing unto itself.

I would hope you don't think of yourself as just a mound of cells.

------
opless
In other news, sky is blue, grass is green, and everything you do online is
monitored.

------
listsfrin
The same is true for rich people: you can afford to buy in bulk, to take
advantage of special promotions. And sometimes, even when spending more money
on products one gets to have better quality on the long run.

~~~
oneVoiceOnHN
These aren't remotely related.

Bulk have risks like spoilage or require additional resources like real
estate. Or that a quality product isn't really quality.

Taxes are immaterial.

------
cornishpixels
No, really? I would've never guessed.

------
ThomPete
their employees are paying plenty though.

