Senate Panama Papers: A World-Spanning Financial Scandal

Ender, I never said I think tax havens could be practically solved - I said I have a fundamental moral objection to the idea of someone not paying the tax they ought to be paying, whether through loopholes or illegitimate methods. This objection doesn't require me to believe the problem of tax havens could be solves.

 

Paying the tax "they ought to be paying" is kind of why tax minimisation methods exist in the first place though and why it is necessarily a subjective opinion only. To look at it objectively, you have to measure what "ought" to be paid by reference to taxation rules. If the rules allow a structure which has the result of minimising a tax liability which would not be otherwise available (absent the structure) then as long as the rules are complied with then that is what a tax payer "ought to be paying".

 

Of course it is subjective, which is why I included loopholes in what I meant by what they aren't paying, however I believe they should be. When someone is practically earning a certain amount, however is fitted into a far lower tax bracket, they ought to be paying the amount they practically earn, despite the fact it is technically legitimate to not do so. To suggest that just because something is legitimate is it therefore right is completely ridiculous.

 

Legitimacy and 'right or wrong' are two different things yes. One can be determined objectively the other is necessarily subjective. You are stating clearly that you have a moral objection to people who don't pay what they 'ought to be paying'. But that is not necessarily just a moral question as it is not really a matter of taking earnings and shoehorning them into a lower tax bracket. Most sensible tax planning is choosing the right vehicle so that the correct rate of taxation is applied and the appropriate deductibles can be claimed. Offshoring is attractive because it simply utlises jurisdictions where a lower rate of taxation is charged on income. If you take a tax paying entity and distribute its earnings among three countries then it will be paying tax in each country. If two of those countries charge a lower taxatiion rate than the other, then it is morally objectionable that the tax paying entity didn't declare its income just in the highest taxation country? I'm not getting the moral problem here.

 

Also, again, because the facts are unwelcome here I'm repeating myself...

Use of a tax haven does not in and of itself give rise to tax avoidance. It entirely depends on how the haven is used. If the haven houses an investment portfolio which uses the tax structure to minimise its operating expenses, but the income is paid in the country of residence of the investor/rich person and therefore is taxed there, it's not the same as being a tax exile to the Bahamas.

 

The moral objection is the scale with which someone uses the tax havens to 'legitimately' avoid their taxes. If someone is earning a certain amount in practical terms (and is earning that money in that particular country) and is paying an equivalent tax rate of someone earning much much less, then it is morally objectionable, whether or not it was legitimate.

Companies should obviously pay accounting to where they earn the money - something many currently don't do.

Ender I have already stated that tax haven's can be used both legitimately and for purposes that aren't morally ambiguous.

 

OK but no.

What if your net capital gains position is a loss?

Under Australian tax law, for example, you can carry forward CGT losses against future assessable income, which would effectively lower your marginal rate (by way of discounting accrued tax liability):

https://www.ato.gov.au/General/capi...ss/working-out-your-net-capital-gain-or-loss/

Now, if those losses are there to not discourage investors - be that venture capitalists, entrepreneurs or mum and dad investors - from putting capital up in new projects, then it's not really morally dishonest.

But if you take an absolutist view on a complicated issue it's going to be exceptionally easy to poke holes.

Not the same issue as the Panama papers though.

 

I completely disagree, but that is because you and I have subjective differences as to what is moral in this context. I would rather a company use a legitimate tax structure to minimise its tax liability than say legitimately employ workers in 'dark ages' like conditions. It is morally objectionable to promote a company as being of a particular social/moral stance, but then secretly investing or aiding businesses which undermine that position. I also belive the wage discrepency between what workers earn and what a CEO 'earns' is also morally objectionable, as is 'golden handshakes' to under-performing CEOs. Again, I think the morality of paying tax really boils down to how those tax dollars are spent. If my tax dollars are being spent on crushing homosexual rights, invading foreign countries and paying police officers to shoot minorities, then every dollar not paid in tax is a blessing.

Again, if that is the rule then yes they should do that, but if they are able to avail themselves of alternate arrangements then well and good. You know that tax legislation is like any other form of legislation, it is drafted to give effect to public policy. So where a tax break exists, it most likely exists for a reason and there is most likely an explanatory memorandum which explains why it is available. Tax breaks are often formulated to govern behaviour so that private enterprise has incentives for making profits. Do you think that dollars not paid in tax are just dead weight? Profits can be spent on all manner of good things and if companies didn't make profits then they woudn't spend money on things, which means that things wouldn't be made, which gives people woudn't have jobs. I'm not an economist or a financial person in the slightest, but I understand the basic proposition that profits benefit the economy as a whole and when the economy is strong humans are generally happy and prosperous.

 

I don't get that argument about the CEO shouldn't be paid more. Golden handshakes? Terrible. But I make decisions which a lot of people can't and won't and that's why I get paid more than they do.

CEO is responsible for the ups and downs of a company, which the average 9 to 5er isn't. Let's not be ridiculous here. And before people crack about playing golf or whatever, go look at Martin Winterkorn.

I think also further to the above Lost, the Commissioner for Taxation here does a good job of providing additional guidance on tax scenarios (ATO TRs - for example, under TR2010/1, the ATO defines a contribution being made into Super when it is received by the fund, not when the individual 'makes' payment) that help interpret the tax code.

But I feel like the ability to carry forward a net capital loss position for future tax liabilities is an example where someone in the highest marginal rate may effectively pay less tax than someone whose net income is lower.

 

Just to be clear, I'm not suggesting that CEOs shouldn't be paid more I just think the wage discrepency now is getting ridiculous. There needs to be more 'profit sharing' incentives in my opinion and I just don't believe any of the CEOs which are being paid squillions are actually worth it. I realise that you have to pay the big bucks to get the performers and there is no job security but it's still an issue I have with the corporate world.

 

I'm going to dive bomb in here on the issue of CEO pay without having followed the larger conversation. In addition to making the distinction between the size of a wage gap versus the existence of one, I'll add that Ender's defenses don't seem particularly unique to me. Yes, absolutely, CEOs have a very particular, specialized set of skills that are vital to the function of their organization. Except that's not unique to CEOs. In fact, I'd ague that in modern organizations, most roles are highly specialized and vital. So what you're actually doing is making a value judgment that the specialized skill set of the CEO is somehow superior to any other. I don't really see where or how that is warranted.

 

I've always had good profit sharing options, but I feel if you're a good worker they'll look after you.

If you're a drone, well..........

EDIT: Wocky how many companies have you worked for with a CEO?

I would add that despite my old employer being nicknamed the Millionaires Factory I never saw that much cash when I was there. I did however see two brilliant CEOs who understood every facet of their (multifaceted) business, who fronted up to Parliament inquiries, who engaged in a number of charitable activities as the face of the company.

I only ask because that sentiment is the one always made by people who don't work for the sorts of companies that have highly remunerated CEOs.

 

For the record I have significant problems with the CGT (especially some of the concessions), however I don't doubt some of its economic benefits, and I don't think all instances of lowering your tax burden is morally dishonest. Indeed I have said as much. However we both know that people earning significant amounts of money in practical terms are to make their tax burden much smaller once they funnel income through companies and trusts. Unless I'm mistake it is still legitimate to do this.

Yeah, I know - I was responding to LOH.

I don't understand why you can't have them both pay the tax on their true earning in a country and have good working conditions? I generally agree with CEO-worker pay disparity.

I think we fundamentally disagree about using tax as a policy protest. Ultimately you can't reduce the money going to foreign wars without reducing the money going to social programs - I would rather change public policy, hold my nose about foreign wars, so that money gets to social programs.

We both know that legitimate tax breaks can be used as loopholes for significant reduction which isn't necessarily a correlation with the original intent.

Regarding the whole 'trickle down theory'... apart from being an justification for tax evasion, I fundamentally find it unfair unless it is acted as public policy so there isn't tax disparity (and I find trickle down theory unfair on principle)

No one here thinks they shouldn't be paid more - its the size of the gap.

 

Ender, every company I've ever worked for has had a CEO.

May I counter by pointing out that people tend to be self-justifying, and that if you've only been in the most highly-remunerated divisions of a large organization, the beliefs about their own specialness are A) likely to be quite common and B) likely to pass on to you?

The problem with the "perspective" argument is that it goes both ways. I'd much rather just have the discussion as a matter of principle.

 

I'm not shutting it down Wocky, though its relevance here was in question. It just sounded like the outsider critique.

 

I will grant that it is commonly peddled by outsiders. I just don't necessarily find it invalid.

 

Philospher - I'm not very good with mark up codes so I'll just respond by saying that what your'e describing as "legitimate tax breaks can be used as loopholes for significant reduction which isn't necessarily a correlation with the original intent" sounds more like tax avoidance to me. At some point, the blurry line between legitimate and illegal can be crossed and a 'significant reduction' which is not in line with the 'original intent' is normally a strong indicia of when that line is crossed.

I'm not sure I was intending to endorse 'trickle down theory'. My point was simply that when a company does well it spends money and those dollars help other businesses. For example, the company I work for sends me to the US every year for a conference and supplies me with a car. But when times are tough it cancels those conferences and may return the car to the fleet company. Those conferences mean Qantas (Australian national carrier) gets airfare, a US hotel gets business, taxis, restaurants, souvenirs for the kids etc etc etc. The car means that some dealer gets a sale, a fleet company earns a buck, annual servicing, tyres, motor oil etc etc. All of that money is spent and spread around. If the company I work for can't afford to put on those conferences or supply me with a car because of a tax burden then less money is available to spend on stuff. It goes to the gubment. Now if the gubment is Denmark then yes tax dollars tend to be spent on the common weal but not so much in other countries.

 

So, is a tradesman buying his company ute through his sole-traded ABN and then taking it as a fringe benefit guilty of tax evasion?

 

I disagree. While tax deduction has legitimate purposes it can still be used to reduce tax burdens by what I personally consider to be too much. It's all a matter if proportion.

Well it sounds like something Ronald Reagan would say, and while I don't deny that that's how the economy works I do think simple fairness suggests that everyone should pay what they owe (with some give and take) and I don't think the while 'but I can use the money better than the government' is fair (especially since it is usually self-interested and can only be truly sort out by the wealthy)

No, Ender.

A tradesman reducing their tax burden slightly - fine.
A millionaire reduicng their tax burden slightly - fine.
A millionaire their tax burden that they are paying equivalent tax to the middle class - not fine.

 

Sir, do you not know the rules about flaming, personal insults and general nastiness????

 

Be thankful I didn't call you Thatcher...

 

I would have reported that and started a thread in Comms

 

She saved England lads...

Philosopher - your last blanket statement collides violently with your earlier allowance of a net CGT loss position...

 

You could have given the position to anyone remotely more competent than the previous Labour governments...

I wasn't aware that CGT net loss could be used to essentially shift your income to radically different tax brackets. If that's the case I don't agree with that.

 

of course it could; it takes a loss you've made, and offsets it against tax liabilities.

If you're a Director of a Family Trust - and this is kind of the most common tax effectiveness vehicle - and you personally lost $100,000 you could pay yourself a lower Director's fee that year, and use that $100,000 to wipe out your annual tax burden.

On current rates, to pay about $100,000 in tax you're on AU$350,000 pa or so (effective rate of 30% for marginal rate of $0.47 for every dollar over $80K). So, yeah.

Now, it's not like you didn't actually make a loss - you did. Can't fake that, as you have to evidence it for ATO.

It's not like we want you as a society to stop investing.

Nuance, sir. Everything is about nuance.