Corporations have a fiduciary responsibility to their shareholders to reduce their tax burden to the lowest possible levels. Assuming the tactics they embrace are legal, they are doing exactly what they can and should.
There are legitimate discussions that can be had about the specific strategies that companies should use to maximize shareholder value. For example, paying higher wages might mean better employees and ultimately more profits despite the increased costs. Long-term investments in R&D might result in higher overall value for the company, despite the short-term hit to the balance sheet.
However, I don't think a legitimate argument can be made that companies should pay what amount to optional taxes (taxes they could avoid but don't). Lawmakers are free to change the laws, but large corporations will always pay the minimum allowed by those laws.
That you cannot think of such an argument doesn't mean much. That such possible arguments wouldn't obtain "legitimacy" in your mind explains far more about your conception of the role of business in society. There are no optional taxes—any company that actively seeks ways to avoid taxes is not dealing justly or ethically with the society in which it exists. The same goes for citizens. A healthy and just society cannot exist when its citizens, and their corporations, seek to enjoy all the benefits of citizenship and the services provided, but simultaneously work diligently to avoid upholding their end of the arrangement to support and perpetuate a healthy and just society.
You are free to overpay on your taxes as well. I assume based on your reasoning that you give the government your entire income minus expenses.
Governments have the ability to levy taxes. If they need money they should levy a tax. It's that simple. There is no 'right amount' that a company should be paying that is more than the law requires them to pay.
Except there's a difference between overpaying and short term tax minimisation.
I, for instance, in my country, am relatively conservative on my tax returns. I do not push everything out to the point of maximal complexity & maximal returns.
The reason I do this is twofold. If my accountant makes a mistake or a bad call, I am still personally liable for the tax I didn't pay + penalties, even though I sought and obtained professional advice. I know of cases now where people have received "audit shocks" where it turns out the government disagrees with how far they're pushing things, and now they owe money + penalties. Increase that sting and those penalties and watch the risk/return equation change.
The other two reasons are: I pay to support local community and infrastructure. I don't mind paying a bit extra to support public transport in my area, for instance, so if I can find a way to make targeted contributions (as opposed, say, my money going to a contractor in Iraq), then I'll put a bit more in.
And the third reason I don't pay minimal taxes it's a form of social contract/political insurance. I know that if I'm a total prick, or want to do things in the future, if I haven't paid my share, or if someone wants to audit me and go through my books as a political game or to make a point, I have far more political capital and support from the population of I show I'm a good citizen vs "I basically will fuck you all to the maximum extent and screw you". This also provides me a clean conscience, legitimacy, authenticity, and general good will.
Plus if anyone does audit me, for political reasons or otherwise, maybe I'll get a small refund or ruling in my favour, which, at such times, I could really use...
I would love to give all my income minus expenses. I could easily make it so I have zero after my expenses. But that's not how things work for individuals... and that's a large part of the difference.
>I would love to give all my income minus expenses. I could easily make it so I have zero after my expenses. But that's not how things work for individuals...
Of course that's how it works. There is nothing that stops you from donating extra to the government. If you really wanted to you could easily do it.
No, your comment quite clearly implies that the corporations should not utilize the tax laws to pay the minimum required amount of taxes. You use words like 'avoid' to imply that it's evasion, but it's 'avoiding' in the same way as someone who 'avoids' taxes by taking a deduction for a dependent.
No, you've misread and inserted your own ideas as what I meant. The comment I replied to used 'avoid' in describing 'optional taxes'. I reused the word in disagreeing with the notion there are optional taxes, particularly as these allegedly optional taxes were suggested as taxes a corporation took action specifically to avoid.
[Edit]: Moreover, you still fail to address how I've suggested any notion of right amounts or paying more than the law requires. I have not. Since the comment I replied to used 'avoid', and you think avoid implies evading taxes, then you seem to assert I should understand the GP to be saying optional taxes are those taxes a company can take action to evade. This is even more problematic.
The effort a corporation expends to avoid taxes, such as those under scrutiny in the matter at hand, are not at all homologous to electing to take a dependent exemption for an individual citizen. Reducing one's tax bill via deductions and elected credits is not the same as going to great lengths to create special structures that enable a corporation to avoid tax bills altogether.
> The effort a corporation expends to avoid taxes, such as those under scrutiny in the matter at hand, are not at all homologous to electing to take a dependent exemption for an individual citizen. Reducing one's tax bill via deductions and elected credits is not the same as going to great lengths to create special structures that enable a corporation to avoid tax bills altogether.
You've said it's not the same. How is it different? Both ways of reducing tax burden are things that the laws permit, and that have been established as lawful from much precedent.
What is lawful != what is ethical. Most of my comments in this thread and on this subject engage the ethical responsibilities of citizens and corporations to their societies, and their parts in the establishment and perpetuation of just and healthy societies.
Beyond that, there is quite an orders of magnitude difference between electing to take an individual deduction as a citizen and establishing complicated structural entities specifically to avoid or reduce taxes by increasing the complexity of determining tax obligation. If you do not see these things are different, I doubt I could convince you otherwise.
>If you do not see these things are different, I doubt I could convince you otherwise.
If you can't articulate why they are different, then perhaps the distinction isn't as clear as you seem to think.
Why do you think a person incorporates a small business instead of operating as a sole proprietor? Why do you think small businesses save all kinds of receipts and pay accountants to ensure they are maximizing expenses?
Who says I can't articulate the difference? You seem to be incapable of avoiding jumping to some seriously erroneous conclusions throughout our exchange here. I most certainly can articulate the difference, and have succinctly done so more than once while reiterating what specifically I am targeting with my comments—a target you continue to ignore and brush aside. You seem to want to argue. I see no indication that writing hundreds of more words will move the needle of this discussion. You make assertions and ask questions that are wholly divorced from my point, and seem to somehow entirely miss the point of every statement I've made.
For your edification, I run a business. I do not pursue complicated measures or hire accountants to minimize or avoid taxation, maximize expenses, or anything similar. I practice what I preach, as the saying goes. And such behavior is entirely counter to everything I'm saying is important here.
Drawling on with small examples that seem obvious to you is worthless. It's not articulating anything, it's only proving the point that there is no real distinction other than one method of paying the legally required amount of taxes feeling more icky to you than another.
Is your line in the sand the involvement of accountants or lawyers? Any publicly traded company needs both of those anyway even if they have extremely boring returns. So what is it that draws the line for you?
I'm interested to hear your opinion on this, but you've got to actually explain, not merely state differences and conclusions.
> Who says I can't articulate the difference?
The comments have not included one so far. What you've said is that one thing is not the same as another, but you have not included an explanation of what difference you see there as being, or how that difference leads to one thing being moral and the other immoral.
> What is lawful != what is ethical.
> The effort a corporation expends to avoid taxes, such as those under scrutiny in the matter at hand, are not at all homologous to electing to take a dependent exemption for an individual citizen.
> Reducing one's tax bill via deductions and elected credits is not the same as going to great lengths to create special structures that enable a corporation to avoid tax bills altogether.
You've said they're not the same, but you haven't explained what the differences are, why the differences are significant to this discussion, and how the differences should support your analysis of the morality. Your comments leave it to the reader to infer what the differences are between one thing or another, and draw conclusions from them that support your point.
I read your comments as expressing the point, "These things are not the same, and one of them is immoral, and if you don't agree with me already then I don't see the point of explaining." It's fine if you want to hold that opinion. However, someone wrote a comment disagreeing with that point of view, and you've attempted to rebut it. People write comments on HN because they like to analyze and understand, but your comments don't include more than a pure opinion on your part that one of these behaviors is wrong without saying why. It's not very constructive to share an opinion without being willing to explain why you think it, especially given that you responded to people who sought to discuss it.
I think a strong argument was made against your point. I will restate it: "Governments have the ability to levy taxes. If they need money they should levy a tax. It's that simple. There is no 'right amount' that a company should be paying that is more than the law requires them to pay."
I think that's a pretty good point - don't you? What is your argument for why companies should pay more tax than they're required to pay? You seem to believe that there's some morally correct amount of tax that companies are morally obligated to pay, other than the amount specified by law, but you haven't provided a justification for why that is so, or for determining what that amount is. You have just said that corporate tax avoidance is different (in an unstated way) from individual tax avoidance. Even if we agreed that they're different in many significant ways, the morality or immorality of tax avoidance does not automatically follow from recognition of differences.
You could articulate your point better by starting with, "It's immoral for corporations to seek to lower their tax burden because..." and then follow up by explaining, "It's still moral for individuals and sole proprietors to seek to lower their tax burden because ... " It would illustrate the issue much better to explain what the essential difference is, and why that difference leads to it being immoral. What are the criteria for tax avoidance in an organization or company to be immoral?
You're entitled to your opinion (even if expressed in an insulting way, as you did here), and I'm certain that there are ways for you to maximize your personal tax bill to help satisfy the social responsibility that you feel others have. Lead by doing. However, I don't think you'll find tax maximization strategies in use at any major corporation, now or at any time in the future, and I'd expect shareholder lawsuits if they were ever utilized.
You, like your sibling respondent, appear to be replying to things I have not said. No suggestion was made for maximizing taxes or overpaying.
Also, I didn't express myself in an insulting way. You've edited this comment a few times now, and it's cool to just stick with the actual topic. I made no insults.
"That you cannot think of such an argument doesn't mean much. That such possible arguments wouldn't obtain "legitimacy" in your mind explains far more about your conception of the role of business in society."
Of course there is. I think there is a strong economic consensus that government subsidies can be bad. Your argument essentially invalidates that and supports a world where legal corruption is moral.
>Your argument essentially invalidates that and supports a world where legal corruption is moral.
No it doesn't. It implies that the correct fix is to eliminate tax loopholes, not attempting to guilt a corporation into paying more, which is about as effective as guilting the sun into cooling down.
How does that thinking apply when you consider that companies actively lobby and work to affect the laws?
Are you arguing that companies have a responsibility to change laws to maximize their profits? If a company could get a law passed that let them, say, remove all environmental restrictions, are you arguing that they should do that?
Do their fiduciary responsibilities trump their social ones?
If a company attempts to abolish environmental restrictions, in order to, say, get to sell food with carcinogenic substances, and in that way make more money — then one viewpoint can be, that the company attempts to make money by killing people. I.e. attempted murder.
Therefore the executives and people at the company, responsible for lobbying / bribing politicians, in order to remove all environmental restrictions so that the company can sell poisonous food — they should go to prison.
Right now I think that's what I wish would happen.
Tax evasion (= money "only"), though, is very different from removing environmental restrictions (= killing people).
So lobbying is the equivalent of murder.. but the party accepting the bribe.. that was entrusted to protect you from murderers.. should not go to prison?
Frankly, in this picture you've painted, I'm not sure what the point of this bribe accepting party is. This is like having a body guard that might shoot you if there's a higher bidder. The whole point of the body guard is to protect you from killers, but now he's shopping around for contracts on your head. It's almost like the State having a monopoly on violence is paradoxical to it's alleged end goal.
Should [a lawmaker accepting a bribe / lobbying-money to remove restrictions meant to prevent people from dying] go to prison? In some cases, yes I would probably want that to happen.
Imagine a company and a few lawmakers that via bribes/lobbying remove regulations around asbestos (which is very carcinogenic) and start building houses with asbestos (because asbestos is inexpensive). Now people are going to die in cancer, almost for sure. The company and lawmakers are, in my opinion, killing people to make money. So, they should go to prison.
So I think I want laws that prevent companies _and_ politicians/lawmakers from suggesting-to-remove and removing important environmental restrictions meant to save people's lives.
Perhaps it sounds weird with laws about what regulations/laws might be canceled. Some kind of "meta laws". One way to think about it, could be a defense-in-depth. Now it gets even harder for some evil company, to make money by destroying the environment & hurting people.
I'm not sure all this would work out well in practice though.
You're describing a bodyguard that might kill you if there's a higher bidder. And your solution is to give the bodyguard more power.
Dude. I just want you to consider that your relationship with said bodyguard is abusive and preventing you from thinking straight. And said bodyguard will never care about you more than the money his higher up friends will provide. I know this bodyguard told you a lot of lies, about always being there for you. About protecting and serving. Sorry dude, it's lip service. The bodyguard works for the highest bidder and the highest bidder isn't you or me.
The solution?? Higher a real god damn bodyguard! One with a collateralized contract and reliable arbitrator of your mutual choosing. Turns out social contracts aren't worth the imaginary paper they're written on.
Actually there is a misunderstanding. I didn't write about everything — I had in mind carcinogenic stuff, dangerous enough to make people sick and kill some (in a large population). So when you write "such a broad category" and you have in mind literally everything — then that's not what I meant.
Yes, but your definition for "carcinogenic stuff" most likely would be interpreted by activists to include e.g. glyphosate - which is now classified as "category 2A possibly causes cancer" and is getting a lot of attention. In reality, category 2A also includes manufacture of art glassware, hairdressers, and shift work, and the more dangerous category 1 includes e.g. beer.
Still you can bet the activists would use our murder charge approach to attack glyphosate manufacturers, not beer manufacturers.
Interesting, didn't know beer is carcinogenic. Googled about that — apparently, although alcohol it's carcinogenic, drinking a little bit, reduces the risk for cancer (and heart attacks).
Actually personally I didn't have in mind the possibly causes cancer category. I had in mind more obviously dangerous things like asbestos, and something that was in heavy use in Europe like 30? 50? years ago but then got forbidden because it resulted in severe birth defects. [Edit: I think it's called Thalidomide, was sold as a drug named Contergan]
Some activists do "attack" beer manufacturers :-) (I found out when googling for "beer carcinogens"). And this particular beer manufacturer did apparently listen to what people said, and removed some carcinogenic caramel coloring from a beer. http://organics.org/8-beers-that-you-should-stop-drinking-im...
For-profit corporations are not formed to serve the public good. They are formed to make money for their shareholders. They can and should always act in their own interest.
Lawmakers exist specifically to serve the public good. If they are allowing lobbyists to affect this responsibility, then they should be voted out of office.
So yes, corporations that can afford to do so have a responsibility to try to get laws passed that favor them, and elected lawmakers have a responsibility to the public to ensure the laws that they pass are in the public interest.
Doesn't matter -- when the principals signed documents agreeing to incorporate, they simultaneously agreed to abide by the what the law says in regard to paying taxes due as the law requires. If they thought these laws were "unethical"... well, that was their chance to make a principled stand against them.
Okay fair point. Though I don't necessarily see the correlation to taxation. I assume what perhaps is being implied is that the money from taxation can be used for ethical or unethical practices (as oldmanjay points out). Yet that analogy skips how tax is only possible with profit, not to mention the fundamental issue of whether or not taxation of profit is ethical in the first place.
Well, your original question was in response to an assertion that a corporation has an ethical responsibility to its society. You asked what if the taxes are unethical, which strikes me as a bit silly at best. I only offered a suggestion to your second question of why certain profits would be considered unethical. The matter of the choices made by leaders who spend tax revenue is independent of levying, paying, and collecting taxes.
If you have an argument that describes how taxing profits is unethical in contemporary society, as they are legislated by elected representatives, I'm sure there are others beside me who'd love to read it.
There are many ways a tax can be unethical. It may finance torture, invasion, and fomenting coups in undeveloped nations that lead to widespread suffering. For example.
Sure it is. Taxes can be levied for very specific purposes. Even ignoring that category of taxes, if you find that a whole country is operating immorally, then funding that company is immoral.
To reply to a comment I can't reply to:
spdy 7 minutes ago
But this is not the context we are talking about here. Spain is part of the EU and the so called "1st" world.
I'm not sure if you're being tongue in cheek or not, but the 1st world may have less repression and human rights violations but it doesn't have none. And member states have invaded other countries in recent memory, have been involved in torture, institutional racism, etc.
You can't willingly start a business in a country that finances torture and invasion, make yourself money, and then turn around and say you won't pay tax because the country is unethical. That will be hypocrisy of highest magnitude.
Taxation without representation has not been an issue in America since 1776. Unless you're referring to multinationals lacking direct representation in foreign legislatures. At which point, it's fair to both consider that as a reasonable consequence of choosing to engage in business in other national jurisdictions, and to admit they undoubtedly have indirect representation.
