Category Archives: Taxes

Pro Big Corporate IRS: Agency Guts Whistleblower Program, Leaves Billions on the Table

It’s widely known among tax professionals that the US does little in the way of tax enforcement, and the little that it does do is directed against individuals and small businesses.

What is not so widely known is how deep the institutional bias is in the IRS in favor of letting big corporate tax cheats get away with it.

Conventional wisdom is similar to the rationalization of weak enforcement at the SEC: that the agency is afraid that if they go after big companies, they’ll have the penalties and fines challenged in court, and they’ll often lose by virtue of being outgunned by better lawyer (yes, Virginia, even if you have a solid case, that doesn’t mean you’ll win at trial). And top tax litigators are among the most highly paid legal talent. I’m not up on current rates, but in the mid 1980s, Sumitomo Bank fought the IRS on a $100 million assessment and won. Their attorney was a solo practitioner who charged $1000 an hour.

It turns out that the picture is vastly worse than that.

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Matt Stoller: Why We Need to Break Up Amazon – and How to Do It

Yves here. The main way that those of the left-leaning persuasion see Amazon as a bad guy is for its treatment of warehouse workers, who work in physically-taxing conditions and are paid what is barely a living wage for a single person.

As Matt Stoller describes in this piece, Amazon’s ambitions are monopolistic, and they’ve already gone a long way towards achieving that ambition in a large number of markets. They regularly engage in predatory pricing to crush competitors and gain market share. Their dominant position then allows them to chose how to extract more profit, which is usually a combination of squeezing suppliers and raising prices.

Antitrust has become close to a dead letter in the US. Amazon makes for a worthy object for reviving it.

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David Quentin and Nicholas Shaxson: The “Patent Box” – Proof That the UK is a Rogue State in Corporate Tax

Yves here. We are delighted to welcome two world-recognized tax experts as writers on our site. They also happen to fall in the minority that believes that paying taxes is the price of civilization. And to top it off, they write in a layperson-friendly yet technically accurate manner.

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G20 Finance Ministers Reveal Impotence in the Face of Rising Stresses

Yves here. It’s hardly uncommon for big international pow-wows like the G20 to produce grand-sounding statements that when read carefully call for unthreatening, which usually means inconsequential, next steps. But this G20 just past was revealing, in a bad way, about the state of international political economy.

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Another Private Equity Scam: Clawback Language Does Not Work As Advertised

As the SEC, reporters, and analysts dig into the operations of private equity firms, it is becoming obvious that one of the reasons that these financiers have cornered the best legal talent in America is for the express purpose of better fleecing their investors.

A prime example comes up in the use of clawbacks in private equity agreements.

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Burger King the Latest to Jump on the Corporate Tax Inversion Bandwagon

A number of corporations have engaged in corporate tax “inversions” this year, which typically involves a large U.S. company merging with a smaller counterpart in a lower-tax country abroad, then moving the corporate billing address to the lower-tax country to reduce the overall tax burden. The actual headquarters and the executives go nowhere, but the nominal address changes so the company can avoid U.S. tax rates. A number of corporations in the pharmaceutical space have pulled this off in 2014, but it took the drugstore giant Walgreen to flirt with the idea (through a merger with the Swiss company Alliance Boots) for the non-financial press and the public to really catch on. Outcry actually stopped Walgreen from going through with the inversion; they merged with Alliance Boots, but kept their headquarters in the U.S. Clearly, it was easier to rally public scrutiny to a consumer-facing brand attempting to skip out on America while still using the public resources afforded any company selling their wares here.

Now, the same coalition that stopped the Walgreen inversion will get another chance with Burger King:

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Philip Pilkington: Taxation, Government Spending, the National Debt and MMT

The other day my friend Rohan Grey — a lawyer and one of the key organisers behind the excellent Modern Money Network (bringing Post-Keynesian economics to Columbia Law School, yes please!) — directed me to an absolutely fascinating piece of writing. It is called ‘Taxes For Revenue Are Obsolete’ and it was written in 1945 by Beardsley Ruml. Ruml was the director of the New York Federal Reserve Bank from 1937-1947 and also worked on issues of taxation at the Treasury during the war.

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Unintentional Tax Humor on the Inversion Scam at Forbes

While you’ve all been busy being distracted by the strife in Gaza and Ukraine, or perhaps more sensibly decided to tune out and enjoy the summer, various not so pretty developments have been moving forward with alacrity in the US. One is a spate of so-called “inversion” deals, in which corporations use acquisitions to move their headquarters overseas, which allows them to arrange their affairs so as to greatly lower their tax bills. The latest group of companies to try this ruse are in the health care industry, brandishing the excuse that if they fail to follow this dodgy practice, they won’t be competitive.

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Senate Report: Hedge Funds Used Basket Options to Save Billions in Taxes

The Senate Permanent Subcommittee on Investigations released a report today that found that hedge funds have been using basket options to save billion in taxes. And when we say “billions,” the report indicates it’s more like tens of billions, since the paper estimates that the tax reduction achieved at one hedge fund, Renaissance Technology, operated by the famed James Simons, was $6.8 billion.

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Randy Wray: “Debt-Free Money” – A Non Sequitur in Search of a Policy

Yves here. I must confess that I am at a loss to understand the deep emotional reactions some readers have to MMT. It’s like raging at a thermometer because it shows you your body temperature. Virtually all of the complaints about MMT are based on a failure to understand what it says about how money works. MMT is descriptive of our current system, and it also has a message that progressives (the real kind, not the Democratic fauxgressive kind) ought to welcome, that the Federal government as a sovereign does not need to run a balance budget, and that a balanced budget is in fact destructive when the economy is as slack as it is now. That means the government not only can but should spend more, which is in contrast to all those barmy arguments about how we can’t spend to [fill in your priorities, have national health care, improve our infrastructure, feed low income kids in school, etc.]. If you don’t like the Federal government directing that much spending, there’s a remedy for that too: revenue sharing, which was instituted under that great liberal Richard Nixon, who though the Federal government raised revenues more efficiently than state and local governments, but state and local government were better at setting spending priorities.

MMT provides a basis for rejecting neoliberalism and austerity, and people who ought to embrace it are instead being told falsehoods about it and are becoming skeptical. That assures that the current crop of looters can continue their work unperturbed.

However, MMT does require that you turn the conventional stories about money inside-out. It takes some mental rewiring to understand it, and that degree of reorientation seems to be a big reason for the heated reactions.

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Don Quijones: Mini Tax Havens – How Europe’s 1% Gets to Pay Only 1%

If you thought tax havens were limited to tax haven destinations like Switzerland and the Caymans and the Isle of Man, think again. European governments happily accommodate tax schemes that allow the wealthy to shift funds into super low tax vehicles. Yet at the very same time, ordinary citizens are being broken on the rack of austerity.

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Why the Rich Aren’t Job Creators

This is a short talk by venture capitalist Nick Hanauer, who among other things, was the first non-family investor in Amazon. Hanauer in very simple and effective terms debunks the “rich are job creators” myth. Even though the video is going viral (now at over 1 million views on YouTube, it is important enough that I wanted to make sure NC readers saw it and circulated it.

Hanauer’s remarks illustrates the degree to which propaganda has overcome commercial common sense.

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How Private Equity Investors Signed Up for Tax Trouble

How did supposedly sophisticated investors sign up for investments that have tax liability bombs in them? The seemingly arcane but actually important tax problem of UBTI, or “unrelated business taxable income,” illustrates how utterly outmatched private equity limited partners are by the general partners and their top-tier hired guns.

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