[mtgx]

How complicated can it really be? If you're making the profit in the country, then you should pay the taxes on that profit there, not send it to another branch to avoid paying the taxes. If there isn't a law against doing that, then there ought to be one.

[Retric]

The problem is there is no internal free market. So, as soon as you move sub components around it's impossible to track what the actual profits where in each company. Let's say the US Fab cost 1 billion and you sold a chip in China for 50$ and 60$ in the US. What's there share of R&D costs?

[dllthomas]

Part of the issue, I think, is people finding new and creative ways of "send[ing] it to another branch" and we're playing whack-a-mole because we want to ban the behavior rather than the intent.

[dumb_dumb]

"ban the behavior rather than the intent"

I think this sums it up quite nicely. The intent, which is encouraged by all branches and is culturally engrained (I will retrieve citations if requested), is "reduce your taxes as low as possible".

With the right advisors, corporations can do this very effectively. This should not be a surprise to anyone. They will pay less, much less. After all, that's what you encouraged them to do.

If your aim is to collect more taxes, then why encourage those being taxed to seek to reduce their tax liability as low as possible?

Forgive me if I am missing the obvious. But this to me has never made sense.

[csense]

> reduce your taxes as low as possible

It's not something that's "encouraged" or "culturally ingrained." It's simply a matter of lowering your costs.

[dumb_dumb]

If I track down a quote from a famous US Justice from the early 1900's where he says every American is expected to try to lower their taxes, would that cause you to reconsider your view?

[philwelch]

The "expectation" is merely because that's what any rational, self-interested person would do. I can't see how it's logically possible to escape that.

[dumb_dumb]

That is exactly it. And though I do not have the quote in front of me, I can tell you this is how the justice who said it approached every issue.

Maybe "encouraged" and "engrained" were not the right words. How about "endorsed"? I think rational self-interest is a concept that might vary in the degree to which it is adopted into people's behavior as you move from country to country. That's only a theory. Certainly, in the US, reducing tax liability, and doing so vigorously, is believed to be the rational thing to do.

But if I'm the taxing entity, is it rational for me to endorse the idea of paying less? That would seem to lead to a reduction in the amount I will collect as those being taxed adopt and refine their tax reduction strategies.