[beagle3]

I agree with most of your points, but:

> A tax system that is reasonably simple, not disastrously onerous, and in many ways optimized for entrepreneurs (for instance, the differing taxation schemes offered for salary versus distributions, or the ease of deducting business expenses).

Is objectively wrong. The US tax code was over 71,000 pages last I checked (in 2009 or so), and that's just the federal part. I have dealt with taxes in several jurisdictions, personal and business - and the US is by far the most onerous, most complicated among them. The business part is a little simpler than the personal part, but both are batsh*t crazy when compared to a lot of other places.

The differing taxation scheme seem to be quite universal these days (I don't know if historically this wasn't the case). The rates are effectively higher in the US, though it seems if you are big enough you can use loopholes to counter that.

The VAT common in Europe is onerous at the personal level (roughly comparable to state/city sales tax, although usually higher), but is almost invisible at the business level - "VAT" stands for "Value Added Tax" - it only gets paid on the added value. If my business buys laptops and supplies them to a customer, that customer pays VAT but I do not (whereas US style sales tax gets collected twice in this case). Expenses seem to be just as easily deductible, if not easier.

Furthermore, the US is actively hostile towards anyone who does anything financially outside the US. Got a bank account outside the US? You have a lot of onerous reporting to do (FBAR/FATCA) with very steep penalties for non compliance. Your company has such an account, and you have signing rights? You are still personally liable with the same steep penalties. Onerous does not begin to describe this.

If you're already a US Tax Payer living in the US (by being a citizen or a permanent resident), the US is probably the best place for you to do business in. If you are not yet subject to the craziness that is the US Tax Code, you should factor a few tens of thousands of USD per year for proper reporting, which might make it a less desirable place.

[tptacek]

Consider businesses with a run rate of between 2-10MM USD as a group, first in the US and then in, say, Denmark or (to make it even simpler) Ireland.

Does the Danish or Ireland cohort tend to operate without the advice of tax accountants? My impression is that they do in fact tend to retain tax advisors.

The argument that the US tax system is particularly onerous is, I think, compelling only if you can demonstrate that it creates a de facto requirement for outside advisors that doesn't exist in other locales.

Otherwise, the complexity of the system (which is not what I was talking about) isn't much of an issue.

I have some experience with tax advisors, obviously, and they are not one of my big business expenditures. :)

[beagle3]

> I think, compelling only if you can demonstrate that it creates a de facto requirement for outside advisors that doesn't exist in other locales.

Optimization of taxes is a constantly changing, narrow field of expertise - and the complexity of even "simple" tax systems is such that even a cheap, mediocre tax professional will usually save you more in taxes (compared to a "layman understanding" of taxes) than they cost. In this sense, no country is simple enough to operate without a tax advisor. In fact, in Israel where I now reside, it is effectively a requirement to have a CPA prepare and sign off your tax papers, even if your business did not have a single transaction that year. However, the reporting is simple (compared to the US, anyway) such that even if you had quite a bit of transactions, your advisor can finish it in an hour.

For similar complexity, I ended up paying my US tax advisor approximately twenty times as much as my Israeli one. I pay for quality in both places, and the hourly rate of the US CPA is approximately twice as much as the Israeli one (that's true in general comparing both markets). The US one just has about ten times as much work to do.

> Otherwise, the complexity of the system (which is not what I was talking about) isn't much of an issue.

I guess a tl;dr of my point would be: In most of the world, a reasonable course of action is to make plans for business purposes and then adjust them according to tax considerations, whereas in the US the reasonable course of action is to make plans based on legal&tax considerations and then adjust them for business purposes.

I agree that looking at the bottom line, it's just another business expense - I was just disagreeing with your assertion of a reasonable tax code. It is the case in the US (much more so than in Europe and other modern countries, in my experience) that where and how you incorporate, how you assign your IP, and how you time your transactions (short term/long term capital gains) can have a huge impact on your bottom line. Makes it much harder to reason about your actions, which is a non trivial (and hard to quantify) cost.

[ThomPete]

No accountants are very important also in Denmark. Danish company tax system is very very complicated. So you are correct.

[jeffasinger]

In my state (New York), there is a sales tax exemption on all goods that are intended for resale, so in your case, only the customer would pay sales tax, and you would not.

However, you have to register with the state to collect sales tax in order to be allowed to buy things without paying tax.