> It will be very naive to believe adding IRS staff will help with that. It is far easier to audit W2 employees than dealing with mega corporations.

You're saying auditing megacorps is hard, but somehow more staff won't help? I don't buy it.

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AnthonyMouse 7 hours ago | parent | next [-]

> You're saying auditing megacorps is hard, but somehow more staff won't help? I don't buy it.

It's not so much that it's hard, it's that it has a lower return on investment, because the IRS gets money from finding mistakes or intentional fraud. Megacorps have entire legal teams dedicated to preventing those things from happening, while lowering their taxes by finding lawful ways of reducing their taxes to almost nothing by pouring over the unfathomable complexity of the tax code to find obscure credits or chain together the right sequence of things so their profits end up in a jurisdiction where they're not taxed.

If you audit them you spend an enormous amount of resources because their accounts are so complicated and then only get money if they screwed up, which they're less likely to have done than someone with fewer lawyers, and even then it will typically be something like you found a credit they weren't allowed to take and they owe $50,000 but the thing where they have a hundred billion in revenue and 0.2% of that in taxable profit was all by the book.

Meanwhile smaller entities are far more likely to have screwed up because they have fewer resources to navigate the complexity of the tax code, and their accounts are less complicated, which makes it easier for the IRS to find mistakes and therefore get money. So if you give the IRS more resources and tell them to do audits to maximize recovery, those are the people they audit.

But that also involves auditing a ton of individuals and small businesses who didn't do anything wrong in order to find the ones that did, and they rightfully hate that because nobody is paying them for the actual costs of the audit where the IRS found nothing, which is why they keep lobbying to stop the IRS from getting more resources to do that to them. And if the IRS had to pay the taxpayer's side of the audit costs then their "recovery efficiency rate" would go way down.

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jandrese 6 hours ago | parent | next [-]

> It's not so much that it's hard, it's that it has a lower return on investment, because the IRS gets money from finding mistakes or intentional fraud. Megacorps have entire legal teams dedicated to preventing those things from happening

Or: Megacorps have entire teams of people looking for ways to reduce their taxes, many of which are legally dubious but the risk of being caught * the size of the fine means it makes business sense to do it regardless of legality.

	▲	AnthonyMouse 5 hours ago \| parent \| next [-]
		> Megacorps have entire teams of people looking for ways to reduce their taxes, many of which are legally dubious but the risk of being caught * the size of the fine means it makes business sense to do it regardless of legality. "Legally dubious" is the problem, because ambiguous laws are supposed to be interpreted most favorably to the defendant rather than the government, and then all parties have to incur much higher costs because the ambiguity means it goes to litigation, and there is a significant chance that all of those resources are consumed and it comes out in favor of the corporation in the end. The IRS much prefers to find cases where the taxpayer is clearly violating the law.
	▲	thaumasiotes 5 hours ago \| parent \| prev [-]
		No, that's a contradiction of your parent comment. In your model, doing more audits would increase "the risk of being caught" and have good ROI.

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loeg 6 hours ago | parent | prev | next [-]

This is a moved set of goalposts from the comment I responded to -- and we know that, because the original author had already confirmed that replying to me before your comment: https://news.ycombinator.com/item?id=47139400 .

	▲	AnthonyMouse 5 hours ago \| parent [-]
		Both of those comments are making a consistent argument: It's easier (and I would add more cost effective) to target smaller taxpayers, so that's what the IRS typically does when given more resources.

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bdangubic 7 hours ago | parent | prev [-]

> It's not so much that it's hard, it's that it has a lower return on investment, because the IRS gets money from finding mistakes or intentional fraud....

Isn't this exactly what all megacorps are hoping for everyone thinks? I am not saying that you are wrong but these megacorps are some of the most evil the Civilization has ever seen (see Meta) and now you and I are hired as tax attorneys - pretty soon (if not right away) one of us will go "this shit's very much so illegal but who is actually going to audit us? - the answer, per your comment is basically no one because we think these megacorps and their lawyers are there to play by the book...

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AnthonyMouse 6 hours ago | parent [-]

In order for that to make sense to them, it would have to be impossible for them to avoid paying taxes without breaking the law, but the very nature of applying "corporate income tax" to an international supply chain makes that relatively straightforward.

The general problem is this. You have a company with its headquarters in Ireland that designs a product in California, manufactures it in China and sells it in Germany. In which country did they make a profit and therefore owe taxes? It depends on what each subsidiary bought from the others and how much they paid, so they're going to structure their operations so that the profit ends up in the one with the lowest taxes. That's the defect in "corporate income tax" for international companies, and why it gives international companies an advantage over domestic ones.

In order to fix that you need a tax code that says the taxes have to be paid to the country where whatever subset of their operations you want to tax is actually present. But then it's not "corporate income tax" anymore. If you want to tax them in the location they have workers it's payroll tax, if it's where they have buildings it's property tax, if it's where they have customers it's VAT, etc. You need it to be something they can't so easily move out of your jurisdiction. Because if you say that it's profit then they'll just arrange to make their profits in Ireland or Bermuda.

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oarsinsync 6 hours ago | parent [-]

Or the US could tax it's corporations just like it taxes it's citizens.

Doesn't care that the citizens pay tax in whatever country they live in. If they earn over some 6 figure sum, they have to pay tax in the US as well.

That would put US corporations at a distinct disadvantage on the global scene, so it won't happen. Disadvantaging citizens doesn't seem to matter as much.

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AnthonyMouse 6 hours ago | parent | next [-]

The thing the US does to its citizens is bizarre and atypical and it should stop doing that.

But how would that even work for a corporation? Suppose you did that; is anything multinational going to remain a US corporation? Of course not, they'll just register in some other country. The CEO of Stellantis nee Chrysler is in Michigan but how many people can guess which country the corporation is registered in without looking it up?

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solidsnack9000 5 hours ago | parent | prev [-]

The problem here is not how the US taxes corporations, but rather that there are different corporations involved. A regular citizen can not establish an additional, foreign citizen that "owns" them or "supplies" them with IP (or labor hours, &c) -- this kind of tax management accounting is not possible for citizens.

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oarsinsync 5 hours ago | parent [-]

They're not different unrelated corporations, they're subsidiaries of a parent that is ultimately a US entity.

The citizen has literally upped and moved themselves entirely to a foreign country.

The corporation has just forked a bit of itself elsewhere.

And yet the corporation can't be taxed, but the individual can.

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AnthonyMouse 5 hours ago | parent [-]

You still haven't answered the question: What are you going to do when Apple or Google becomes "subsidiaries of a parent that is ultimately not a US entity"? What about your proposal prevents them from registering the parent company somewhere else while changing nothing else about their operations? Making them file different paperwork doesn't accomplish anything.

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bdangubic 5 hours ago | parent [-]

would in this case help to treat Apple and Google as foreign company? No government contracts (or super strict rules to get them), tariffs…?

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AnthonyMouse 4 hours ago | parent [-]

> No government contracts (or super strict rules to get them)

Now you've created a disadvantage for corporations to bid on government contracts, reducing competition and causing the government to pay more for stuff. Meanwhile the companies that actually bid are then the ones that specialize in lobbying the government and register locally and other corporations still register elsewhere.

> tariffs

If you were going to use that you could just as easily use VAT to begin with.

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bdangubic 2 hours ago | parent [-]

foreign-owned companies already are at disadvantage (rightfully so) getting gov contracts. so if you gonna try to evade paying taxes claiming you are based in Burma the government should treat you accordingly. given that there is no bigger customer than US government the companies might re-think their Burmese HQ?

	▲	AnthonyMouse 2 hours ago \| parent [-]
		> given that there is no bigger customer than US government the companies might re-think their Burmese HQ? Only if the percentage of their business represented by US government contracts is more than the US corporate tax rate, i.e. only for companies like Lockheed whose business is focused on government contracts. But those are some of the largest "domestic companies" being put at a disadvantage by the existing tax system because they already can't use the same international tax avoidance strategies as other companies when they're required to use domestic supply chains by those same government contracts. Meanwhile the companies that do lower percentages of their business with the government would just stop doing business with the government at all, causing the government to pay more for things because that company would otherwise have been the one to get the contract by being the one to offer the government the best price.

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pimlottc 7 hours ago | parent | prev | next [-]

I think they are suggesting the lack of political will to go after big companies is the bigger problem

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up2isomorphism 7 hours ago | parent | prev [-]

Of course it won’t help. If you have an audit target to meet you want target meta?

This exactly why ICE agents tends to target illegal immigrants that actually get a job and contribute to the society instead of criminals. Because the former are easy targets.

Also fundamentally the tax law in the US are intrinsically favor capital owners, especially large corporations, adding more IRS agents only cost more tax payer’s money and give regular people more headaches.

	▲	loeg 7 hours ago \| parent [-]
		> If you have an audit target to meet you want target meta? I don't believe the approach the IRS takes is to set targets and only audit the lowest hanging fruit up to some target. They have different sub-organizations pursuing different goals, and some sort of vision about fairness that means going after tough cases. > This exactly why ICE agents tends to target illegal immigrants that actually get a job and contribute to the society instead of criminals. Because the former are easy targets. This is completely orthogonal, but also untrue. It's way easier to go after criminals, as long as states cooperate. The recent Trumpian ICE is more expensive and less effective than earlier regimes. > adding more IRS agents only cost more tax payer’s money and give regular people more headaches. Many, many regular people underpay the taxes they owe. Additional IRS agents help close the gap between taxes owed and taxes paid, at a cost lower than the additional revenue. Your argument is just "individual tax cheats should be able to get away with it," which I can't agree with.