Let’s get those tax cheats!
This series How to Dodge Taxes describes some of the techniques the wealthy and corporations use to reduce taxes. Some are legal. Some are not. Many of the illegal activities are difficult to prove in a court of law. It is natural for readers of this series to believe that writing new tax laws will solve the problem.
Writing new tax laws is not that easy. Our legislatures already work too slow for the 21st century. So introducing new tax bills means other societal issues are not addressed. Then there are the politicians wanting to score political points by telling us how the thousands of tax laws are already persecuting average citizens, keeping them from accomplishing better things for themselves.
While I’m far from an expert, here is my assessment of the state of our tax laws. If we put all these laws into 20 volumes, only one of those volumes would apply to wage and salary earners, which is about 90% of us. And the process to calculate taxes on this income is fairly straightforward; most Canadian accountants charge $200 for preparing these tax returns. Filing personal tax returns is not a hardship for most of us.
The second volume is the rules for small business. Small businesses pay a tax on the profits, which is the difference between revenue and expenses. This volume expends many words on what constitutes a legitimate expense for small business, as business people sometimes like to include non-business expenses to reduce taxes. If the business keeps a good set of books, accountants would charge about $1500 to file a small business tax return. This is not a hardship.
The third volume is the rules for workers who cross borders. For example, Over The Moon is a Canadian country/folk music duo. Recently they did a month-long tour of Britain and Ireland. Their UK agent set up accounts that allowed them to work in these two countries. Then the agent found them the venues to play in. Somehow Over the Moon was paid; they got to deduct their travel expenses, like plane tickets, hotels, meals, and car rental. Plus their agent fees. Then they paid UK and Irish taxes on the profit. They returned to Canada and were not obligated to pay Canadian taxes on their European earnings. The process has become fairly streamlined for artisans, athletes, and other workers to temporarily work across their border — and avoid being taxed in two countries.
The other 17 volumes of tax laws belong to intermediate and big businesses. There the profits are larger. Some industries, like the petroleum and airline industries, will have their own specific set of rules somewhere in the 17 volumes. Many accountants make it their job to interpret the rules in their employers’ favor.
The Tax Circle
There is a big cat-and-mouse game with these 17 tax volumes. Businesses find interesting ways to reduce their tax payments. Tax authorities start seeing patterns. They ask the politicians for new tax bills. Big business uses its lobby power to limit the bills. Even so, some bills become new tax laws, which go into the 20 volumes. Then businesses look for ways around those new laws. This cycle has been repeating since government started taxing income in the early 20th century.
So when a reader of this series starts thinking: “They should just write some new laws to deal with these tax cheats,” it is almost a pointless task.
We need to change the nature of business instead.
The Spolu
Today’s corporations have one primal objective: maximize the profits for the investors. This is what is driving commerce around the world.
Co-operatives have been promoted as an alternative model for commerce. I belong to two co-operatives myself. But my anecdotal observations suggest co-operatives have gone backwards in their share of total commerce.
The spolu is a new model for co-operative business. The spolu will distribute profits between investors, employees, customers, and suppliers. Plus spolus will take on certain philanthropic missions.
Before the profits are distributed, spolus must first pay their corporate tax. This is part of their social responsibility to help pay for the infrastructure that allows spolus to generate a profit.
Each spolu will be accountable to the spolu network. Spolus will be occasionally audited for their adherence to the spolu rules and spirit. Spolus who fail to heed the warnings of the auditors will be kicked out of the network — and revert back to a corporation, with the investors having all the control and profits.
Socially responsible consumers will use the spolu trademark to identify businesses with a social conscience. These consumers can patronize spolus instead of corporations. Businesses that want these customers have to join the spolu network.
In other words, spolus will see part of their responsibility is to pay taxes. Taxes are how commerce pays for the infrastructure that helps make a profit.
I have a 24-part series about the spolu. The first article is here.
I have also set up a webpage about the spolu concept. It is a compilation of the 24 articles. It is about a one-hour read:
I should say that the spolu concept is under development. The written work so far needs more thinking and more editing. But at least 70% of what needs to be written has been written. Comments are welcome and might lead to a better document.
Published on Medium 2024
This is the last article of this series. Here are the other five parts:
The Offshore Company Money Machine
The Nefarious Usage of Corporations
And if you want to go to different places:
The Republicans Won: time for a new Medium strategy
