Why the next Facebook might never have to pay taxes

By: ispeculatornew
Date posted: 05.15.2012 (5:00 am) | Write a Comment  (2 Comments)

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I discuss taxes frequently on this blog. It’s a polarizing subject and one that I hate to see simplified. Some such as the new left wing French government think that simply raising taxes will bring in more revenue. That might be true in the short term but not in the long term.

Why Raising Taxes Is Not Always The Best Solution

I’ve discussed how companies such as Facebook ($FB), Google ($GOOG) and General Electric ($GE) have managed to pay a tax rate that is often below 5% through various strategies. The high US corporate tax rate is a big reason why these companies have been given enough of an incentive to be creative with their corporate structure. There is nothing illegal about it either. For some companies that ship physical products it is more difficult but even those have been able to pull it off. Apple has huge cash reserves but the vast majority of those are held overseas where they avoided the big tax payments. That also makes it more difficult to use the money for dividends or to reinvest in the US but in many cases, it’s a price that is deemed to be worth it.

An Extra “Creative” Step To Reduce The Tax Bills And Avoid Immigation Laws

As many of you know, I’m very interested in technology companies and many of these companies have been incredibly innovative in saving taxes. A big part of that is that they are very recent companies and I imagine that even non-tech international companies being set up these days put a lot of energy into creating an “optimal corporate structure” for tax purposes.

The other big issues that tech companies have these days is hiring top talent, especially when that talent is abroad. Many bright engineers go study in the US but are then unable to get a green card to work legally in the US…

A Brilliant Idea

The latest idea is a project that is being built right now. A huge ship will be stationned 12 miles off of the coast of California where tech companies will be able to rent space. The ship will be in international waters so no US work visa is required. In theory, foreign workers could either spend weeks on the ship, going back to California on weekends or maybe even do the transit every day. Companies that are stationned there would have no problem getting qualified employees that are struggling to get US cards, would not technically be operating in the US so would be able to avoid paying the big US tax rates…

Brilliant No?

Read more about it here

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2 Comments

  1. Comment by Zavi — May 15, 2012 @ 7:26 am

    Brilliant, but it just seemed a bit far-fetched 🙂

    I’m not too sure how government would deal and avoid that kind of potential problem!!!

  2. Comment by Intelligent Speculator — May 15, 2012 @ 6:01 pm

    @Zavi – Seems like it but it’s actually going to happen:)

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