The companies are in many cases doing things like this:
1) their revenue they classify is centered in a different country like Ireland
2) they setup a massive line of credit with an international bank
3) they take out massive loans against the money they have “overseas” that is not taxed
4) they then pay the buybacks and other things to their investors with that loaned money in US
5) they then pay back the bank at their international site
6) the bank then borrows more money from federal reserve at nearly zero interest rate
Rinse and repeat.. tons of companies have done this. So sure some investors will eventually cash out but companies should also be taxed if they derive some benefit from the country they are from or selling products. I would argue those taxes should be low but allowing companies to totally dodge them seems like a bad setup long term.
What I don't understand about this is... Why can't I partake? If my employer is based out of these havens for tax purposes, why can't they pay "me" by paying into the bank account of the foreign on-paper-only company I own, whose line of credit with a foreign bank I then use for my own expenses?
I feel like this must be against the law somehow, but I don't quite understand where the line is.
> What I don't understand about this is... Why can't I partake?
Honestly: because you're not rich and connected enough to have the rules written for to your benefit your naked self-interest. If it was legal and economical for ordinary people to evade taxes, too many people would do it and the country would collapse.
It's not against the law at all. It's just expensive because you forgo labor protections, social security contributions, medicare contributions, paying for accountant's time to file for international income, etc.
Wages are taxed differently than a company's income. If you were to distribute the income to yourself every 2 weeks, you'd end up paying all the same taxes as wages.
It's pretty straightforward to determine where someone works. You are physically in the USA when you do the work so you're on the hook for income tax. What the companies do is set up a bunch of companies in different locations. Then they manipulate their books so that the low tax companies show profit while the high tax locations don't.
But you're not getting paid. Your company is getting paid, and then you're using credit against your company's assets to pay your expenses. You, for all intents and purposes, are volunteering.
Maybe your company has to sell something to be legit? Okay, you sell the people who are paying your company toothpicks. They pay your company for the toothpicks, the labor is just incidental.
Because the Department of Labor has actual real teeth and staff, whereas the IRS is drastically understaffed.
Also the situation you describe would make your life incredibly complicated. The logistical hoops necessary to pay your rent make it extremely unappealing, IMO.
Wouldn't it be hilarious if the bank prior to the buyback bought a bunch of the stock (I don't know if this is true, but seems plausible). Then in that case the company would literally be taking out a loan from the bank in order to buy the stock from the bank. So then the question is if its possible for the bank to claim some sort of thing where when they sell the stock to the actual company that it is some special type of transaction and maybe gets favorable tax treatment? Wow I want to look into that.. sounds interesting / shady if thats possible to do..
Rinse and repeat.. tons of companies have done this. So sure some investors will eventually cash out but companies should also be taxed if they derive some benefit from the country they are from or selling products. I would argue those taxes should be low but allowing companies to totally dodge them seems like a bad setup long term.