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Tax raid on super-rich hiding mansions in offshore companies raises 100million, FIVE times more than expected

 Offshore Companies  Comments Off on Tax raid on super-rich hiding mansions in offshore companies raises 100million, FIVE times more than expected
Feb 272014

Treasury moved to close loophole used by wealthy to avoid stamp duty By placing homes in companies they can be sold without paying tax Ministers had expected the new levy to raise 20million this year But Danny Alexander reveals it is on course to generate 100million

By Matt Chorley, Mailonline Political Editor

PUBLISHED: 07:25 EST, 21 February 2014 | UPDATED: 10:40 EST, 21 February 2014



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A crackdown on the rich and famous who own mansions through offshore companies is on course to raise five times more than expected.

Pop stars, actors and jetsetters were able to avoid paying stamp duty when they bought and sold multi-million pound properties by selling it as part of a company based abroad.

A move to close the loophole had been expected to raise 20million this year, but it is now set to net the Treasury 100million.

Two years ago it emerged that every home in Cornwall Terrace in North London had been transferred to a company on the Isle of Man

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Tax raid on super-rich hiding mansions in offshore companies raises 100million, FIVE times more than expected

8 Ridiculous Tax Loopholes

 Tax Havens  Comments Off on 8 Ridiculous Tax Loopholes
Feb 252012

On paper, the U.S. has one of the highest corporate tax rates in the world. But in practice, corporations pay far less. The Government Accountability Office (PDF) estimated the average tax burden at 25.2 percent, and some of the largest corporations, such as General Electric and Wells Fargo, pay no taxes at all. This is possible because the tax code is riddled with exceptions and loopholes, created at the behest of lobbyists and exploited by teams of tax experts, many of whom used to work for the IRS and the Treasury. With the help of Citizens for Tax Justice, The Daily Beast rounded up some of the most egregious corporate tax loopholes.

Deferral of Overseas Income

Multinational companies don’t have to pay U.S. income taxes on overseas profits until they transfer them back home. But in reality, companies just leave their profits in overseas tax havens, deferring taxes indefinitely. Not only that, an accounting scheme known as “transfer pricing” allows companies to move profits from the U.S. to offshore havens so they’re counted as overseas earnings. For example a pharmaceutical company could sell a drug patent to a subsidiary in the Cayman Islands for a nominal fee, then have the subsidiary charge the parent company huge licensing fees. The company can then deduct the licensing fees from its taxable income in the U.S. and send the profits to its foreign subsidiary, where taxes can be indefinitely deferred. Some 83 percent of top 100 publicly traded companies had tax-haven units in 2009, according to the GAO. General Electric, Google, Pfizer, and many other companies use this technique. The federal government loses an estimated (PDF) $100 billion a year through offshore tax abuses.

Deductions for Shipping Jobs Overseas

At first glance it doesn’t seem particularly egregious that corporations can deduct moving expenses, but that changes when the break is applied to companies moving operations overseas. President Obama proposed ending this exemption for companies moving overseas while giving a credit to companies moving back to the U.S.

The Domestic Production Deduction

This deduction was meant to encourage companies to keep manufacturing operations in the U.S. by allowing them to deduct profits from “qualified production activities.” But by the time the law was enacted, those activities had expanded to include not just manufacturing but everything from oil drilling to filmmaking to real estate. (Obama proposed barring oil and gas companies from using the deduction.) The Center on Budget and Policy Priorities estimated that the deduction cost states $500 million in 2011, and the Congressional Budget Office (PDF) estimates it will cost the federal government $163 billion over the next decade.

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Last-In, First-Out Accounting

Normally when you buy something for $30 and sell it for $50, you have to pay taxes on a $20 profit. But corporations—especially oil companies—manage their accounts differently. They might buy oil for $30 a barrel, and then buy some more for $45 a barrel later in the year. Then when they sell a barrel of oil for $50, they get to assume that they sold the last barrel they bought, the one that cost $45, allowing them to report a profit of $5 instead of $20. Citizens for Tax Justice estimates that the loophole is worth $97 billion over the next 10 years.

Punitive Damages Deduction

When corporations are hit with punitive damages, they’re able to write them off as an “ordinary and necessary” business expense (PDF). Consequently, Exxon’s $1.1 billion Alaska oil spill settlement actually cost the company $524 million after taxes. Obama’s budget proposes to eliminate the deductibility.

Accelerated Depreciation Deduction

This allows companies to deduct for the depreciation of a piece of equipment at a faster rate than it actually takes the equipment to depreciate. Because interest expenses are also deductible, a company can borrow money to buy equipment, deduct both the interest on the debt and the “accelerated” depreciation of the equipment, and claim deductions greater than the profits generated by the investment. It’s one of the loopholes that allow corporations to pay no taxes during profitable years.

The corporate jet deduction became a hot-button issue during the debt-ceiling debate when President Obama used it as leverage against the Republicans. Under the current law, corporations can claim deductions for the depreciation of their jets at a faster rate than commercial airlines can. Closing the loophole wouldn’t save much money—about $4 billion over 10 years—but as a political symbol, it’s invaluable. (For what it’s worth, yacht owners get an accelerated depreciation deduction plus a few more.)

The 71,000-page tax code is full of accelerated-depreciation loopholes for various industries. Along with corporate jets, NASCAR racetrack owners get a special exemption. They can deduct for the depreciation of their tracks over a seven-year period instead of the 39 years the government estimates (PDF) it actually takes them to depreciate. The break was put in place in 2004 but was renewed in the 2008 financial-system bailout known as TARP. It costs the government $40 million a year.

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8 Ridiculous Tax Loopholes

Pierre Teilhard De Chardin | Designer Children | Prometheism | Euvolution