Transfer pricing and tax havens | Taxes | Finance & Capital Markets | Khan Academy
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- Опубліковано 7 жов 2012
- How a corporation can set up a tax haven and use it through transfer pricing. Created by Sal Khan.
Missed the previous lesson? Watch here: www.khanacademy.org/economics...
Finance and capital markets on Khan Academy: In exchange for being treated as a person-like-legal entity (and the limited liability this gives for its owners), most corporations pay taxes. This tutorial focuses on what corporations are, "double taxation" and a few ways that multinationals might try to get out of paying taxes.
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How in the world did he draw Map of USA so perfectly???
Paper cutting of the map and then drawing on borders
This video got me a job in Transfer Pricing 😃
wait wait, is this real? I mean this video is very helpful tho, but dude that's awesome
@@fatihaa9186 yep in Big 4 that too :)
@@maitrivyas5106 that's make your story more interesting for me, are you an accounting graduate or what?
@@fatihaa9186 eco, maths, stats triple majors
@@maitrivyas5106 ok, this comment explain why u got that job haha. I thought u just a random guy without educational background, watched this video and boom! U got that job
The amount of videos I have watched from this professor (?) are countless. He explains things so thoroughly and so well. I love love love love love love these videos.
Thank you, your explanation is much more better than my lecturer.
sometime better than my boss...
Thanks again for the breakdown, Sal! I love learning from you and Vi! i only hope people keep this information in mind while they watch the Presidential Debates.....
Companies are using IP (royalties, trademarks) as well as interest charges by leveraging up the company in the high tax country or management fees charged to the high tax company....or also increasing the price charged for goods ...raw materials, partially converted or finished goods. To round out the full story.
This was beautifully explained! so clear and concise, loved it!
Where can I find the other videos explaining the avoidance of repatriation of funds?
Correct!
Money itself isn't an end, money is used to purchase things.
Currencies can be transmuted into anything if you have enough, so it makes sense that Businesses would like to have as much money as they can so they can have more things, profit motive right there.
This is all based on just one equation (E=ˠ M˳C² )∞ the Lorentz contraction of space and time is between the energy and mass. The greater the energy the greater the contraction of space and the slower time will run. Mass will increase relative to this and each ref-frame can be seen as a vortex in space formed by the rate that time flows. The brackets represent the boundary condition of the ref-frame formed by the energy and the infinity symbol represents an infinite number of ref-frames.
Another Great Video!!
That was really a great explanation.
Ermm...I understand this so well. Thank you for this video
@khanacademy
Can your next video be "solving US economy" please
thank you
Was there any resolution of the first sale doctrine case? I can't find anything online.
Thanks for the info sal!
Fantastic! Great info!
Many countries do not tax intercorporate dividends, pre-BEPS .....hence the need to additional rules to ensure Global Intangible Low Tax Income (GILTI) is appropriately taxed at a minimum rate
ur very good at explaining stuff
Very interesting video well done. I've always wondered what was the real reason and how? Next video should be why are so many American companies in Iceland or one of those country's up in the north an
this vid helped me so much wow
NICE ONE SAL
Thank you so much the video was very useful
excellent explanation, where to find the video to talk about the repatriation?
There is also tax on cost you paid to another country. Say 20%, so in this case additional tax you pay is 20%of 800K = 160K
Thank you very much
What's the name of the video that talk about repratriation tax?
very good thank you
Where is the video that explains how to bring back that money tax free? Can someone please send me the link?
this is a new series
lovely Explanation
Thanks for the video, helped me a lot :-)
Good explanation.
So where would the bank account of the shell company be located?
Very helpful
very good explanation
GREAT VIDEO PLEASE SHARE
Can you tell me now you would use code to make radom problems with the answer.
Nice video, just one request, can you change your mouse icon from Hand to Pancil, it will look more natural while looking :)
I do agree with you on this point.
I don't think there is a repatriation if the company is set up in Delaware or Nevada, or at least its minimized if that's where its set up.
Central Banking, Government regulation, tariffs go on Wikipedia and look up Keynesian theory, Done? Okay.
In it's essence Keynesian Theory is if you increase Aggregate Demand on the short run unemployment will decrease, and total income and the standards of living will increase. This has been seen worldwide to work when properly administered, which is why economists strongly support Keynesian theory, because it works.
I read it, I agree. It seems really agressive though, like you disagree with me on something, I can't figure out what though. That's why I'm asking you.
By contrast, something like the relationship between people, corporations and governments is immensely complicated and something that we simply don't have enough data on to make the short, simple, black and white assertions such as the ones you are making.
So how does the company repatriate the funds back to the US? Will they still be subject to 35% withholding on net profit repatriation.
Cool
I think in order for us to have this discussion, we need to make the a priori assumption of "taxation occurs, and is obligatory to work/do business in the USA".
Otherwise the discussion is going to continue to have some serious scope creep.
How the subsidiary gets all the IP from the parent company?
This is really explanatory!
I hate the term loophole. Money is always spent in a far better way when in private pockets.
I never said I could teach music, and I don't see how that's relevant. The point is that I have enough understanding of the concepts required to learn music to make an informed judgement on whether or not your analogy is logically consistent and it isn't.
A free market is a theoretical construct, like a perfect vacuum. I shudder to imagine what Romney truly believes.
Lol
OK. I called it a *model* although I based my statement on anecdotes told by my fellow countrymen who migrated to Sweden about good life there.
If you consider separately social system and economy, and if you introduce notions such as culture or mentality, then how can you or any1 else form a scientific approach in economic thinking?
I may take example comparing US and Mexico. Almost the same Constitution and political system, but big difference in wealth or quality of life? Mentality? Culture?
Purely... Purely
How does that tie in to imprisonment and death?
If certain checks are in place(checks that are notably absent in the USA), it is possible to make government relatively free of corporate control and corruption, and to ensure they serve the people. If corporations aren't able to make huge campaign contributions in exchange for officials protecting their intrests, and the public is as informed as possible, the only thing that elected officials will be competing for is who can act in a way that is most approved by the public.
Seems only sustainable model in our times is scandinavic one, altough I can not fully comprehend it.
that's a really good map lol
You misspelled transfer in the description.
nicee
Are you suggesting to me that in a free market system, that it is completely impossible for any company, anywhere, at any time, under any set of circumstances to gain a monopoly over anything that is a prerequesite for either living, or interacting with society in a meaningful way. Even if there were no monopolies, there would still be some people who had no access to an alternative, and who would be open to exploitation. And I still don't see how you can get past the courts and military issues.
How?
Khan Academy: Tools for the Caliphate.
can somebody explain this to me? So if a company tax evade by transfer pricing and end up with a bigger net profit, but this net profit cannot enter back into the country without getting taxed and thus ending up with the same net profit as the company otherwise would have if it didnt do transfer pricing, what is the benefit by doing it then?
You could use the subsidiary to buy products abroad on behalf of the parent company?
Well, you can get loan from that company and use that cash...
I am not certain the overall economic rate for tax in Canada is lower than in the US.
Corruption by definition is lack of control. How else would it exist?
I don't understand how you can possibly imagine characterising the relationship between people, corporations and governments as simple. I am a musician myself, and just because music is abstract does not mean the concepts that someone has to learn in order to understand it on a functional level are complicated. Most concepts involved in teaching young kids music are things like how to read rhythm, pitch and so on, things that follow consistent, rules that are easy to follow once learned.
Shut up
It's time I got myself incorporated. All that money wasted paying tax needlessly.
A shyster is a slang word for someone who acts in a disreputable, unethical, or unscrupulous way, especially in the practice of law, politics or business.
Romney-nomics!
The government can pass all of the tax laws and close all of the loopholes that corporations use to get and keep profit. But it will always amount to very little. The amount of money that corporations have vs. the fed gov to figure out new ways to make/exploit loopholes is deafening. And corporations move at the speed of money, where as the gov has to wait months, years if not decades to 'fix' these loopholes. The problem with rich people is they are smart. Thats how they are rich/wealthy.
Taxation is not theft since historically every reasonably prosperous or secure group has eventually ended up forming some sort of political or governing institution to administer certain functions that are inherently intractable to carry out via the private sector.
Why does the subsidiary get the 800,000 if they're the ones that were given the intellectual property...? Wouldn't it be the other way round then? I thought companies pay for the ability to use the intellectual property...
This guy has 3 degrees from M.I.T. and a MBA from Harvard i think he's doing more than just educating the poor. Vote for your own interests middleclass the rich certainly do.
Yeah I wouldn't say music especially with students at 3 years of age would be particularly complex, I agree music can be abstract and require reflection and introspect, but 3 year old children I doubt seriously the complexity of your occupation.
There's a good reason economists earn upwards 100K annually because their job is actually complex and a great deal relies on the accuracy of their predictions.
source plz.
Don't have to pay taxes. My income at present is below the no tax threshhold, and either way, all that would come my way is fines, in order to take back the money I was stealing from my fellow citezens by continuing to use public services while refusing to help pay for them and then imprisonment if I refused to pay those. But, then, I thought we were ending this discussion.
good idea, but too slow
We used to be that way.
But in the case of publicly-traded companies, like Apple, that do transfer pricing like this, how does the public, that owns the company, gets its fare share of the profit if the profit is being transferred abroad to avoid taxes, given that if this profit gets repatriated and distributed as dividends, it would get taxed!
not every publicly-traded company pays dividends to stockholders. Your stocks goes up in value, and thats it
I didn't know Sal worked for Apple.
incorrect, I'm not sure where this notion that Keynesian Economics is a bad thing came from, however Keynesian Theory works, and if you need proof look at Australia's economy who effectively used Stimulus packages along side with a loose monetary policy which shielded them from the GFC.
And in context Heynes Theory which is polar opposite was rather popular with European countries especially in Greece and look where that's got them.
He said that free people shouldn't have to pay taxes. Fair enough, but without tax money none of what I listed gets provided. So instead people have to pay taxes; And to insure they do, imprisonment/death is imposed on those that don't. So, no imprisonment/death means none of what I listed, as people, evidently, won't pay taxes under their own volition.
Either you can keep all you money earned to yourself, or you can live in a country with roads, streetlamps, a court system, a functional police force and any number of other things that the government has to pay for, not both.
Favor legendar em português!
There are Portuguese subtitles. Check the captions option under settings.
Also, please cite the multiple logical fallacies you believe I committed in my prior post. (Both the allegedly fallacious point I made as well as the named fallacy I committed)
The only logical proposition I wrote was that "something that makes economic sense does not necessarily make good [moral] sense", providing FLSA / Child labor laws as supporting examples.
How may an independent contractor take advantage of this......:)
It only makes sense for big companies.
Why not incorporating the company directly in Delaware or Wyoming?
They will still be in us servers
Explain that last part?
+Gitonga Mwaniki what last part?
My previous two comments are something of an oversimplification, but this topic is really too complex for a 500 character format.
35% corporate tax is insane! The nation that have less tax have higher growth.
You also forgot taxes paid in another country can be deducted from U.S. tax.
Jake Wish yes however major tax treaty countries such as EU countries, UK and Latin America countries have similar level of corporate tax rate
By what mechanism do you suggest people would be able to deal out retribution to corporations? In a government free system there would be nothing stopping them from gaining monopolies on things as basic as food and water, or from controlling large armed forces. You cannot boycott a company if they have a monopoly on clean drinking water and you can't attempt to fight a company that has a monopoly on weapons.
If you were a student of economics you would have been well aware of the concept "Market Failure"
That is, a free market creating an outcome which is not (pareto)efficient
Types:
- information asymmetries
- non-competitive markets
- principal-agent problems
- externalities
- public goods
- natural monopoly
I was surprised by the title: transfer pricing and capital markets. I was wondered how to relate tax avoidance using related party transactions scheme to capital markets. It is hard to find a Professor in a university who has the expertises in both international tax and capital markets.
The role of a government is not to supply things the private sector cannot, but to regulate the way the private sector is allowed to work. You cannot have a capitalist economy without someone in control, making sure we don't fuck ourselves over, and keep the greed at least marginally in check. This is the role of the government, and I don't see how you could persist without it.
government just, you know, makes food more available, keeps the world from going into chaos, and organizes people in a way that we naturally want to be in. Taxes are just, they make the world a better place.
So how do you bring that money back to the US? Bitcoin?
Deadalus DX AFAIK, you can't do it legally and tax-free. The most common way is to use the money of foreign subsidiary to invest into parent company, typically via loans. There are also more technical ways of doing it, such as entering into cost sharing agreements and such. The other common way is to pile up cash in foreign subsidiary and wait for the right moment to repatriate profits tax-free. They may use that time to search for new legal loopholes or wait for tax holiday which is quite likely to occur again since US is struggling with tax revenues.
investment gold? d00h... digix dao and similar ethereum based ico's might be moving in your desired direction :)
Mmmm so the loan not only would be tax free, its interest payments would be deductible, interesting
JuanFernando Gracia the IRS has weapons to defend such transactions. The loan from foreign entity might be subject to Sec. 956 rules that consider the loan as investment in US property that requires immediate income recognition. Additionally, the interest expense generated by the US entity might not be deductible as it is subject to sec. 163j and related party rules.
tariffs
They could provide every service the government provides but they won't, ever.
And there is a good reason for this, profit motive.
Take roads for example the company would have to charge money for the service of providing a road, in fact if there were no government all of the roads would be tax roads, there goes your argument for cheaper and better.
And in the case of taxes there pretty much two choices, Pay them or not, there's no alternative.
How do you bring the money back without being taxed?
Short of cheating the system, there isn't a way really. However, a company will probably still come out ahead by bringing back the money and paying the corresponding withholding/repatriation tax.