Welcome to TaxView with Chris Moss CPA
You all remember when Credit Suisse plead guilty to helping “clients deceive U.S. tax authorities by concealing assets in illegal, undeclared bank accounts, in a conspiracy that spanned decades..” —and nobody going to jail? According to news reports back then the only penalty to Credit Suisse was a $2.5 billion fine. In fact, former US Attorney General Eric Holder, made certain that Credit Suisse and their CEO Brandy Dougan would still be allowed to do business as usual in the aftermath of the criminal plea. Are you surprised? The outdated and ultra-complex US Tax Code, 100 years in the making, is a dinosaur in the 21st century. Is there a better way to tax Americans? Stay with us here on TaxView with Chris Moss CPA to find out what can done to improve our current tax infrastructure and put an end to those offshore tax shelters.
Everyone knows that large corporations are moving their corporate headquarters offshore to save taxes. But not as many realize that certain wealthy individuals also move money offshore illegally. As a result, a few hundred or perhaps thousands of Americans put themselves and their family at risk of criminal prosecution just to save some tax dollars each year by illegally keeping assets and earnings off shore. Come on America’s top wealthy taxpayers there is always legal workaround to illegal activity. Keep your money and workers here in America, the country that made it possible for you to make all that money in the first place.
But what about corporations? They can and do legally reduce their taxes by setting up business operations offshore But corporate tax strategy of shifting income oversees is hardly ethical. In my view moving offshore hurts America. Why? Because Americans lose tax revenue and workers lose jobs. Indeed the whole offshore process of allocating income and costs between Europe and the US makes absolutely no economic or even rational sense. It's time for Congress to create incentives for American family business and large multinational corporations to keep their business assets in the United States where they belong.
But you can hardly blame corporations for wanting to save taxes. As this article is being written, Amazon is battling with the IRS in US Tax Court (Amazon vs IRS 2014) on how costs are allocated from European and US operations for years 2005 and 2006. The stakes are very high for both Amazon and the US Treasury. If Amazon loses they will owe over $1 Billion in tax and penalties. If they win, the American Government loses billions of dollars in lost tax revenue.
How do we stop the massive movement of business operations to offshore tax shelters by corporate America? The simple answer is to first do away with the corporate income tax and replace with a value added tax (VAT). Second do away with the personal income tax and replace with a National Sales Tax (NST). If we replaced both the corporate and personal income tax with a VAT and NST all offshore money would eventually flow back to the US. The National Debt approaching $20 Trillion would be paid off in a matter of a few years and our annual deficit would immediately disappear. The underground economy would vanish, and tax revenue as a percentage of GDP would rise dramatically. Just so you all know, the last dramatic increase in tax revenue as a percentage of GDP was in 1943 with the introduction of the W2 form during World War II. It is my view a similar increase in tax revenue as a percentage of GDP will occur when Congress enacts the VAT/NST combination. History perhaps will show a VAT/NST combination to be a turning point for America, allowing us to once again regain our place as a world political and economic leader in the 21st century.
When all is said and done, replacing Income tax with VAT and NST is good for America and makes sense. If you believe that American business should stay in America ask your elected officials their position on VAT and NST. Make sure you voice is heard before the next Presidential election. Let's keep American business here in America and ask Congress to think seriously about replacing the corporate and personal income tax with a National VAT and NST. Thank you for joining Chris Moss CPA on TaxView.
See you next TaxView,
Chris Moss CPA