Forums > Social Discussion > a system to beat the tax man?

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ben-ja-men
GOLD Member since Jun 2003

ben-ja-men

just lost .... evil init
Location: Adelaide, Australia

Total posts: 2474
Posted:so next year all things being equal im going to start my own business, now the idea of paying tax is something that im not to fond of at all so ive been pondering over how to get around it and pay the least amount of tax i can. the current system doesnt really encourage ppl to work harder as the harder you work the higher percentage you pay in tax .... however if you where offering a service but a really cheap price you would be making less money and hence paying less tax, so if a network of business was set up where by everyone in the network was able to purchase the products and services of the other ppl in the network at say 1/10 of the normal price these buisnesses would make less money and hence pay less tax. but to keep everything balenced you would only be able to purchase to the amount you had given.



so for example if bob sells harry a car that would normally cost $20,000 for $2,000 bob would then be able to purchase up to $20,000 worth of value for $2000 from other businesses. so if bobs business would normally make bob $2,000,000 a year instead of paying tax on $2,000,000 he would be paying tax on $200,000

so if the tax rate was 40% instead of paying 800,000 in tax only 80,000 would be paid in tax so at the end of the day the value of stuff earned would be $1,200,000 but with the proposed system it would be 1,920,000 a net increase of 60% to the amount of stuff you would actually get out your work.



would just need to get a large enough network of businesses to make it work ....



tis all very legal methinks? surely the government cant force businesses to charge high prices otherwise sales and the like would become illegal, nor would only doing the deals to ppl who partake in the system that whole mates rates thing/loyalty systems etc

EDITED_BY: ben-ja-men (1152357264)


Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourself, who am I to be brilliant, gorgeous and talented? Who are you NOT to be?

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Patriarch917
SILVER Member since Oct 2005

Patriarch917

I make my own people.
Location: Nashville, Tennessee, USA

Total posts: 607
Posted:It wouldn't work in America. When a business pays taxes, they government doesn't just ask how much cash is in their bank account and take a percentage of that. If your business acquires a car worth $20,000 while paying only $2,000 for it, the "asset" side of your accounting sheet would still go up by $18,000. You would get taxed on the value of the item you acquired.

"Income," for the purpose of taxes, is not just the increase in the cash in your pocket. It is the increase in your "assets." Assets include things like inventory and equipment. If I give wal-mart a free jar of pickles, they have to pay income tax on it.

Barter is not a way for a business to avoid hitting a higher tax bracket. The way to avoid hitting a higher tax bracket is to vote for politicians who support a flat tax.


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ben-ja-men
GOLD Member since Jun 2003

ben-ja-men

just lost .... evil init
Location: Adelaide, Australia

Total posts: 2474
Posted: Written by: Patriarch917


If your business acquires a car worth $20,000 while paying only $2,000 for it, the "asset" side of your accounting sheet would still go up by $18,000.



how is the value of the asset assessed though? if one car dealership sells a car for for $20,000, a second car dealership in the same area sells the exact same car for $22,000, a third car dealership on the posh side of town sells the same car for $35,000 surely its a blurly line when assessing the value of assets?


Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourself, who am I to be brilliant, gorgeous and talented? Who are you NOT to be?

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Doc Lightning
GOLD Member since May 2001

Doc Lightning

HOP Mad Doctor
Location: San Francisco, CA, USA

Total posts: 13920
Posted:Also, Ben, what you are proposing...if it could actually be instituted, would lead to massive deflation. It would greatly raise the value of the AUD, and so it would balance out in the end.

Here's what I mean: what you've just done is you've made a $20,000 car worth $2,000. If your system were a good idea, then, being a good idea, it would spread. Soon cars everywhere that were once $20,000 would be going for $2,000. You're just altering the value of the dollar and ultimately it would even out across the board.


-Mike )'(
Certified Mad Doctor and HoP High Priest of Nutella

"A buckuht 'n a hooze!" -Valura

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ben-ja-men
GOLD Member since Jun 2003

ben-ja-men

just lost .... evil init
Location: Adelaide, Australia

Total posts: 2474
Posted:while it may eventually even out across the board it would bring peoples buying power back to what it should be in relation to the amounts of tax paid, as the ozzy tax brackets (as it was explained to me anyway) havnt really been properly adjusted in accordance with inflation so ppl are having to give up much larger chunks of their potential buying power in tax

Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourself, who am I to be brilliant, gorgeous and talented? Who are you NOT to be?

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Patriarch917
SILVER Member since Oct 2005

Patriarch917

I make my own people.
Location: Nashville, Tennessee, USA

Total posts: 607
Posted: Written by: ben-ja-men


 Written by: Patriarch917


If your business acquires a car worth $20,000 while paying only $2,000 for it, the "asset" side of your accounting sheet would still go up by $18,000.



how is the value of the asset assessed though? if one car dealership sells a car for for $20,000, a second car dealership in the same area sells the exact same car for $22,000, a third car dealership on the posh side of town sells the same car for $35,000 surely its a blurly line when assessing the value of assets?



Well, lets use cars as an example. They print a "blue book" in which you can look up the value of any car. Any price that deviates from the "blue book" price will be considered profit or loss, for tax purposes.

Assessing the value of assets is a blurry business, and you have a bit of wiggle room for fancy accounting. However, I doubt you can wiggle down to a tenth of the price.

Creative accounting for the purpose of tax evasion is definately going to raise a red flag. If you start claiming that $20,000 cars are only worth $2000, they are going to catch it.

What's the point, though? If you buy a car for $2000 from your business partner, then turn around and sell the car to your customer for $22,000, you would actually be worse off, taxwise. Even if the government accepted that the car was worth 2000, they would consider you to have made $20,000 in profit once you sold it.

Similarly, if you just used the car for business purposes, American accounting practices would require you to put the "blue book" price in your asset column. You would show $18,000 in profit for that year, and you would have to depreciate that over time (5 or 7 years, I think).

Lets assume that we got everyone in your country, or the world, to agree to just drop our prices by 90%, and burn 90% of our money. This would be "deflation." The government's respons would be to adjust the tax brackets down to reflect the new level. The higher tax bracket might start at $10,000, rather than $100,000.

I doubt your income tax system is foolish enough to let businesses avoid taxes by bartering rather than using cash... which is essentially what you are proposing.


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alien_oddity


alien_oddity

Carpal \'Tunnel
Location: in the trees

Total posts: 7193
Posted:there are legal ways to "avoid" tax but "tax evasion" is pretty much illegal the world over

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Igirisujin
SILVER Member since Jul 2005

Igirisujin

Carpal \'Tunnel
Location: Preston, United Kingdom

Total posts: 2666
Posted:Yeah, and if you slip up and do something wrong the government will lock you up and you'll be getting nightly booster shots from a 250 pound guy called Big Jimmy for the next 40 years

Chief adviser to the Pharaoh, in one very snazzy mutli-coloured coat

'Time goes by so slowly for those who wait...' - Whatever Happend To Baby Madonna?

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Doc Lightning
GOLD Member since May 2001

Doc Lightning

HOP Mad Doctor
Location: San Francisco, CA, USA

Total posts: 13920
Posted: Written by: Brit_Joe


Yeah, and if you slip up and do something wrong the government will lock you up and you'll be getting nightly booster shots from a 250 pound guy called Big Jimmy for the next 40 years



You say that like it's a *bad* thing... wink


-Mike )'(
Certified Mad Doctor and HoP High Priest of Nutella

"A buckuht 'n a hooze!" -Valura

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Igirisujin
SILVER Member since Jul 2005

Igirisujin

Carpal \'Tunnel
Location: Preston, United Kingdom

Total posts: 2666
Posted:I knew you were going to post next, I just knew it!!! lol

Chief adviser to the Pharaoh, in one very snazzy mutli-coloured coat

'Time goes by so slowly for those who wait...' - Whatever Happend To Baby Madonna?

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Mr Majestik
SILVER Member since Mar 2004

Mr Majestik

coming to a country near you
Location: home of the tiney toothy bear,...

Total posts: 4693
Posted: Written by: ravehead


there are legal ways to "avoid" tax but "tax evasion" is pretty much illegal the world over



yes, unless the certain country doesnt charge taxes. Its my understanding that many Cruise ships are registered in Tax Free Havens so the owners and staff dont have to pay any tax on their earnings.


"but have you considered there is more to life than your eyelids?"

jointly owned by Fire_Spinning_Angel and Blu_Valley

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TheWibbler
GOLD Member since Apr 2003

old hand
Location: New Zealand

Total posts: 920
Posted:Ben, there is a system in england called LETS.

No money changes hands, everyone in the network does favours for everyone else in network and the hours worked are recorded and effectively traded hour for hour. I've heard about other systems too. The tax man HATES this, there's nothing illegal about it and i've heard of a website that allows this trade to take place.

It's a fine line because you have effectively introduced a new currency 'time' instead of money. I'm all for systems like this.

Good luck with your business,

matt

ps, i'm back in melbourne so maybe i'll see you around.


Spherculism ~:~ The Act of becoming Spherculish.

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