Those are just few of the tax avoidance schemes that come to light - which it should be noted are not necessarily illegal. The reality is that the rich and famous are involved in these schemes - earning big money and paying less tax than hard working, honest men.
The government doesn't take the necessary steps to put an end to these kinds of schemes in any haste - probably because they're involved in many themselves, along with their friends. If everyone was doing it, the schemes would be closed. I therefore recommend everyone do it, when legal.
I suggest you read the article more carefully. The comedian in the article is being investigated for using a tax shelter to evade British taxes. If you read more about the K2 tax shelter, you will learn that British tax authorities consider it to be illegal (obviously, taxpayers using the K2 do not) and are launching enforcement actions.
The article doesn't say K2 is considered illegal, rather, it clearly states "legal, but aggressive." It does say the scheme is under investigation, but it's not declared illegal yet. The icebreaker one is.
My linking to the article wasn't just to point out these specific schemes, but more to just highlight the scope of tax avoidance/evasion. There are many loopholes that get abused, some get fixed, although not always in a timely manner.
I'm not recommending you defraud your government, or do anything illegal - I'm recommending you do the same thing that every big corp does - pay the minimum tax they are required to by law, and no more.
People are led to believe that the richest pay ~40-50% in tax, or whatnot depending on where you are - but that couldn't be further from the truth - they generally pay less (as a percentage of their total earnings) than the middle or working classes.
You know, when these bankers pay themselves a $9 million tax free bonus at the end of the year - are they defrauding the government?
Work it out, say a banker is on a nice $1m salary, which he pays 50% in tax, but pays zero tax on his fat $9 million bonus.
I'm less naive than I was a few years ago since learning somewhat how the system works.
1) Perhaps you missed the part where I said IRS only applies to US? Tax rates do differ in different countries, if you weren't aware. That's one of the major tax avoidance methods - do what you can offshore, wherever you benefit by paying less.
2) Again, depends where you are. While all bonuses may not be tax free, they are usually taxed differently to income tax anyway - such that less tax is paid. Why do you think people pay bonuses rather than just increasing salaries?
3) I wasn't claiming otherwise - my claim is that the rich don't aren't paying more as a proportion of their total earnings, which is what is claimed to be the case by the system.
Whether the world is out to screw you or not I'd debate. It's more like the world is out to get as rich as possible, and you get screwed as a side effect.
1) Perhaps you missed the part where I said IRS only applies to US? Tax rates do differ in different countries, if you weren't aware. That's one of the major tax avoidance methods - do what you can offshore, wherever you benefit by paying less.
If you live in the US and you make money, you owe US taxes on the money, regardless of where the company is.
2) Again, depends where you are. While all bonuses may not be tax free, they are usually taxed differently to income tax anyway - such that less tax is paid. Why do you think people pay bonuses rather than just increasing salaries?
As others have pointed out, bonuses in the US are taxed as ordinary income, and they're taxed at the same rate or higher (!) than ordinary income in the EU. Take a quick Google trip through a search of "banker tax EU" to come up with some real doom and gloom there.
3) I wasn't claiming otherwise - my claim is that the rich don't aren't paying more as a proportion of their total earnings, which is what is claimed to be the case by the system.
This is simple. Rich people have more long-term capital gains and less ordinary income. It is 100% not because of bonuses.
You have now suggested two forms of tax evasion: falsely allocating income to "dividends" and using offshore tax shelters. Please stop trying to give tax advice.
Bonuses are income. They are taxed as ordinary income (or the equivalent of ordinary income in E.U. nations). Bonuses are not given lower rates; if anything, certain types of bonuses are subject to higher rates than ordinary income. Companies pay bonuses because bonuses are discretionary, while salaries are contractual. In other words, giving a bonus one year does not commit them to paying the bonus again the following year.
If you're taking my points as advice, you probably deserve to be screwed. I'm not trying to give it.
Falsely allocating dividends, using offshore tax accounts are what big companies are actively doing, and many getting away with it. And yes, these include your favorite tech companies and such. (http://www.ibtimes.com/articles/334737/20120429/apple-avoid-...)
The banking secrecy in some countries is the real enabler of tax evasion though - because corporations can simply fudge the numbers to reduce the tax bill.
Distributing profit as dividends is not "falsely allocating income". The only issue is whether you have to pay yourself a reasonable salary or whether minimum wage is sufficient.
Almost everything you wrote is false. Not all bonuses are income, they may or may not be taxed, they may or may not be subject to higher taxation than ordinary income. You have a very US-centric view of the world.
Of course my comments are US-centric. Hacker News is a US-centric forum.
Distributing profit as dividends is "falsely allocating income" if you are not paying yourself a reasonable salary, to the extent that you have redirected salary income to dividend income. Once you do this, it is no longer up to you to decide what a "reasonable salary" is. The IRS (or the local tax authority, if not in the US) will decide that number.
Most forms of bonuses are income in: 1) the US, Canada, China, Australia, the UK, France, Spain, and India. There are various exceptions, but the general rule in the nations where most people conduct business is that bonuses are income. As income, bonuses are taxed at the same rate as income is ordinarily taxed in those nations. In some nations, certain types of bonuses are subject to a higher rate of tax than the ordinary income rates. If bonuses were not taxed, or were taxed at lower rates, most income would be paid out as bonuses.
2) You're recommending that we defraud our federal government in your original post.
Just stop.