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  • How much do you think of the world's wealth is hidden offshore?

  • Take a guess!

  • Millions of dollars? billions?

  • how about hundreds of billions of dollars? economists estimated that the wealth hidden

  • in tax havens is equal to about 10 parent of the global GDP (80 trillion dollars), that

  • is more than 8 trillion dollars

  • But why on earth people would hide their money in the first place, don't they want to brag

  • about it?

  • Why hide it when you can spend it to have an incredibly lavish life?

  • Let me just make it clear, it's not the criminals who are hiding their money, but the world's

  • largest corporation, Apple, Microsoft, Google, you name it! and the people who are running

  • these corporations!

  • It's a common practice and its 100 percent legal!

  • how

  • However, the question remains, how do they do it? isn't tax avoidance is illegal?

  • Well, let me explain?

  • Let's say you start up a company (in the USA) and everything is just perfect.

  • Just in your first year, you have made an incredible profit of a hundred million dollars!

  • Congratulations!

  • You are a genius!

  • Before you celebrate your success!

  • IRS is going to knock on your door and take 21 million dollars out of it because the corporate

  • tax in the United States is 21 percent!

  • That's a lot of money! why would you pay so much to the government when you made that

  • money with your blood and sweat.

  • To be honest, that's still low because before Trump (during Obama) the corporate tax rate

  • was 35 percent, which means you would have paid 35 million dollars in taxes and would

  • be left with only 65 million dollars.

  • But that's not the only bad news!

  • Even if you decide to go abroad and sell your product elsewhere (Europe), where the tax

  • rate is lower than in the United States, Uncle Sam will still come after you for its share

  • of your profit on the top of the taxes you will be paying in that country.

  • Whether that's fair or unfair, it depends on whom you are asking.

  • you can write down what do you think!

  • However, things are not as bad as they seem.

  • There is a way for you to avoid those taxes legally.

  • Instead of declaring 100 million dollars in profit, be smart about it!

  • how about you lower your profit to just 30 million dollars and now suddenly you only

  • have to pay only 6.3 Million dollars (21% out of 30M) instead of 21 million dollars.

  • It's not as difficult as it seems.

  • Get on a plane and travel to the little island of Bermuda and set up a new company there,

  • it's easy, fast and would cost almost nothing, because you wouldn't have stuff, building

  • or anything else, except an address to a small office in the middle of nowhere!

  • Then simply give all of your patents, trademarks and intellectual property of any kind from

  • your real company that is in the united states to your new company in Bermuda.

  • So when uncle sam comes to collect 21 million dollars out of your hundred million dollars!

  • You say sorry!

  • We have licensed this technology from this company in Bermuda, so we have to pay 70 million

  • dollars to them.

  • So we are just left with 30 million dollars, so now you only have to pay 6.3 million dollars.

  • Your 70 million dollars in Bermuda are not taxed because the corporate tax rate in Bermuda

  • is 0 percent.

  • Congratulations, you have saved 14.7 million dollars.

  • ( make sure the animations do show the scheme)

  • But how about the profit you earned in Europe, it will be taxed right?

  • You set up a new company in Ireland that's going to make another hundred million dollars.

  • instead of paying 12.5 percent corporate tax in Ireland and the remaining 7.5 percent to

  • the United States.

  • You transfer that hundred million dollars to a new company you set up in the Netherlands

  • at 0 percent taxes through a little tax loop.

  • Your Dutch (Netherlands) company immediately sends it back to your first Irish company

  • that's simply a subsidiary of your Bermuda company, So the money ends up back at Bermuda

  • where the tax rate is 0 percent.

  • ( make sure the animations do show the scheme)

  • Congratulations you have saved millions of dollars!

  • That's how Apple, Google, and many other giant corporations avoid taxes and hide their money!

  • It might not make a huge difference when you are earning millions of dollars, but when

  • you are earning billions of dollars, saving even a billion dollars would make a huge difference.

  • So when politicians increase or decrease the corporate tax rate, it doesn't really make

  • a big difference because why pay even a 10 percent tax rate in the united states when

  • you can pay 0 taxes in Bermudaand you can't really blame them for that because

  • the ultimate goal of any company is to maximize profit and not pay more taxes.

  • The problem with this method

  • However, every strategy has its flows, including this one.

  • Having billions of dollars offshore is great but What is the point of that if you cant

  • use it!

  • Because if you bring it back to the US, you still have to pay taxes on it, which makes

  • all that scheme useless.

  • But regardless, it still makes sense.

  • When the United States lowers its tax rates, you bring that money back and invest it.

  • US tax rate was 35 percent, but when trump lowered it down to 21 percent in December

  • of 2017.  companies such as Apple aggressively started

  • bringing back all the cash they had been hiding in offshore accounts for years,

  • If you are watching the news, lately Apple started aggressively buying back its stock,

  • because you gotta do something with hundreds of billions of dollars that you suddenly got.

  • That's why corporations started taking a different approach to avoid taxes, without an offshore

  • account and in a much more sneaky way.

  • Largest US companies such as Being, Netflix, Amazon, general electric, either pay 0 taxes

  • or an extremely small percentage.

  • From 2008 to 2017, Boeing paid only 8.4 percent on 54.7 billion dollars in profit.

  • In 2018, Netflix reported 845 million dollars in profit but paid absolutely no taxes at

  • all.

  • The company can make a big investment and dramatically expand itself and gain market

  • share, in fact, they might have to borrow money and at the end of the year report a

  • loss, and when you are reporting a loss, you are not only not paying any taxes for that

  • year, but you can forward it to future years.

  • So if you are going to make a significant profit next year because last year you gained

  • such a huge market share, you still can deduct your last year's loss and significantly reduce

  • your tax bill, if not avoid it at all.

  • And its a common practice among the companies.

  • The tax code has many loopholes that companies frequently use such as tax credits on depreciation

  • or research and development.

  • Some go as far as paying their employees with stocks, so they are not only deducting it

  • from their tax bill but the company can create stocks out of thin air.

  • So the company might not be making any profit, in fact, some companies keep on reporting

  • loss year after year.

  • Uber has a market cap of over 50 billion dollars and it's making revenue of a few billion dollars

  • but the company has not reported even a penny of profit.

  • In other words, it hasn't paid a single dime in taxes yet.

  • Even if Uber's valuation crosses 100 billion dollars, it still doesn't have to pay taxes

  • unless it reports a profit.

  • That's why billionaires hide their wealth in stocks.

  • Jeff Bezos started 2018, with a net worth of a hundred billion dollars and made another

  • 40 billion dollars by the end of the year and paid absolutely zero in taxes on those

  • additional 40 billion dollars.

  • because his wealth isn't liquid and consists entirely from amazon shares and he only has

  • to pay taxes if he liquidates his shares by selling them, but as long as he doesn't, he

  • doesn't have to pay taxes.

  • But what is the point of all of that wealth

  • if you can't use it?

  • This wealth is just on paper!

  • Well, it's one way to think about it, but from an opposite point of view, what would

  • you do with a 140 billion dollars in cash.

  • As long as your company keeps growing your wealth keeps growing.

  • And if you want to drive a bently, fly private jet or travel across the world and stay in

  • the most expensive hotels.

  • Just use the company's money and then deduct as a business expense and lower your tax bill

  • even further.

  • When politicians talk about raising taxes on the rich, they mean the doctors, lawyers,

  • and engineers who work super hard to make hundreds of thousands of dollars if not millions

  • and not the real rich people who will always find loopholes in these tax codes to avoid

  • all of this taxes.

  • I hope you guys enjoyed this video.

  • Hit that like and subscribe button if you did.

  • Thanks for watching and until next time.

How much do you think of the world's wealth is hidden offshore?

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How Billionaires Hide Their Money

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    Summer posted on 2020/10/08
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