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Orient Paper, Inc. Message Board

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  • peristentone peristentone Jul 22, 2010 1:59 AM Flag

    Translate this report from china!

    Large US companies attempt to divert revenue to low tax jurisdictions. But that is because the US tax system is unbelievably greedy to both individuals and businesses alike. Big corporations like Microsoft put their European operations in low-tax Ireland and then try to find ways to have Ireland "license" technology to other Microsoft subsidiaries in order to drain earnings from high tax locations to a low tax one.

    If the tax system were restructured to use a 15% flat rate to all kinds of income, then people and businesses would simply spend money on the most productive use of capital. All of those US corporations diverting abroad would bring the sales and earnings back onshore and tax revenues would increase. Instead, all of the arcane laws and exceptions means that every taxpayer spends time trying to find what types of income reduce income tax.

    If the Democrats object on principal that this rewards the rich, then they should pass asset taxes on anyone who is *rich*. That means $5M in assets or more, by current standards. What they do instead is talk about the rich in abstract, but then pass laws that affect people who are solidly middle class. A homeowner with four kids going to college and two sick parents who makes $250K is living in economic misery. Such a person isn't rich. And under tax law they cannot even deduct their own medical expenses until they are a huge percentage of their incomes.

    In any case, we aren't talking about legal tax evasion when a company in China that has no operations outside of China reports radically different numbers to tax authorities and investors. Lying about income is a much more serious problem than structuring business entities to avoid it by legal diversion.

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    • Yes we are looking at a structure that is legal.
      ONP used this one offshore entity can be set up with a Chinese subsidiary that enters a management contract with the operating business. Because technically the offshore investors don't own what they are investing in,this technique has been used to funnel foreign money into sectors where foreign ownership is forbidden. But it has also found much wider application. Orient Paper Inc., which trades on Amex, is an example.

 
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