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Orient Paper, Inc. Message Board

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  • peristentone peristentone Jul 22, 2010 12:59 AM Flag

    Translate this report from china!

    I've long been suspicious of Chinese reverse merger companies for exactly the reasons outlined in the Michigan article. You have to worry about:

    1) Are the entrepreneurs crooks, not only because of high fraud levels in China but specifically because the reverse merger technique leaves the criminal in a jurisdiction where his crimes cannot be prosecuted by the victims (i.e., US authorities cannot touch a Chinese national doing business in China)

    2) Is some idiot in the communist party going to wake up and have a random impulse to change a regulation that then renders all of the contracts that are the basis for your holding company existing invalid.

    Clearly the Chinese authorities need to form a separate exchange that is made completely open to outsider investors and stop their paranoid restrictions on outside investments.

    And on the US side probably we need much stiffer regulations preventing loosely structured holding companies from trading stock for assets they don't actually own.

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    • Out of the mouth of Obama. “You’ve got a building in the Cayman Islands that supposedly houses 12,000 corporations. That’s either the biggest building or the biggest tax scam on record.”
      Look at all those us companies we bailed out and their subsidiaries in tax havens Goldman Sachs paid 1% tax in 2008 it is a way bigger problem here

      • 2 Replies to kustumnikes
      • 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.

      • Talking about Goldman paying 1%, do people realize that for most of the 1990s the most successful companies like Microsoft and Intel paid no taxes at all? The reason is that they were able to claim "losses" on the stock they gave to employees, because the stock was always going up in value rapidly.

        The system as structured today allows the richest 1/4 of 1% to spend millions on lawyers and accountants to escape a large part of their obligation. Rather than simplifying the system to remove loopholes, and reducing the burden for the middle class, the current direction is to get even more tax and burden for the middle class (politicians just lie and call them the "rich"). The 1/4 or 1% continue to find the loopholes, and they always will until you make the system simple and don't create different tax rates for different types of activity.

 
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