Transfer pricing and tax havens | Taxes | Finance & Capital Markets | Khan Academy

[@zachkim9929]

How in the world did he draw Map of USA so perfectly???

[@abhinavsharma323]

Paper cutting of the map and then drawing on borders

[@zeleenne]

The amount of videos I have watched from this professor (?) are countless. He explains things so thoroughly and so well. I love love love love love love these videos.

[@zoechia730]

Thank you, your explanation is much more better than my lecturer.

[@vilisawonder]

sometime better than my boss...

[@maitrivyas5106]

This video got me a job in Transfer Pricing 😃

[@fatihaa9186]

wait wait, is this real? I mean this video is very helpful tho, but dude that's awesome

[@maitrivyas5106]

@@fatihaa9186 yep in Big 4 that too :)

[@fatihaa9186]

@@maitrivyas5106 that's make your story more interesting for me, are you an accounting graduate or what?

[@maitrivyas5106]

@@fatihaa9186 eco, maths, stats triple majors

[@fatihaa9186]

@@maitrivyas5106 ok, this comment explain why u got that job haha. I thought u just a random guy without educational background, watched this video and boom! U got that job

[@ambrosiathe1]

Thanks again for the breakdown, Sal! I love learning from you and Vi! i only hope people keep this information in mind while they watch the Presidential Debates.....

[@ptmagrath]

Companies are using IP (royalties, trademarks) as well as interest charges by leveraging up the company in the high tax country or management fees charged to the high tax company....or also increasing the price charged for goods ...raw materials, partially converted or finished goods. To round out the full story.

[@willofdodge1]

@khanacademy Can your next video be "solving US economy" please thank you

[@PaxImperium]

Correct! Money itself isn't an end, money is used to purchase things. Currencies can be transmuted into anything if you have enough, so it makes sense that Businesses would like to have as much money as they can so they can have more things, profit motive right there.

[@PaxImperium]

Central Banking, Government regulation, tariffs go on Wikipedia and look up Keynesian theory, Done? Okay. In it's essence Keynesian Theory is if you increase Aggregate Demand on the short run unemployment will decrease, and total income and the standards of living will increase. This has been seen worldwide to work when properly administered, which is why economists strongly support Keynesian theory, because it works.

[@philippevil5723]

ur very good at explaining stuff

[@FearMyLazerFace]

I don't understand how you can possibly imagine characterising the relationship between people, corporations and governments as simple. I am a musician myself, and just because music is abstract does not mean the concepts that someone has to learn in order to understand it on a functional level are complicated. Most concepts involved in teaching young kids music are things like how to read rhythm, pitch and so on, things that follow consistent, rules that are easy to follow once learned.

[@frostguy9293]

Shut up

[@bashkanabe5173]

Thank you very much

[@FearMyLazerFace]

I never said I could teach music, and I don't see how that's relevant. The point is that I have enough understanding of the concepts required to learn music to make an informed judgement on whether or not your analogy is logically consistent and it isn't.

[@TheTripMachine]

Thank you so much the video was very useful

[@FearMyLazerFace]

By contrast, something like the relationship between people, corporations and governments is immensely complicated and something that we simply don't have enough data on to make the short, simple, black and white assertions such as the ones you are making.

[@me_raghav5637]

That was really a great explanation.

[@Dyslexic-Artist-Theory-on-Time]

This is all based on just one equation (E=ˠ M˳C² )∞ the Lorentz contraction of space and time is between the energy and mass. The greater the energy the greater the contraction of space and the slower time will run. Mass will increase relative to this and each ref-frame can be seen as a vortex in space formed by the rate that time flows. The brackets represent the boundary condition of the ref-frame formed by the energy and the infinity symbol represents an infinite number of ref-frames.

[@foresthanke44]

I read it, I agree. It seems really agressive though, like you disagree with me on something, I can't figure out what though. That's why I'm asking you.

[@Carebearbull]

If you were a student of economics you would have been well aware of the concept "Market Failure" That is, a free market creating an outcome which is not (pareto)efficient Types: - information asymmetries - non-competitive markets - principal-agent problems - externalities - public goods - natural monopoly

[@tan4620]

I was surprised by the title: transfer pricing and capital markets. I was wondered how to relate tax avoidance using related party transactions scheme to capital markets. It is hard to find a Professor in a university who has the expertises in both international tax and capital markets.

[@adonyz666]

this is a new series

[@sonixxxxx23]

This was beautifully explained! so clear and concise, loved it!

[@vallyndumbe3655]

very good explanation

[@habibmaryam]

Ermm...I understand this so well. Thank you for this video

[@antitheist59]

Nice video, just one request, can you change your mouse icon from Hand to Pancil, it will look more natural while looking :)

[@PhullKnameNullContent]

A free market is a theoretical construct, like a perfect vacuum. I shudder to imagine what Romney truly believes.

[@john-wo4rv]

Lol

[@chaitanyap4246]

lovely Explanation

[@xavier3961]

Another Great Video!!

[@fajarsitinjak4997]

There is also tax on cost you paid to another country. Say 20%, so in this case additional tax you pay is 20%of 800K = 160K

[@rhyme6300]

excellent explanation, where to find the video to talk about the repatriation?

[@munib1000]

NICE ONE SAL

[@claudetgriffinjr]

Very interesting video well done. I've always wondered what was the real reason and how? Next video should be why are so many American companies in Iceland or one of those country's up in the north an

[@vkain100]

Business school didn't teach me anymore than what was in the books. It looks good on a resume though.

[@222Randomness222]

government just, you know, makes food more available, keeps the world from going into chaos, and organizes people in a way that we naturally want to be in. Taxes are just, they make the world a better place.

[@polka678]

Good explanation.

[@Mr18to87]

Cool

[@NavaidSyed]

I hate the term loophole. Money is always spent in a far better way when in private pockets.

[@danoking69]

GREAT VIDEO PLEASE SHARE

[@FearMyLazerFace]

Yeah, that was one of the main reasons, but I don't see that that's relevent. My point was that the checks and balances in place in america to prevent a tyranical government from taking over the country have been pretty effective. This doesn't mean the american government is incapable of making mistakes, far from it. Treaty of Versailles was one of those mistakes. I would also like to remind you that the government of the USA was hardly the only one involved in the treaty, all the allies were.

[@andreasprott2182]

After more than 3 years of 45 do you still think the checks and balances are effective?

[@ronansher]

He said that free people shouldn't have to pay taxes. Fair enough, but without tax money none of what I listed gets provided. So instead people have to pay taxes; And to insure they do, imprisonment/death is imposed on those that don't. So, no imprisonment/death means none of what I listed, as people, evidently, won't pay taxes under their own volition.

[@elecmahm]

I think in order for us to have this discussion, we need to make the a priori assumption of "taxation occurs, and is obligatory to work/do business in the USA". Otherwise the discussion is going to continue to have some serious scope creep.

[@l2ic3]

The role of a government is not to supply things the private sector cannot, but to regulate the way the private sector is allowed to work. You cannot have a capitalist economy without someone in control, making sure we don't fuck ourselves over, and keep the greed at least marginally in check. This is the role of the government, and I don't see how you could persist without it.

[@williamaulbach]

The government can pass all of the tax laws and close all of the loopholes that corporations use to get and keep profit. But it will always amount to very little. The amount of money that corporations have vs. the fed gov to figure out new ways to make/exploit loopholes is deafening. And corporations move at the speed of money, where as the gov has to wait months, years if not decades to 'fix' these loopholes. The problem with rich people is they are smart. Thats how they are rich/wealthy.

[@tylerkniess]

Thanks for the info sal!

[@ptmagrath]

Many countries do not tax intercorporate dividends, pre-BEPS .....hence the need to additional rules to ensure Global Intangible Low Tax Income (GILTI) is appropriately taxed at a minimum rate

[@elecmahm]

But again - that is all an entirely different line of discussion. The point I made earlier is simply "a corporation does business in the US, but exploits certain rules so that it minimizes its obligation in a way that affects the rest of us", and I believe this is wrong.

[@PrincessTS01]

A shyster is a slang word for someone who acts in a disreputable, unethical, or unscrupulous way, especially in the practice of law, politics or business.

[@steeve3386]

Where is the video that explains how to bring back that money tax free? Can someone please send me the link?

[@omgiheartpie]

Taxation is not theft since historically every reasonably prosperous or secure group has eventually ended up forming some sort of political or governing institution to administer certain functions that are inherently intractable to carry out via the private sector.

[@FearMyLazerFace]

If certain checks are in place(checks that are notably absent in the USA), it is possible to make government relatively free of corporate control and corruption, and to ensure they serve the people. If corporations aren't able to make huge campaign contributions in exchange for officials protecting their intrests, and the public is as informed as possible, the only thing that elected officials will be competing for is who can act in a way that is most approved by the public.

[@wood9670]

I don't, that was the intended implication of my post. I am a market anarchist or voluntaryst. If you decide to respond and ask questions, please be courteous. I have given a lot of thought to my position. I recognize that it is not mainstream. And yes, I recognize the government currently provides services that people like, want, or need. I just believe the means by which they are funded and enacted are immoral, inefficient, and can be addressed differently.

[@JR-zc5mq]

Purely... Purely

[@user-jx3we5ty4u]

this vid helped me so much wow

[@sazdakhan8359]

Very helpful

[@seatown2000]

This guy has 3 degrees from M.I.T. and a MBA from Harvard i think he's doing more than just educating the poor. Vote for your own interests middleclass the rich certainly do.

[@FearMyLazerFace]

Either you can keep all you money earned to yourself, or you can live in a country with roads, streetlamps, a court system, a functional police force and any number of other things that the government has to pay for, not both.

[@fengxue6466]

very good thank you

[@elecmahm]

I do agree with you on this point.

[@jorgevillalobos3269]

Fantastic! Great info!

[@FearMyLazerFace]

Don't have to pay taxes. My income at present is below the no tax threshhold, and either way, all that would come my way is fines, in order to take back the money I was stealing from my fellow citezens by continuing to use public services while refusing to help pay for them and then imprisonment if I refused to pay those. But, then, I thought we were ending this discussion.

[@bullsfan9162]

What if you did this transfer with another US state with a lower tax rate than the parent company? That way you can avoid the international regulations/bringing cash back in US

[@FearMyLazerFace]

I never said anything to suggest that the government is above criticism, or that they should just be blindly trusted. The point here is that at least in theory, a moral government could exist. This is not true for corporations in a capitalist society. Corporations are amoral. They will do terrible, horrible things if it is profitable for them to do so. If they don't, their competitor does and outcompetes them. The only thing that has any power to prevent this is a government.

[@TheInspiredPlanet]

I don't think there is a repatriation if the company is set up in Delaware or Nevada, or at least its minimized if that's where its set up.

[@l2ic3]

Sure, that is the case in America. But I am talking about in theory. A government is a requirement. Thus, the problem is the political systems used to alter the government, not the government itself. And political system that cannot be exploited clearly has not yet been devised. As soon as you know how to fix these problems, I would love to hear it. No sarcasm intended.

[@KingCadmos]

Corruption by definition is lack of control. How else would it exist?

[@Menegoth]

I didn't know Sal worked for Apple.

[@paralelo53]

Romney-nomics!

[@RenegadeFury]

that's a really good map lol

[@elecmahm]

That's not exactly how I phrased it. Paying taxes is the law. That is a fact. Whether or not the lawmakers have the defactor authority to create said laws is another discussion. "Skirting this law...is wrong" is a separate premise. I argue that it is wrong to do this because these companies benefit from the things that taxes PROVIDE but believe that they do not need to contribute to the funds that provide them. If a company wishes to not pay taxes, it should not enjoy any of the fruits of tax.

[@FearMyLazerFace]

I have, and I'm sorry, but no president has ever been able to successfully gain absolute power. Never happened before.

[@Martinezj90]

Where can I find the other videos explaining the avoidance of repatriation of funds?

[@FearMyLazerFace]

By what mechanism do you suggest people would be able to deal out retribution to corporations? In a government free system there would be nothing stopping them from gaining monopolies on things as basic as food and water, or from controlling large armed forces. You cannot boycott a company if they have a monopoly on clean drinking water and you can't attempt to fight a company that has a monopoly on weapons.

[@Thegamemakur]

You misspelled transfer in the description.

[@PaxImperium]

Yeah I wouldn't say music especially with students at 3 years of age would be particularly complex, I agree music can be abstract and require reflection and introspect, but 3 year old children I doubt seriously the complexity of your occupation. There's a good reason economists earn upwards 100K annually because their job is actually complex and a great deal relies on the accuracy of their predictions.

[@adhominems]

source plz.

[@PaxImperium]

incorrect, I'm not sure where this notion that Keynesian Economics is a bad thing came from, however Keynesian Theory works, and if you need proof look at Australia's economy who effectively used Stimulus packages along side with a loose monetary policy which shielded them from the GFC. And in context Heynes Theory which is polar opposite was rather popular with European countries especially in Greece and look where that's got them.

[@FearMyLazerFace]

I can't say I blame you for wanting to end this discussion. I have found it rather exhausting. I would just like to say that, despite your repeated attempts to characterise my position as being otherwise, I do not support the coercion through threat of violence of anyone to restrict their freedom, as long as they are not harming anyone else. And I reject your premise that anyone is being threatened with death or violence if they refuse to tow the line for the government.

[@TheMuscularSheep]

nicee

[@AuroreAurora]

Thanks for the video, helped me a lot :-)

[@deadalusdx5637]

So how do you bring that money back to the US? Bitcoin?

[@jamesblack993]

Deadalus DX AFAIK, you can't do it legally and tax-free. The most common way is to use the money of foreign subsidiary to invest into parent company, typically via loans. There are also more technical ways of doing it, such as entering into cost sharing agreements and such. The other common way is to pile up cash in foreign subsidiary and wait for the right moment to repatriate profits tax-free. They may use that time to search for new legal loopholes or wait for tax holiday which is quite likely to occur again since US is struggling with tax revenues.

[@saso-gi9sy]

investment gold? d00h... digix dao and similar ethereum based ico's might be moving in your desired direction :)

[@ThePorschefan]

Mmmm so the loan not only would be tax free, its interest payments would be deductible, interesting

[@graceman1300]

JuanFernando Gracia the IRS has weapons to defend such transactions. The loan from foreign entity might be subject to Sec. 956 rules that consider the loan as investment in US property that requires immediate income recognition. Additionally, the interest expense generated by the US entity might not be deductible as it is subject to sec. 163j and related party rules.

[@anotherks7297]

tariffs

[@joshuaronisjr]

Why does the subsidiary get the 800,000 if they're the ones that were given the intellectual property...? Wouldn't it be the other way round then? I thought companies pay for the ability to use the intellectual property...

[@donantonio5646]

Exactly can somebody please explain this?

[@PowerBosnia]

Why not incorporating the company directly in Delaware or Wyoming?

[@vignesh.n7744]

They will still be in us servers

[@imadalrawashdeh6853]

But in the case of publicly-traded companies, like Apple, that do transfer pricing like this, how does the public, that owns the company, gets its fare share of the profit if the profit is being transferred abroad to avoid taxes, given that if this profit gets repatriated and distributed as dividends, it would get taxed!

[@gadget00]

not every publicly-traded company pays dividends to stockholders. Your stocks goes up in value, and thats it

[@tapranascer]

Conclusion: Raising corporate taxes kills small and medium businesses that do not have scale to have an offshore office. In addition, in the attempt to charge the big businesses that have a foreign office, it creates additional taxes for money to enter back in the USA, reducing the incentives for foreign investments to enter the country. Sounds like a good ideia.

[@itsjmonkey]

Figures people, if you're going to make an argument, bring some substantive evidence of it to the table.

[@Xune2000]

It's time I got myself incorporated. All that money wasted paying tax needlessly.

[@elecmahm]

A company that has the privilege of doing business in the US should not be allowed to "shop around" for its tax rate. If you want to do business here and sell your products here (thus taking advantage of American demand and American infrastructure) then you pay our taxes. Plain and simple. Just because something makes "economic" sense doesn't make it a "good" thing to do. This is one of the reasons we have child labor laws and the FLSA.

[@Icyiceice1]

So how does the company repatriate the funds back to the US? Will they still be subject to 35% withholding on net profit repatriation.

[@KingCadmos]

How does that tie in to imprisonment and death?

[@Chiyenworkout]

35% corporate tax is insane! The nation that have less tax have higher growth.

[@klimlib]

OK. I called it a *model* although I based my statement on anecdotes told by my fellow countrymen who migrated to Sweden about good life there. If you consider separately social system and economy, and if you introduce notions such as culture or mentality, then how can you or any1 else form a scientific approach in economic thinking? I may take example comparing US and Mexico. Almost the same Constitution and political system, but big difference in wealth or quality of life? Mentality? Culture?

[@Dyslexic-Artist-Theory-on-Time]

Interesting video! This is an invitation to see an artist theory on the physics of light and time! This theory is based on just two postulates 1. Is that the quantum wave particle function Ψ or probability function represents the forward passage of time itself 2. Is that Heisenberg’s Uncertainty Principle ∆×∆p×≥h/4π that is formed by the w-function is the same uncertainty we have with any future event within our own ref-frame that we can interact with turning the possible into the actual!

[@TheRawBabe]

good idea, but too slow

[@FearMyLazerFace]

Are you suggesting to me that in a free market system, that it is completely impossible for any company, anywhere, at any time, under any set of circumstances to gain a monopoly over anything that is a prerequesite for either living, or interacting with society in a meaningful way. Even if there were no monopolies, there would still be some people who had no access to an alternative, and who would be open to exploitation. And I still don't see how you can get past the courts and military issues.

[@Chiyenworkout]

Pollution in free market actually come from 'government own land'. Government let the private business to dump their pollution.

[@KingCadmos]

We used to be that way.

[@KingCadmos]

How?

[@KingCadmos]

Progress is Regression. The third sentence ought to be the world. EXACTLY! Many governments were formed to protect us from other government. But then there must have been a first, one built not to protect but simply for greed, one that no longer exists. If that is possible in the first place, than your government is that way too. That would mean a fundamental mutation in the human psyche that gives up any government in the world and thus creates a perfect utopian society.

[@klimlib]

Seems only sustainable model in our times is scandinavic one, altough I can not fully comprehend it.

[@Heirophanteye]

I am not certain the overall economic rate for tax in Canada is lower than in the US.

[@spazzmonster]

How may an independent contractor take advantage of this......:)