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 Bermuda.  and 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.