If all goes according to plan, Facebook founder, chairman, and CEO Mark Zuckerberg's share of the profit in his company's upcoming initial public offering will result in him facing a tax bill of around $1.5bn for 2012. What's more, the Financial Times reports, that astronomical bill could increase if the IPO is more successful …
Why can't I...
...be so lucky?
Look, I'll settle for a measly 1% of the proceeds.
Now of course, I've got this unclaimed bank account and I need a little money for a fee, but that is another story. Write to me in Nigeria, address to follow.
well, i assume that at least he'll be paying those 35% properly instead of the creative accounting that Mitt Romney is using so that he's only paying 13,9% tax on his millions
Mitt Romney isn't using particularly creative accounting. He just owns shed loads of investments and lives off the income from those investments, which is taxed at 15%. He donates a few million to charity (church) and so his effective tax rate is a bit less than that.
Blame the US law makers for setting the tax rate at 15%.
I am in no way defending capital gains tax but the 'logic' is that in theory it is already earned and taxed income that is reinvested (and therefore it is unfair to retax it), and also it is taxed lower to encourage reinvestment. The reality is that sales tax and inheritance (or estate) tax shoots down this theory as both are retaxing already taxed income. The rich make the rules, and therefore pay very little tax, as a concession the extremely poor also pay no tax, probably because it would cost more to collect the small amount they would pay.
As a member of the 53% (that do pay tax) I am not happy with it!! There needs to be a much more basic tax system. Have a basic floor that takes into the amount the federal poverty level or something similar and everything above that, no matter what, is taxed at a reasonable percentage. Thus freeing up millions of tax accountants and civil servants to do something useful.
15% Is Still Too Much
That investments are made with after-tax funds is lame. The fact is your income comes from your employer's pre-tax funds as a cost of goods and services so it has not been taxed prior to your income tax. Any remaining profit is taxed at about 35%. What is left is reinvested in the company and some is paid as dividends to stockholders. Those stockholders are then taxed another 15% capital gains on what has already paid 35% by the business. 35% followed by 15% of the remaining adds up to a 44.75% tax rate, not the 15% rate those who think you are stupid would have you to believe.
The capital gains tax rate should remain at 15% for the first $100,000... that would encourage savings and investment by the middle class, too. It's the guys making $10m, $20m (or in the case of Zucky, $6b) m and more who should pay a higher rate on that investment income over $100,000 per year.
Lower the corporate tax rate to 4%... and watch companies leave Ireland's 7% rate in droves.
Mitt Romney doesn't use creative accounting...
... He lives off the interest earned by his investments. Interest is taxed at a much lower rate, and capital gains tax only becomes due when he sells his investments.
How is that creative accounting?
Maybe a few other MegaCorps...
could learn a lesson here. Pay your taxes
Shame on you VodaFone, Burton's and U2.
You enjoy the profits now pay your way. Its only fair.
Especially U2, with sanctimonious St. Bono preaching "Give, give, give" to the rest of us, but hiding his own mazoolah overseas to minimise taxes...
Give it to Business Cat!
It's not Facebooks taxes !
Maybe a few other MegaCorps
could learn a lesson here. Pay your taxes
shame on you VodaFone, Burton's and U2.
You enjoy the profits now pay your way. Its only fair.
As stated in other public domain docs, the proceeds from the IPO go straight to the IRS for his PERSONAL tax bill. At some point the other shoe will drop and the shareholders will realise that the company is being treated as a personal piggy bank. According to an inside source reported in techradar last years profits were $500 million (half a billion). Zuckerbergs tax liability is three times the companys profits, if that's correct. Stewardship ????
Nice quote.. thanks
Not really sure what your point is though.
Zuckerberg pays tax = Good
VodaFone/Burton's/St Bono don't don't pay tax = Bad
how tax is paid isn't the issue. Willingness to pay it is!
I pay tax and so should everyone else.
I wonder which shell company St Bono's share of Facebook's profits will be paid into and which tax haven they are based?
You are still missing the point:
Zuckerberg =/= Facebook therefore your analogy isn't one.
I upvoted you already, but you deserve special mention for outing Bono. Sanctimonious millionaire p**ck. Gimme a Buffett any day.
Far as corporate taxes go... lower them, massively.
Then ding the income from shares and dividends as normal income. The only issue left would be to make it so that foreign investors did pay taxes in the corporation's origin country, rather than to their home governments. And you would also have to lower taxes on earnings from _foreign_ investments.
Complicated? Probably, but 15-20% tax brackets on billionaires is not fair by any means. Nor is it really necessary for capitalism to be efficient, unlike what some pretend. Just make sure the tax code is simplified enough to require less tax accountants at the end - otherwise only the rich get tax breaks.
I got some "big" stock options gains a while back. Yes, I worked hard, but it did feel like a total cash grab, tax-wise, compared to my usual hoi polloi (unwashed masses) salaried self.
Back to minding my magical wish granting ponies now...
"personal use of aircraft"?
Zuckerberg the best we got and he doesn't even have a flying car yet? I despair, I really do
So he's due to face a $billion tax bill for owning assets worth several $billion, or is El Reg playing a bit loose and means he'd face such a bill if he sold those shares?
I could be wrong about this BUT, I believe the tax bill would be for exercising his stock options whereby he is paid (allowed to buy) a large number of shares at a cut price, therefore he then owns X squillion shares that he only paid a relatively small fee for, the difference being in effect a bonus which is taxable. i.e. pay 10 million for 100 million in shares, pay tax on the 90 million you didn't pay for them, so you pay 35% on the 'gifted' 90 % portion of the options, you still end up rolling in it. Again I could be completely wrong, I'm still figuring out this crazy tax system here.
It's a bit complicated but (IIRC) you get taxed on them on the day of the IPO as if the difference between the option price (effectively nowt) and the launch price had been salary.
If you never sell the shares or the they become worthless, eg. the company goes bust, - you still owe that tax. Some friends got screwed by this in the first dot-com bubble 10 years ago.
If you read the article super-carefully, not missing a single paragraph, you will find the answer to this and many other questions you may have about this story. There's a particularly relevant part about him exercising stock options, buried in there amongst all the words.
If I sell you something for £1 which I'm selling to other people for £1000, then you have had the equivalent of £999 given to you as a subsidy to buy the asset. The actual value when/if you sell it again is not relevant as it was your choice to buy the item and take the subsidy.
That's what's happening here: 6¢ is not the price other people will pay for the shares so the difference is de facto income, which happens to be instantly spent on buying shares.
Always always remember: the rules on stocks and shares in the US are ALL in place because someone sometime ripped the arse out of the system and had to be stopped. The rules didn't just fall out of the sky in a land that worships the imaginary free market almost as much as it worships their imaginary god.
"That's 'billion', with a 'b' ..."
when Zuckerberg gets stopped by the police
"i pay your salary... bitch"
Perhaps this will mean in 2012 the "1%" in California will pay even more than the 40% of the state tax income than normal. Makes you wonder how the "occupy" people think that the "99%" will survive on their own!
Forbes is reporting
that in addition to the $1.5B owed to the IRS, Mr. Zuckerberg will also owe $500M to the State of California. That's a $2B tax bill just for income taxes, not to mention that the other various taxes sapping Californias and Americas of their money (gasoline, sales, property, school, blah blah blah).
Despite all the protests about the top 1% paying their fair share, where is all the fecking money going? Trillions of dollars a year and frankly little to show for it methinks. So much for the common decency to give a man a reacharound every once in a while.
Look in the US defence budget. It's in there somewhere.
I really doubt he will pay anything like that, time will tel though, im sure his people will whittle that tax liability down to feck all.
on the subject of Bono...
Bono is using these investments to create a trust to fund his philanthropic adventures. you can do so much more with a few billion then a few million.. He was advised to make those plays to do just that.
fund his philanthropic adventures??
Maybe if MegaCorps paid their taxes we wouldn't require 'philanthropic adventures'
So by this theroy.....
Steal/Avoid/Evade taxes which causes cuts in the public sector, private business to go under and real hardship in Ireland as people lose their jobs and homes... so that St Bono can return at sometime in the future with a ship load of cash and dole it out on a 'philanthropic adventure'
You either work for 'Elevation Partners' or are just plain dumb! People like Bono and Bob Geldolf and all the other hedge funders avoid tax because of greed.
I pay tax so should he
Nope, he'll pay all of it
because you have to have the tax avoidance measures in place before the deal closes. If he'd had the appropriate vehicles in place beforehand, sure he could have avoided much or all of that. Just remember, even with the stupendous gross amount he is paying, because of an upper level inversion, he'll still be paying less as a percentage of actual income than some other schmucks who are pulling in a measly $150,000K because they are actually closer to the inflection point of the tax collection curve.
And I say that as a schmuck who is downside and nowhere near the $150,000K number.
Zuck's deal flushes all other deals down the toilet.
He will exercise 120,000,000 options on or about the day of the IPO. If he's lucky he will get all of his options exercised. If he's lucky the Obama recovery will be strong and the market will reflect that. Who knows, maybe the FB treasury will get to sell some stock and add a pittance to its books.
If the IPO closes at $20 a share, Zuckerberg makes $2.4 billion, $30 a share, $3.6 billion, $40 a share (what they're hoping for) $4.8 billion. Then he pays his tax of 35%. Depending on what he sold the stock he got for his options. -- let's say $40 -- he pays the government $0.06 on every $40 of tax. The new FB shareholders pay the rest.
So if his liability is $2 billion, he pays $3,000,000 out of pocket and uses the $39.94 per share given to him by the hapless investor to pay the balance due of $1,997,000,000.
Not a bad deal, no? (I hope I got my decimal places right) :-)
Theory of capital-gains tax
Current capital-gains taxes are a joke. The original idea was to counteract the live-or-die-by-quarterly-results mindset prevalent in most companies, and encouraged by stock analysts.
In the beginning, the requirement to be eligible for c-g rates was that you must have held the investment for (IIRC) five (5) years; the theory being that if you knew you wouldn't get the preferential treatment for half a decade, you'd be more willing to see the company run for long-term results. (I don't remember what the rate started at, but I'd bet a doughnut it was higher that 15%.)
Of course, once this was instituted, all the guys with large amounts of money started using some of it to bribe^Wlobby congressmen to cut down the term, and it was gradually whittled away (and probably the rate, too) until it has become the loophole for the wealthy you see before you.
Another good idea bites the dust.
I'm finding trying to understand all this a little taxing.
Mines the one with the tax return in the pocket.
I don't really care
He made some dosh, and paid his taxes. No news there, surely.
Yes, people have paid rather more per kg for his bubble, but I didn't , so I don't really care.
This is non-news, and we get enough of that from the BBC.
Where is all the tax going?
Nobody seems to be asking why so much tax needs to be paid. Oh, yes that's right - for Ponzi schemes that are going bankrupt (i.e. Social Security/Welfare & Gold plated pensions for civil "servants"), Public Private Finance Initiatives in which the government gets totally ripped off by private companies and a free health system just about anybody from any part of the world can use. The solution is not in making companies and risk takers pay the same taxes as employees (i.e. people who take no risks) but in making the government more accountable for how it uses the taxes it currently collects. A fair taxation system would be something like this: any income below 20 000 is free of tax and any other income above 20 000 being taxed at 15% (regardless of source) and a land tax rate of 2%. With stiff penalties for tax evasion and avoidance. Simples...
"Nobody seems to be asking why so much tax needs to be paid"
Perhaps it's because the lion's share of the government's revenue comes from taxes. And the government has committed itself to expenses far in excess of it's revenues. If the deficit between revenue and expenses is $400 billion, what do you propose to do?
Medicare, Social Security, Defense are most responsible for the red ink. Medicare is keeping elderly, sick people alive. We could save a lot of money trimming Medicare. Would you want that?
We could cut the benefits of everyone collecting SS, who would then have scramble to try to make their monthly nut. And we could move eligibility up to 70.
With China and Russia flexing their strength (and an alliance which we just saw in the Security Council vote on Syria) do you really want to cut the Defense Department budget. And there's the possibility that if the government removes $400 billion from the economy by not spending it, it will create a vicious cycle of a shrinking GDP and shrinking tax revenues.
Whatever tinkering you do, you run the risk of "unintended consequences", some of which are not very pretty.
Doesn't Zuckerberg have even one accountant? Doesn't he know the super-rich don't pay tax? He'll be drummed out of the club.
Forward thinking accounting team??? No, not really.
They aren't forward thinking here. It's an SEC filing announcing the strong possibility that the CEO will shortly sell off a vast number of shares, and explaining *why* he will be doing so. Other investors need to know this so that they don't think it means something is wrong with the company, or the CEO, or something.
Even if it is not required by law / SEC regs, it is just good policy. It's not about planning ahead.
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