From: Black Unicorn <unicorn@schloss.li>
Date: Wed, 8 May 1996 15:19:21 +0800
To: Cypherpunks <cypherpunks@toad.com>
Subject: Re: Why I Pay Too Much in Taxes
In-Reply-To: <199605072244.AAA02953@utopia.hacktic.nl>
Message-ID: <Pine.SUN.3.93.960507223421.339P-100000@polaris.mindport.net>
MIME-Version: 1.0
Content-Type: text/plain


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On Wed, 8 May 1996, Anonymous wrote:

> Timothy C. May wrote:
> >Indeed, I am extremely limited in how I can avoid complete traceability of
> >my major income sources. Not rich enough to shelter income in a really big
> >time way
> 
> That's just lack of creativity. Try this:
> 
> Get a friend of yours to setup a consulting company and
> hire you (and maybe a few more people who pay too much
> taxes,acting like a mixmaster). The company pays you salary
> to cover your cost of living. Anything above that, i.e.
> money that you would otherwise save, is paid to an offshore
> company as license fees (or something, this is the creative
> part).

Where does the company get the funds to pay you?

As the source of personal services income is the site of the preformance
of services, your salary will be taxible at U.S. rates.  Licensing fees
hoarded into an offshore holding company will be taxed yearly regardless
of their distribution as dividens (if the money is invested as equity)
and the principal taxed on repayment if characterized as debt.  It will
not, of course be legally yours if deposited without either
classification.

> This is really legal as long as you don't receive any money
> from offshore without paying the taxes. If you borrow the
> money back it gets a little fuzzy.

Except that it is going to cause your friend who set it up to incur the
penalities that surround classification of his company as a Foreign
Personal Holding Company.  If he is a U.S. citizen, he can deduct the
costs of sending you salary, but that means he still has to pay about 60%
of what goes out.  (Revisit the double taxation issue).

> Thousands of people in upper middle class are doing exactly
> this, so the mixmaster is really in place already. The local
> mix is just an extra precaution for deniability (it was my
> friends company, I had no idea what he was up to!).
> 
> For the friend to accept the (very minor) risk of jail,
> he/she should probably be much poorer than you, or have
> a *lot* of clients, to make his pay outweight the risk.

What pay?  I don't get it.  Where does this friend gets his money?

> By the way, are there any PGP encrypted mailing lists for
> discussing serious tax fraud?

If such a list existed, would we tell an anonymous poster/fed?

If your above scheme is intended merely to conceal funds it is a fairly
poor example as it depends on the secrecy of each and every 'employee' of
the company.

> 
> Mr.X
> 

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---
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