BS is BS:
"...but companies such as Bank of America (granted they hire a lot of people), can pay zero taxes."
In 2014, Bank of America's Income tax expense was $2,022,000,000, or an effective tax rate of 29.5%
Source: Bank of America 2014 Annual Report, page 23 – Table 5, and page 27
media.corporate-ir.net/media_files/IROL/71/71595/AR2014.pdf
Since the start of far-reaching economic reforms in the late 1970s, growth has fueled a remarkable increase in per capita income and a decline in the poverty rate from 85% in 1981 to 33.1% in 2008 (poverty being defined as the number of people living on less than $1.25/day or about 8 yuan).
Poverty levels in China compared to the US:
The poverty threshold in China is less than $1.25 per day. In the US, the poverty threshold is less than $33.10 per day.
In RMB, the poverty threshold in China is income less than 8 RMB per day. In the US, the poverty threshold is 205 RMB per day.
China has 400 million people living on less than 8 yuan per day.
Another long rambling reply that didn't really address any of the issues involved. I had though about making a counter argument but how does one argue with someone that has let their anger and resentment at the world cloud their logic?
An argument is the simplifying of the complex into simple, lucid points, whereas arguing, is hiding behind a wall of words. I am quite happy to entertain arguments but have no time to engage in arguing.
@geezer
BoA TAXES
Like I said - everyone who can surf the internet becomes an instant expert. You quoted 2014. How about 2008-2013? Quoting a single incidence in time and claiming that represents history is lazy and reeks of bias.
POVERTY
As you note - poverty means different things in different countries, based on the cost of living, in those respective countries.
WORLD BANK
"China's success in reducing poverty over the last three decades has been remarkable and is well recognized globally. The number of poor in China living on less than $1.25 per day fell from 835 million in 1981 to 208 million in 2005."
The World Bank has a variety of reports, with conflicting numbers, depending on the date of the report and the reporting agency within the WB. They quote 208 million versus your number of 400 million - reference link provided below for those who enjoy quoting BS.
Now, the numbers I've provided, which are current as of 2013 from the World Bank - a branch of the United Nations, are about HALF your quoted numbers of 400 million, yet I don't feel compelled to call you a LIAR for the public benefit of gokm users, nor do I feel compelled to accuse you of posting BS.
I'm NOT saying your sources are superior or more or less current than the World Bank - merely different based on whether the authors wish to bias or unbias the statistics.
Accounting, to include US GAAP was long ago subverted from being a truthful representation of a company's financial health, to "creative accounting" to minimize tax obligations and maximize investor sensationalism - it's a form of entertainment. Bank of America is not alone in its aggressive strategies to minimize its taxes, to include significant lobbying - which is incidentally, deductible depending on how it's classified and accepted by the IRS.
As you obviously used an internet search engine to quote a single instance in time of BoA actually PAYING taxes, then your internet search would also have revealed a plethora of articles complaining about BoA's aggressive tax avoidance and reduction policies.
Internet trolling aside - take a look at BoA's SEC or Annual Report filings:
Income Tax Expense (Benefit) (FTE Basis)
For those unfamiliar with accounting lingo, if a number is in parenthesis, it means it's a NEGATIVE number. So in the category of income tax expense, a positive number means the company had to PAY tax. If the number is in parenthesis, it means the company got a tax refund.
Now - these numbers are further convoluted as BoA and others still insert non-GAAP (Generally Accepted Accounting Procedures) numbers into their annual reports. We used to call this pro-forma, but that got severely BAD rep after it was used to falsify, mislead, and fraud investors - so now we just call fake numbers "non-GAAP" - and in an extremely convoluted fashion - using non-GAAP numbers is also GAAP, as long as you note the numbers are non-GAAP. This is akin to saying - "I'm going to lie and deceive you - but as long as I tell you I'm lying and deceiving you - it's legally allowed ... under GAAP). The US has become a nation of Pharisees.
So looking at the HISTORY of BoA over the last THREE (3) years, which is a standard financial practice as opposed to quoting a single isolated point in time, which is professionally amateurish at best, and blatantly fraudulent if the poster is a current or former financial professional:
FTE Basis mean Fully Taxable Equivalent, which is generally the number used for US income tax calculations by the evil IRS. The US tax codes are so ludicrously convoluted and complicated, that no normal human being can understand them - yet we are required to become tax experts equivalent to professional IRS employees every year, when we file our annual personal income taxes. It's truly a demeaning and degrading process - but it's the law.
The US has a nominal FEDERAL (aka national) corporate tax of 35%, which also varies considerably, depending on a variety of things. The USA also MAY have state and local taxes, depending on where you or your company live.
Based on @geezer's referenced download of BoA's 2014 annual report, BoA paid an effective tax rate of 29.5% in 2014. That's clearly documented...or is it?
A minor complaint is @geezer is quoting the entire number, as opposed to normal professional accounting practices of simplifying numbers into thousands or millions, for public reporting purposes. Why @geezer would convert a number reported in MILLIONS to it's formal entire value is a potentially interesting insight into his personal psyche (as opposed to presenting the full number in the interest of clarity for gokm users).
Anyway - moving right along - let's look at how to lie with accounting (NOT @geezer - he's merely naively propagating information he either doesn't understand or is intentionally using a single point in time to bias and support his comments of "BS is BS"). Read on if you're interested, but accounting is life-sucking and brain numbing. I hate it - have always hated it, but have had to learn how to do these things, read these things because I have to pay US income taxes as an individual and if you're NOT savvy, the IRS will take your money for free - or in a perfect storm - legally murder you, by accident (it's happened).
Note - this is NOT an attack on BoA - merely a clarification of @geezer's attempted use of BoA's isolated 2014 Annual Report to claim the company pays its taxes in a fair and responsible manner. If that were true - their executive management would be fired for NOT maximizing profit over taxes. After the 2008 financial crisis - US corporate taxes generally dropped to around 12%, so @geezer's claim, based on BoA's annual report, that the company is paying 29.4% of it's potential total 35% in federal income taxes is absurd, naive, and silly. If I were on BoA's board - I would fire the CEO and CFO for such irresponsible behavior. BoA has a plethora of legal tax haven investments and reinvestments it can make, to avoid 100% of its tax burden, to include an army of offshore investment vehicles.
Contending that BoA is a responsible tax-paying virtual citizen, like it's primary shareholder, Warren Buffet and Berkshire Hathaway - if I really cared, I'd have to seriously investigate such a claim, as it's preposterous for an industry which gave us the 2008 global financial crisis.
2014 Annual Report
INCOME (FTE) (USD Millions)
2014 USD 6855
2013 USD 16172
INCOME TAX EXPENSE (USD Millions)
2014 USD 2022
2013 USD 4741
Now, let's look at the 2013 numbers from the 2013 Annual Report.
2013 Annual Report (FTE) (USD Millions)
INCOME (FTE)
2013 USD 17031
2012 USD 3973
INCOME TAX EXPENSE (USD Millions)
2013 USD 5600
2012 USD (215)
Oh, wow - just looking at TWO (2) years of annual reports from BoA, I see that in 2014 BoA says they had income of USD 16.172 BILLION versus their 2013 AR where they formally and publicly reported their taxable income was USD 17.031 BILLION. A USD 1 billion difference for the same fiscal year.
Oh wow - somewhere between 2013 and 2014, BoA reduced its taxable (FTE) income by about USD 1 BILLION. To try to understand where that USD 1 billion went, you'd have to go read BoA's SEC publications, to include proxy statements, errata, restatements, etc ad infinitum, explaining how they deviates their way through USD 1 billion in lowered tax bases for 2013. That's the world of professional forensic accounting and NOT for the feint of heart.
In 2014, BoA reported paying 2013 taxes of USD 4.741 BILLION, however, in 2013, BoA reported paying taxes of USD 5.6 BILLION.
Oh, wow - their tax burden for the SAME year was reduced by USD 1 BILLION (I'm rounding to nearest significant digit). How did that happen and how can BoA report substantially different taxes for the same year?
I'd go further back in history, just to be academic and thorough - but that's purely for personal research on how to detect accounting fraud and then trying to understand WHY BoA and its internal and external accountants would practice such behavior - but I currently have no need of BoA professionally, so I'm not getting paid to look at this bank...today.
Now - to reiterate - BoA is NOT doing anything illegal (that I am aware of). These practices are US GAAP. The Annual Reports have SEC published quarterly updates, proxy statements, errata, corrections, and my favorite - restatements, to the published annual reports, which may or may not explain or document the USD 1 billion discrepancy(yes).
These are well known and understood accounting tricks and practices which, regardless of intent, deceive the general public. Executives and board directors use the tricks to "miraculously" rediscover hidden money(yes), leading to windfall bonuses, benefits, and other perquisites. When I was in college, I used to work for a professional executive headhunter who used to love to regale me with stories of generally unprosecutable corporate rogues and frauds who made his business so successful. White collar fraud - difficult to detect, almost impossible to criminally or civilly prosecute.
Unlike @geezer's erroneous and mistaken contention, money is NOT a fixed quantity in time. BoA and all corporate and accounting america is well aware of a plethora of tricks, such as re-investment, which can be used to hide, defer, and allay corporate taxes. What you see published is a deceptive practice and the general public is easily fooled. Also - these two acronyms - PV & FV.
On the surface, BoA reported USD 5.6 BILLION in taxes in 2013, but when reporting on the 2013 taxes again in 2014, the tax expense for the same year was "adjusted" to USD 4.741 BILLION.
So in the space of ONE year, BoA reduced its tax burden for the SAME year (2013) to retrieve USD 1 billion (roughly). Where'd it go? How'd they do that? Magic?
Although this is NOT the same as saying BoA paid no taxes (they actually paid zero taxes around 2010 - but they were using alleged losses from the financial crisis etc to declare huge losses to offset profits. Also - as I said, US tax law is incredibly convoluted and complex - for example, it's not publicly well-known that certain activities (aka profits) arising from Mergers & Acquisitions are NOT taxable - that's a nominal 35% increase in profit IF you can find the right M&A - hence one of the reasons for the recent M&A boom. They're both strategic value AND provide some massively stellar tax benefits, but that's another "BS is BS" thread.
Also - please note, in 2012 and 2011 (I didn't document 2011), BoA paid NO TAXES. They reported tax refunds.
So, in conclusion to @geezer's accusation and contention that I and my posts are "BS is BS" - to @geezer et al, this is true. @geezer et al see what they choose to see and hear - and that's just nice - most people behave like lemmings.
I'm not permitted the luxury of seeing things as simplistically as most normal people, or as corporations and their professional accountants would have me believe.
MOST people are like @geezer, because they have no professional need or personal desire to see or know the truth - the REAL truth. It requires time, patience, knowledge, and either a desire or a need to search for the truth.
Apathy, ignorance, contempt and negligence are the norm, hence the philosophy and belief that "BS is BS".
I truly envy @geezer's perception of life, finance, economics, and his ability to publicly ridicule and mock people based on professional and personal experiences in life and the internet which makes everyone an armchair professional expert.
Again - in the same manner that I am NOT claiming or accusing BoA of being fraudulent - merely aggressive in tax avoidance, which is incidentally, their fiduciary responsibility - I am also NOT reflectively accusing @geezer of "BS is BS", LYING, or FRAUD - merely that @geezer and I have rather different experiences and perspectives - probably diametrically opposite - if not different worlds or universes.
As part of my two year general education requirement at my university, I was required to read the Hebrew Bible (that's what it was called - BIG old hunkin and EXPENSIVE book). I occasionally still read the bible (new and old testaments) although I am neither a practicing nor evangelical christian. I am also NOT a believer - just because one believes or knows something to be true, does not require one to follow that belief or path religiously.
I learned lots of interesting things from the Hebrew and subsequent New Testament Bibles (obviously, translated in English) and the various incarnations of the New Testament - I even have/had a comparative study bible, to look at all the major different translations - how's THAT for geeky or thorough. One of my buddies started studying Greek - so he could look at the original Greek manuscripts (for New Testament) - I chose a different path. One doesn't need to be Christian to recognize or acknowledge wisdom, to guide one's life. I've been meaning to post these quotes for some time, but just never got around to them. They're not meant to educate, criticize, or improve anyone. I could no more change or influence @geezer than I could influence @brick, nor do we mutually care. They're more a statement on the philosophy or religion of human interactions - and how I view these blogs and the people who comment interactively.
I am in no way a good person or an evil person, but I strive to do what's right, to know what's right, and to practice and be what's right. That culture and behavior somehow introduced and exposed me to a world of evil people beyond anyone's fair share.
ANYONE who's met Colin Flahive and his group - can immediately and instantly recognize a good man - it's in his eyes, who's mission is to do what's right - to give people meaning, value, and respect.
OLD TESTAMENT (HEBREW BIBLE)
Psalm 1:1 - "Blessed is the man who does not walk in the counsel of the wicked or stand in the way of sinners or sit in the seat of mockers...".
So I chose to avoid mocking people - although I'm an abysmal failure at that, despite my best intentions. Why is that? Skipping references to deities and the religio-christian verbiage - the answer is held below:
NEW TESTAMENT
2 Timothy 3:13
"You will know a good man by his fruits, his words, actions and his deeds towards others. Stored in his heart will be nothing but good; the Word of God, graces, comfort, love, kindness, good resolutions, knowledge, and good affections. An evil heart will bring forth the opposite."
In my life - I've found these things to be evidently and consistently true (religious things aside). Amazing psychology from ancient or early western texts and extremely helpful in understanding western (aka predominantly white) societies, behaviors, and cultures.
I'm sure, if I search the internet hard enough - I'll find similar remarks and or philosophies in other religions and belief systems, but the Christians claim Jesus (aka God) said this - and that kind of works for me. Choose your own poison.
That aside - and arguably back on topic to the "one yuan bill" discussion - China's stated goal utterly misquoted by me, is to raise the GDP per capita (my interpretation) to over USD 10k (CNY 60k?) per annum, which is basically on par with USD poverty (USD 33/day x 365 days = USD 12k). When I first heard this - I THOUGHT they'd said CNY 10k per annum, but they corrected me - USD 10k per annum.
That is an amazing goal - because it not only means poverty alleviation - but technically, some sort of rural prosperity, assuming PV (present value) versus FV (future value) of money, which I alluded to earlier.
And - like I said - I am WAY behind Colin and his group - but it's inspiring and encouraging to see someone with an admirable vision and demonstrated practice that extends way beyond merely operating a "for-profit" business.
I have nothing but praise, respect, and admiration for Colin and his group's accomplishments - not the modest financial success, but HOW they achieved that success with their staff.
It's a fantastic business model - to give respect, responsibility, support and to even incubate the lowest denomination of legal currency.
Perhaps I should've posted this gushy part of the post in the Interview: Great Leaps section...
ugh..that was so long, it was probably an epic abuse of the gokm TOS...I hate accounting.
@tony or whoever your are
You asked a question, I responded - with my typical verbose manner. Short responses typically lead to further miscommunication - so I addressed your comments as definitively and completely as possible, out of respect for what I misinterpreted as genuine and honest questions.
My bad. You're right - I hide behind verbose and rambling responses to avoid answering the question.
You're right, I'm wrong. The USA is the paragon of virtue, democracy, and civilization, China is the paragon of the evil empire. China's recognized progress on alleviating poverty on 400-600 million people - equivalent to MORE than the entire population of the United States - the paragon of virtue - that achievement is merely a spit in the ocean - a grain of sand on the beach, compared to China's evil government practices and oppression.
A man is judged by the fruit of their labors and so it is with nations.
So humor me - name a major US fruit from the last 20 years. As a nation - what benefit have we provided to our own people or to the world.
I'm fickle, but I'd genuinely LOVE to see a more positive side of the USA beyond the hype and propaganda. You keep mentioning my bitterness etc (true) - so humor me - show me something different, something good. I could use some good news, some positive news.
I get plenty of useless rhetorical hype and propaganda from USTDA and US Commercial Services. What do you have?
Your opinion of US GAAP is just that; your opinion. But then you are "I'm world class (not saying much, these days) accounting - IFRC and US GAAP - required for project syndication by international investment banks." Or so you say. Interesting for a guy who once confused "IPO" with issuing stock and blew me off with a typical 马马虎虎 condescending and verbose response which convinced me you don't know jack about Accounting. BTW it is IFRS not IFRC.
You said "As you obviously used an internet search engine to quote...." Yeah, I googled Bank of America and pulled the 2014 Annual Report. Damn, I am sorry for using a search engine. A major failing no doubt, but, at least I can read an annual report. I've written a few MD&As and signed, as CFO and CAO, enough of them. Even had to visit the SEC to discuss my creativity in accounting reporting, (One of my ideas is now pretty common in 10Q filings).
@laotou said "Bank of America... can pay zero taxes." Guess what, I only need one instance to show you are spouting BS. I provided it. BS is BS.
If you look at page 27 of the BoA 2014 AR, you would see "Table 7 Five-year Summary of Selected Financial Data." There, in five neat columns you would have found five years (2010 through 2014) of results to compare. I am surprised a world class accountant, or engineer, or risk management (that means insurance to me) or whatever, an eminent guy like you missed that. I did reference page 27 in my post.
You might know, in spite of your nonsense about "truthful representation of a company's financial health, to "creative accounting" to minimize tax obligations," there is a difference between "book" and "tax" incomes. "Book" is prepared according to GAAP and "tax" income per the IRS code and regulations.
Back in the day, it was a Tax Accountant prepared the taxable income and prepared a schedule to reconcile the difference. I never prepared a corporate tax return as I was not a Tax Accountant. One of the reconciliation items was the difference between book and tax depreciation. Book is done according to GAAP and the method remains consistent. Tax
depreciation varies as the IRS regulations vary from time to time as the government allows or disallows accelerated depreciation methods for tax purposes. The tax rule variations would cause GAAP violations in that consistency would not exist.
BTW, your statement "if a number is in parenthesis, it means it's a NEGATIVE number," is wrong. In a financial statement, (xxx) indicates the number is not the normal value. Thus profit, normally a credit, is bracketed when it is a loss, a debit. This is what accountants call a convention. Taxes are normally a debit but when some event or transaction creates a significant reduction in tax, you will see tax expense bracketed as in the BoA 2011 and 2012 financial results. You might have noticed that but didn't mention it.
You got FTE wrong as well. FTE calculations pertain to banks and financial institutions but not normal corporations. It has to do with interest income that is not taxed (municipal bonds) and interest expense rarely material to firms not involved in financing operations.
FTE is: "Interest income, on a tax-equivalent basis, less interest expense. Tax-equivalent interest income is interest income plus the taxes that would have been paid had tax-exempt securities been taxable. This number attempts to enhance the comparability of the performance of assets that have different tax liabilities."
How can you judge that the US tax codes are "ludicrously" convoluted? You correctly state the nominal Federal corporate tax rate is 35% on C Corporations. But the first $335,000 is taxed at 34%. These are Federal Tax rates and THEY DO NOT VARY for C Corporations. You don't seem to understand corporate taxation.
You say "A minor complaint is @geezer is quoting the entire number, as opposed to normal professional accounting practices of quoting numbers in thousands or millions, for public reporting purposes." Gee whiz, I could done that but then I would had to state all dollar amounts are "In millions."
You repeatedly bandy the word "professional" implying I am not "professional." If you knew Accounting, you would be aware accountants do not use the word "professional" as those uneducated, in accounting anyway, might. We practice the second oldest profession and let whores be the "professionals."
Your analysis of BoA's financial results is less than I would expect from one claiming to be a "world class" accountant, or, even an eminent engineer. Perhaps you should have used Calculus and a little Algebra to add up the numbers.
Your BS about BoA's 2013 tax expense is nonsense. I also downloaded the 2013 AR. I hate to call anyone a liar and regret I tagged you as such. But, you either fabricate, imagine or confuse this stuff. To use your word: You made MASSIVE errors trying to whack me. I taught Financial Analysis my friend, and, you don't know jack.
Don't feel bad.
Accounting is not intuitive. It is a learned art that takes time and study. It isn't about numbers. It is about language, definitions, conventions, concepts, and principles. It takes thinking, critical thinking, some logic, discipline, a bit of law and a bit of experience to do it. I am good at it because I wanted to be good at it and I put the years of study, beyond school, into being good. I am not a CPA but I did pass the California CPA exam in one sitting.
BS is BS. It is what it is.
This topic is requiring a lot of concerntrtion to get through.
What seems to have happened is that a post about a 1 yuan note with a message written on it somewhere in Kunming seems to have been brought around to the Bank of America and millions and millions of dollars.
Like a lot of threads before it this one seems to have followed the pattern of ending up talking about life in America on a forum called Living in Kunming.
Can't Americans go for 5 minutes without having to talk about themselves?
Ha.Ha.
Time to shut this mother down!!!!!!!!!!!!! Ha.Ha.
