No one, including tax lawyers, will tell you with a straight face that this is the way things were expected/designed to work. All of these tax avoidance strategies are emergent properties of complex systems that are the result of uncoordinated action amongst individual actors that cannot be fixed without collective organization. I support this and 15% seems reasonable to me.
You're understanding is outdated this mechanism is finished as of 2018.
https://en.wikipedia.org/wiki/Double_Irish_arrangement
However this article is a little biased -- it's main contributor is a user called "Britishfinance" -- who appears to be a London based corporate shill to take the heat off the City of London being a tax haven.
Like what do people think, some guy working in the City spent tons of time making extremely well sourced and well constructed articles just to... Divert some sort of "heat" from the entire London financial sector... On Wikipedia? Imo that's absurd, and it's very similar to the type of accusations people (pointing at the original reddit post that popularized the city shill theory) make whenever they find an article that bruises their nationalist ego.
Luxembourg, City of London, Liechtenstein, Monaco, Netherlands, Belgium, the Vatican, Switzerland (sort of), Malta, all for slightly different reasons. I've even read articles from these nations where they point out that the only way they'll ever distinguish themselves is with tax law. Or rather: that they'd be broke if they weren't tax havens.
And then we're remaining silent about "royal" tax havens that are individual companies which get preferential tax treatment from parliaments (e.g. Shell) and, uh, I guess "presidential" Total. These deals, for individual companies, are far more atrocious (and forced on tax departments) than any tax haven you'll find. They are directly enriching favored individuals in a particular country, and get tax advantaged for it.
And to add a more "creative" situation to terminate, Cyprus is a double tax haven (both the Greek and Turkish parts of the Island are tax havens, for different reasons, interesting for different types of individuals and/or companies, but the fact that money can cross the line, even if people cannot, offers interesting opportunities as well). Neither side of the Island will ever have anything to offer the world other than some small tourism industry, so ... for them as well being a tax haven is the only option (other than, I guess, war).
So what do you do about the problem that many of these countries have no real options other than being tax havens?
Nice catch. It could be a Russian bot or just Russian activity.
Will ‘Global Britain’ clamp down on money laundering?: Regulatory easing after Brexit risks attracting more dirty money to London
What exactly makes the City of London a tax haven? If anything, it is not a tax haven itself but a facilitator to set up structures in some Crown Dependencies.
But that makes it a financial and corporate service capital, not a tax haven (i.e., "a country or independent area where taxes are levied at a low rate")
Instead, ask yourself why you can move funds so easily across borders and decide whether allowing these capital flows is a good idea or not. The inevitable cost of allowing them is tax arbitrage but it’s not close to the biggest cost - financial instability, trade deficits, a shrinking middle class and deindustrialization are much bigger costs, and are equally inevitable once you allow these cross border capital flows.
Allowing cross-border flows of floating capital such as machines and commodity inputs and outputs should not be problematic if all new legal tender is initially placed into circulation through public local loans issued on security of the replacement cost of industrial fixed capital physically attached to domestic soil.
Conveyance of state enforced privilege such as deeds, titles, patents can also only be recorded between domestic residents and domestically chartered corporations liable for corporate tax. While these privileges provide security for capital investment they are not really capital themselves.
Allowing foreign investors to purchase shares of domestic corporations does not seem overly problematic as long any deeds, titles, patents held by corporations are directly taxed and there are some distributive offsets and deductions for domestic residents.
The perfect is the enemy of the good enough, we cannot craft a perfect tax solution, but we can make it better.
That's not what's going on here. In a fiat money world, money doesn't move out of a country, it is held in correspondent accounts. E.g. there is a bank account here with your name on it. When you think you are moving your money, you sell that bank account to foreigner, and now their name is on it. They sell a bank account in their native country to you. No money has moved in the course of this transaction, rather you have entered into an ongoing financial relationship in a foreign nation without being subject to that nations laws (beyond a bare minimum of requirements) or tax obligations. That is what "unfettered cross border capital flows refers to". It is not so much something that needs to be stopped as something that needs to be actively allowed, because you need an entire system of international investor rights and banks with pairwise correspondent accounts in both nations to make such an arrangement work. There is a massive infrastructure needed to support this illusion that you can "move" money from one country to another with the click of a link.
And this system didn't exist even 30 years ago, it's a new system.
The question is whether the benefits outweigh the costs. If you allow this you are going to have lots of problems with tax evasion. But I'm not sure what the real upside is here. The only purpose of these foreign capital inflows is to finance trade deficits, and that doesn't seem to be in our interest, either.
Moreover, what we dinged China for is not preventing capital outflows but preventing capital inflows, and we rightly pointed out that this forces trade surpluses, which is kinda the point (see my comment about "only purpose"). So of course China, which is interested in running surpluses rather than deficits, is going to block inflows. The question is why do we allow them?
Thus we are back to the unstable equilibrium of trying to get everyone to agree to maintain this vast international system but promise not to try to tweak it to their advantage. Well, China has pretty clearly demonstrated that it's not going to play along -- neither is Korea or Taiwan, for that matter, so why are we still pretending the unstable equilibrium -- this dream of converting a world with sovereign fiat currencies into one that looks like the old specie flow model -- is a thing that can exist?
The only reason is because for a lot of influential people, these capital inflows are highly profitable -- e.g. for those who can skim a little off the top. Just like Bermuda's tax laws are beneficial to financial advisors and bank staff in Bermuda. But let's not let this minority set the overall national policy: yes, these capital inflows benefit the US financial sector, as US banks can now charge fees to customers all over the world who want to maintain accounts in the U.S, but they do not benefit the US economy nor the US tax base.
I recall a US presidential candidate in the most recent election cycle mentioning this as the solution to the current corporate tax avoidance problem. In fact it was a major part of his campaign.
I am not very knowledgeable of the downsides of a VAT approach and how it could be gamed, but what he seemed to say did make sense to me. The idea was to tax the value created in the location it was created. I suppose the way you could game that system was to somehow show that no (or very little) value was created in the US?
Would moving to taking a small percentage of revenue solve this? A federal sales tax that is included in the price of products that cannot be avoided. Sure the argument against this may be that they will just pass the increased costs down to the consumer, but why wouldn't the same would happen if the corporations start having to pay more taxes in general .. whether on their profits or on something else?
But note that in the EU we do have VAT, and the governments are still (pretending to be) looking for ways to curb "tax optimization".
We just need to only record and recognize conveyance of deeds, titles, patents between domestic residents and domestically chartered corporations and eliminate deductions, depreciation, expensing for intangibles.
Federal income tax does not allow depreciation of land, IP and enclosures of ideas should be treated similar to land.
If your competitors are using these loopholes, you have to as well.
It’s the individuals that shield their wealth by using international corporations that stand to lose the most.
But, even if so, CEOs/board members are often those high net worth individuals. So there's a potential conflict of interest that isn't resolvable.
This explains why corporations will lobby against a minimum tax, even if the institution doesn't ultimately care.
Raising taxes on your profits is surely not in the interest of your shareholders.
It doesn't matter if it isn't worse for you competitively. It's worse for your profits.
If you could have more competition AND more profits, you would want that.
Certainly that won't ever be abused to screw over one company and benefit another for political purposes, right?
And, seemingly, a tax authority (the IRS) would be better equipped to calculate these amounts anyway.
Nope. A blanket tariff that applies to everything equally.
Make a rule, if you own >50% of a company, you can't buy trademarks, patents, whatever from yourself.
Right now, these companies get all the tax/financial protection of another country, but all the legal protection of the US.
Imagine the EPIC vs Apple Battle, if they had to try it in another country, or even better, in every country that 'licences' apple's IP.. Lots more chances for losing.
Source: Apple's Congressional hearing from a few years ago
That's just absurd. If you want something to happen in jurisdiction X, you sue in jurisdiction X, not some other place where you might be a citizen or legal entity. Apple can try to sue in Ireland or Netherlands or wherever, but if they are suing a US company for some breach or whatever that happens in US, the Irish or Dutch court will just dismiss the lawsuit for the lack of jurisdiction, as it could not possibly enforce its judgement in the US.
An expert weighing in on the specifics would be nice, since I'm just speaking in vague generalities b/c I don't actually know the specifics, I can only compare it to my experiences in software.
I'm also not arguing that it's not worth doing, just that it's probably not as easy as "just" doing it.
https://www.hollywoodreporter.com/business/business-news/fox...
That's why putting in place a simple minimum tax is a good plan - if there's a complex system but an overarching rule that says regardless of any other rules, you must pay at minimum 15% of profits, then you at least can't avoid that minimum (I mean, except with clever classifications of what your profits are, but at least for the most part it's not feasible for most of the large companies, excepting some like Amazon, to claim that they make no profits).
The problem regarding transfer pricing is that the US, the Netherlands, Ireland, Luxemburg, plus most of the places generally reputed to be tax havens have holes in their law you can fly an Antonov AN-225 [1] through.
[0] https://www.oecd-ilibrary.org/taxation/oecd-transfer-pricing...
They should expand that principle to simply disregard transactions between all members of a conglomerated or commonly owned group.
At the end of the day moving profits around isn't illegal and I dont see how banning it solves that problem. As long as it is taxed somewhere, which is what all country cares.
Well, that's the crux of the matter, isn't it?
Because they actually are taxed "somewhere", it's just that this usually tends to be a place with very low taxes. We're not talking tax evasion here, but actually legal ways of paying the least tax possible.
The issue with this approach is that some countries can attempt to undercut others with taxes. Of course, this could be seen as "capitalism at work", why should a country charge (tax) more if they can get by with less by being more effective?
The issue is that this doesn't happen in a vacuum. And if BigCorp makes a ton of profit in HiTaxCountry it's likely because the good conditions there are afforded by the taxes (which pay for education, infrastructure, etc). Whereas LoTaxCountry is usually some small island nation with next to no one actually living there, which means little cost for infrastructure, etc, so of course they can get by with next to no taxes. Even though "next to no taxes" on billions and billions of dollars can actually make up quite a hefty amount for a minuscule country.
1) I don't like unelected, global, IGOs who have powers over citizens without citizens' consent, such as forcing a tax increase in tax havens which crushes local autonomy in those places. The US can do this by embargoing a tax haven.
Imagine if you are a resident and business owner in Monaco, etc., who is now facing an increase in corporate tax that is only necessary because the US decided to threaten sanctions against your country to make it less attractive to (ostensibly) US corporations. You could make a moral argument about what tax revenue should be but I don't think it's moralistic because of my next point.
2) No one ever discusses fiscal responsibility or whether tax revenue is well spent. The solution is always to increase taxes or to increase the power to collect taxes.
Apple wins (lower taxes). Ireland wins (free income from a random corp). America loses (loses tax dollars to invest in infrastructure, education, etc).
If you want to look at a case of aggressive US extraterritorialism, FATCA is a lot more egregious.
If anyone tried to enforce things like this on the US we'd be having a press conference with some general explaining that attacks on our sovereignty will have consequences.
But the way they went about this is disappointing.
There should be a way to solve this that would still allow countries to compete in attracting businesses. They talk as if they want everybody to settle for mediocrity.
> Treasury Secretary Janet L. Yellen has warned that a global “race to the bottom” has been eating away at government revenues.
This literally sounds like something a cartel would say.
It is incredibly depressing how little I get from the government vs how much they take from me. The entire system is a sham and I honestly don't want to support it anymore. I'm working as hard as I can to try and escape it at the earliest possible moment.
Yes, and that is paid for by my outrageous property/vehicle registration/gas taxes. Huge portions of our cities have roads in near 3rd-world conditions. The major arteries of every top-50 US city grind to a halt twice a day, and you have been conditioned to believe this is normal/acceptable. Our bridges, roads, and railways are falling apart.
> Do you live, work or shop in a structure that adheres to building codes?
Yes, and I pay for that directly via the price of homes (home inspection and permit costs are passed on).
> Do you have power? Do you have access to the internet? Do you enjoy food that doesn't kill you?
I pay for all of these things directly out of the money left over that the government does not take from me. In the case of food, I pay taxes again on it when I buy it.
> share the frustration that tax money isn't always (often) spent effectively, but then I ask...what have I done? what would I do differently? At the end of the day, I'm not that interested in doing these things.
Where do you live that the government provides you home, roads, sidewalks, food, power, and water for $0 post-taxes? Because I pay for all those things directly with post-tax income.
>Paying these taxes doesn't measurably impact my overall well-being.
How does 30-50% of your take home not impact your "overall well being"? All forms of calculation that result in a lower number than that have, in my experience, come from ignorance of the comprehensive tax cycle.
When I lived in China, I was shocked not by how controlled it was (which is what I expected given the western vision of China) but by how chaotic and uncontrolled it was compared to the US. Everything from food, health, and safety inspection, to the enforcement of traffic laws, the regulation of lenders and financial products, academic integrity, I could go on forever. I became aware of these things only when I lived in a place that lacked them.
It's invisible because it provides no true value to them.
Right now you and I are paying for some NSA hacker to compromise American telecom networks, 13 carrier battle groups to put around the ocean doing nothing, literal armies of people in a hundred plus bases on literally every continent that provide NEGATIVE value to your average person on the street, and so much more.
Your car has broken down and you can't afford to fix it, while the government has taken ten grand from you in the last 12 months that could have purchased you a new car. But it's ok, some overpaid bureaucrats are making real progress in abstract geopolitical interests in a country you can't even find on a map! It's a simple example, but people really underestimate how much more they'd have in their pocket if the government wasn't siphoning off cash at every step on the economic cycle. Look at the number of people struggling, and imagine how much we could relieve that by simply stealing less from them.
Please just write out the word "people". You're already using full words and normal punctuation everywhere else.
If the above individual wants to see widespread corruption, you may want to check out some European Union countries that have this culture. Croatia is a good example, where nepotism is the modus operandi, as in whom you know will get you places in society. Bulgaria is also a great example.
Ever heard of the Pentagon? Here's a good start: https://www.thenation.com/article/archive/pentagon-audit-bud...
Is it really? We could eliminate entire sectors of the federal government and your average person would have no clue. Why do we need 18 intelligence agencies? Why do we need 13 carrier battle groups? What, exactly, do our 100+ overseas bases do for the average tax payer?
None of it makes sense in a supposedly representative government where those who slave away and pay for it get a say in how things are run, or where their collective effort is spent. The current distribution however makes perfect sense if said representative government is an illusion and the taxpayers instead really work to supply the whims of an unelected and unaccountable few. They want to play the great game, and you're gonna go to work to pay for it or we'll send men with guns to your house to take you away. This underlying threat of violence underpins every aspect of our civilization.
I guess its the kind of dumb policy we have to put up with until someone points out that those affected by this are likely 'minorities" in western societies and is therefore racist/bigoted. Its the only way to argue nowadays.
Also, every country that agrees to this minimum tax loses a bit of sovereignty, because if a member state needs to for example lower their rate to 14% or 10% in the future for a very good reason, they can't.
Seems odd to start with corporate income taxes as it seems pretty efficient to not tax corporations and encourage more distribution to individuals and tax there.
I remember in my microeconomics101 course how taxes on corporate profit are easy to squish around with tax deductible benefits that reduce profit (eg, country club dues are an expense, corporate jets are an expense, 5000 square foot offices are an expense). Since it’s hard to police these expenses, it’s more efficient to just push all profits to salary and dividends to individuals and tax there since there are so many fewer individual exemptions.
Also, increasing employ income tax rates incentives the company to provide tax deductible benefits and lower salary. The actual solution is to make employee benefits non tax deductible. For example personal use of a Company Car by an employee is taxable to the employee as a non-cash fringe benefit, which is why company provided cars have become uncommon.
So to apply energy on taxing individuals rather than corps. For corps income is so fluid, I think we get more revenue with tariffs, usage taxes, property tax, VAT, sales, etc.
Profit isn’t as important to corporations as it is to individuals.
So, in practice lowering US corporate taxes is a tax break on the Saudi royal family etc and a net increase in taxes for American citizens.
US has a good legal system, fairly educated population, market, etc. Most of these corps would not have made it in a country like Russia, or they would've been taken over in China etc. They need to pay their fair share back into the system that allowed them to thrive.
The poor and middle class would need to disproportionately gain wealth if they were to rise to the same position in the power hierarchy, and they are not mobile. High taxes are like fixing positions in place, like a moat to make it difficult for others to rise, since it isn't going to retroactively take money.
Historical data further shows that taxes keep rising but so does inequality.
It's blatantly obvious that you cant control the laws of every country when the game theory makes it obvious that lower taxes makes you more competitive at attracting wealthy people.
I don't know if you're aware of this, but taxes in the west are significantly lower than they were in the 50s, 60s and 70s. The top marginal income tax rate in the 60s was 90% in the UK and 91% in the US. Currently it is 45% in the UK and 37% in the US. Corp tax is currently 18% in the UK and 21% in the US. In the 60s it was 45% in the UK and between 11% and 55% in the US.
But you're right about inequality rising
Long term, I would almost prefer if we just moved to taxing people's assets. Maybe we can force corporations to basically pay out most of their profits to shareholders to avoid having them get too large?
> Tuesday's show presented the common-sense, no-nonsense Planet Money economic plan — backed by economists of all stripes, but probably toxic to any candidate that might endorse it.
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
Large corporations, in my opinion, are already causing the breakdown of local societies. Deals are done over large areas, less and less people are in control of their own fates. More and more externalities are caused as business leaders are more detached from the realities of their actions. Wages for workers are lower as more needs to be paid to management, and profits get used for stock-buybacks rather than bonuses and higher wages, to please shareholders rather than workers
Most economists thing growth and raising people's incomes is a good idea.
Capitalism seems like a pretty good deal. Are there any other governments or societies you would think it would benefit the U.S. to switch to?
That implies a GST/VAT/sales tax rate of ~35% in my country, changing from progressive to regressive tax. Enforcing it would require both the abolition of cash, and to somehow police the barter economy.
https://www.interest.co.nz/news/99949/budget-2019-summary-al...
Edit: 35%. Currently GST is 12.5% and 2019 GST budget was $21 billion, PAYE + other source deductions budget was $35 billion.
Now, suppose you have bought a house and suddenly all of your neighbors are rich. An appraiser comes to your place and suddenly you owe taxes and you basically get evicted from your home under a net-worth-taxation regime. 100% guarantee in your "ideal" situation, the rules will be abused to fuck over those with less clout.
The real tricky part is small businesses. If I run a small software consulting business or own a bar how much is that worth? Is that the value of the software consulting business with me or without me?
let's just be clear about what you're saying. It's okay to effectively force people off of their homes that they have built an emotional attachment to. Perhaps their family has lived there for a few generations. They should just take the money and shut up.
what are nations competing for? who can afford to take the least tax revenue
who can afford to take the least tax revenue? already rich countries, or countries that don't give a shit about distributing wealth equally
who continues to get richer? I'll let you answer that one
What do other countries have to do with it?
Read the subtitle:
>The Biden administration wants other countries to back a minimum tax as part of its plan to raise the U.S. corporate tax rate to 28 percent from 21 percent.
This makes no sense. Is the IRS a global institution now?
In their own minds, they always have been.
I also find it funny that a country that can't even level-set taxation within it's own 50 territories wants to dictate taxation for the world now.
It makes perfect sense if you take them as separate concepts.
1. Joe Biden wants other countries to work with the US and set a tax floor for corporate taxation.
2. The US Congress can pass a law that brings corporate foreign taxation in line with how real people (not just fictional ones) are taxed on foreign profits. This doesn't make the IRS any more global than they have been for 100 years.
Literal global rule. Some would call that overreach.
I say this to demonstrate that “ungodly” always means “more than me,” irrespective of all else. Justification through jealousy. A recipe for a lowest-common denominator society, at global scale.
You say that as if it's ridiculous. That sounds fine to me. Warren Buffet espouses exactly the same thing I'm saying. Is that jealousy too?
Ungodly means more than you need. No one needs a billion dollars. The top marginal tax rate was 90% in the 1960s, and guess what? inequality was much lower
Bloomberg has a better write up: https://www.bloomberg.com/news/articles/2021-04-08/plans-for...
To answer your question, this wouldn't create a new organization to collect a global tax. Instead it would give the IRS the authority to tax American companies (say, Google) an additional amount on their overseas earnings. So, if they paid 13% in Irish tax, but the American tax rate is %21, the IRS could charge them the gap (an additional 8%). This would be true in all countries that sign the agreement.
Obviously tax havens would still exist, but they'd be harder for big multinationals (like American tech giants) to abuse.
Tax agencies around the world already cooperate with American tax agencies on matters similar to this. In fact, the proposal would actually reduce the amount of inter-agency cooperation required as it would great reduce the amount of treaty-related work the tax agencies have to carry out.
It could still happen. Maybe Amazon would move to the Bahamas, or any other country that doesn't sign the agreement. But the hope is that if most industrialized countries sign on, then that risk would be minimized.
The current system isn't working anyway
I believe the word you're looking for there is /did/ not /does/. And the answer is for some, yes, for some, no, but regardless -- it happened for a variety of structural reasons (British Empire, Mongol Empire, etc).
Perhaps a more interesting question is whether such a dominion will work for the future. And for that, I'm not so sure. What's to say that we won't see some kind of three body system between India, China and the West? Not to mention what could happen as South America and Africa continue to ascend. I think the logistics of collecting a 15% global tax will be "interesting" to watch play out.
Also, this isn't a single authority, this is one authority asking other authorities to all agree on something.
The fact is that all abrahamists follow some version of a silly book in which some sky daddy told a man in a desert that they are the choosen people and that by following that specific man, they have the right to dominion over the earth.
These philosophies also all lay out rules for how and when they may tax, kill and enslave those of the other religion.
So yes, at least 50% of the earth’s population are OK with one group dominating the tax laws of the planet, as long as it is their group.
[0]https://www.mentalfloss.com/article/76951/why-are-so-many-us...
This is ladder pulling. Who needs smaller countries competing on fiscal rates when all tech should be registered in Dellaware?
Note how it's a small 15% to start with. If this goes through and all the treaties are in place moving it to 25% should be much easier.
Maybe the US should investigate all the creative ways US corporations pay so little tax anywhere. It's a problem caused by US and US corporation and now they come to provide a solution.
Shouldn’t the responsibility for US corporate problems be (presumably) addressed by the US government? I’m not understanding your point here.
Most countries are mad about multinationals, most of them rich US multinationals. If the US would do a proper job of taxing their own corporations none of this would be necessary.
Interesting how this is just in time for the Dutch sandwich scheme to expire. Clearly something else was missing!
Company A sells all of its IP to Ireland. They have the Irish company charge them 100% of the profits for IP. Poof. No US taxable income.
What's your magic beans solution for this beside what the IRS plans to do?
Currently, US corporations have a minimum tax of 10% on global income or 20% on US income; sounds like the numbers are proposed to change to 15% and 28% (or something; NYT paywall is loading too fast today, and it's a proposed law so the details aren't set and not worth fighting over); and the US is saying hey, these guys are going to pay 15% on income from your country, you may as well have them pay it to you instead.
The AMT on global income was part of the Trump tax changes, and is a departure from the full corporate rate on global income, but only due when/if money made it back to the US.
I imagine a next step would be charging multinationals headquartered elsewhere but operating in the US the AMT on their global income. That's kind of far reaching though, so if they can get a few major countries on board instead, that's better.
Of course they'll need to close the US/UK buy back loophole...
They should just dump it and tax dividends and capitals gains like any other income.
It's easy to shift corporation tax but much harder to shift an individuals income.
It's much easier to simply impose an AMT and eliminate a relative handful of expense shifting mechanisms (many of which are already covered by a regime known as "transfer pricing").
I think that even if taxing corporations doesn't make sense in terms of tax revenue, it makes sense in terms of stopping companies from growing too large
Imo corp tax should be nil until you get to about 1m profit, and then brutally progressive after that. Small businesses are great, and companies that benefit the consumer by being large can be public-owned and both compete internally and internationally.
