Modern tax systems are diverse by design: sales tax/VAT. Excise/sin taxes, income taxes, CGT, employer taxes, etc. The mix is designed to reduce volatility. It's also designed to max out tax revenue while avoid damaging the economy by discouraging things like labour, savings, or other important activities too much. The effective maximum revenue for a country to collect in taxes appears to be somewhere in the 35%-45% of GDP range. After that diminishing returns on taxes kick in. Most euro countries are taxing (or rather spending) near that max. So, they can't afford to let corporate taxes.
Problem is that corporate tax is unavoidably problematic. Large multinationals can arrange their activities (not just their paperwork) depending on taxes. I doubt an single country want to create a tax the ensures large companies avoid setting up local subsidiaries within their borders. The end result is a different set of rules for the large and/or sophisticated that is more lenient than the rules on small companies.
Personally, I would rather see corporate tax abolished than see it applied in such a way that it discriminates against small companies.
> The only way to really combat it is for different
> countries to collude and perhaps sanction tax havens.
> Even then, I doubt they will be able to raise much tax.
Sounds like textbook prisoner's dilemma -- if they betray each-other then they both lose, but there's still a chance that they could betray their opponent without being betrayed themselves.
It seems to me that international law is riddled with subtleties where the general rule is "cheat effectively" rather than "don't cheat."
It's really hard to properly tax corporations because they have the resources and the motivation to really fight back. But we shouldn't stop trying.
there is the market and acting outside of it and mostly by different rules there are the multinational big enterprises/corporations.
Why should NOT different tax rules apply them?
Is this an idea easily translated into laws? Probably not. Doable for sure.
Btw, please do not "combine" those Mega-Corps with small companies... they are not the same and will not be in the future; it only helps to drive certain unrealistic fears benefiting those lobbying and looking FOR the loop holes around the world.
Naturally I'd assume in that case that dividends would be taxed at the same rate as earned income, and that both would have to rise somewhat at the higher brackets to cover the lost income. But given that is the case, I honestly don't see any downside. Can anyone help?
What you want is an "integrated" tax system like Canada has, where individuals receive "dividend tax credits" which are approximately equal to the taxes paid by the corporation.
All of a company's wealth is ultimately destined for somebody's pocket. Why can't we just tax it when it gets there, and abolish corporate taxes?
Compounding investment returns. If I loan you $1000 at 5% interest, I have to report $50/year of interest income on my tax return. Since I pay approximately 40% income tax (federal + provincial), I have an after-tax return of 3% compounding annually. If you abolish corporate income taxes, then I could have my company loan you the $1000 and receive the interest; it would then compound at 5% per year, and I would only pay income tax when the money is paid out to me as a dividend. In effect, you would be turning corporations into tax shelters.
Now, this isn't absolutely insurmountable; in fact, Canada already has different tax rates for "active business income" vs. investment income, and theoretically you could have a 0% rate on "active business income" and a 40% corporate tax rate on investment income (which would then create non-taxable dividends when finally paid out to individuals). But you'd still have the complication that "retain profits" produces a different taxation result than "pay out profits as dividends, then raise more funding a few years later".
Historically taxes were mostly about ease of collection. Putting everything on income would raise the big question of whether wealth not income taxes are fairer.
Right now the big win is massive simplification not changes in tax base.
As to which effect is stronger, I have no idea!
Hell of a coincidence, mate. They're incorporated in Ireland purely by accident, they would never threaten to leave at the slightest mention of "corporate tax increase", and what they really wanted to do all along was to move to the Scandinavian countries. They should all band together and get a stand-up comedy act going.
Finally governments have noticed that these companies are shuffling money around (between countries normally) and are not paying anywhere close to those rates.
It's very sad that these companies do have a slim chance of fighting this kind of reform. Ideally they should just pull their heads in and concentrate on building wealth under a new slightly more sensible tax regime.
I believe that society benefits far more from a company like Google having and spending the money than any federal government.
As Google is currently paying almost no taxes, I'm curious that how and how much is Google spending its money to support stuff now supported by the federal government?
For instance, how much is Google paying to people living on federal welfare money, and as the current job markets are what they are, would they have to decide between starving and stealing to survive, or could they still survive with Google handouts?
Military spending is a huge portion of the federal budget. While it is ludicrous how much money is being burned in it, what kind of shape would be military be with the money Google & co are currently spending to support it?
Medicare and Medicaid also are big items in the federal budget. How much is Google spending to offer health care to people who cannot for whatever reason, e.g. disability, cannot pay for it?
Google and companies like it can only exist in the benign environment created by strong-ish national governments. Pretending otherwise is just foolish.
This is pretty much what they do, with legal entities in different jurisdictions. Then they can move money around such that the 'profit' is always made in a low-tax environment. For example, I always found it amusing that the invoices for my Amazon purchases had anything to do with Luxembourg (a country with <600k people), until I learned more about how tax havens work. Especially, about the process of 'capturing the state'.
If anyone would like to read more about Tax Havens (aka Secrecy Jurisdictions) I thoroughly recommend the book Treasure Islands by Nicholas Shaxson [1]. (Disclosure: that's an affiliate link for my college's library).
[1] http://www.amazon.co.uk/Treasure-Islands-Havens-Stole-World/...
Bonus points if you can get to 10 items per entity that comprise at least 20% of either entity's budget.
(To reply to my own snark: "Just cut taxes" sounds great until you realize that SSI, Medicare, and the military are far and away our largest expenditures in at the federal level of the United States. In Texas, health care and education together account for 54% of the state budget. What to cut, indeed.)
Maybe I've seen too much big money fraud, but sometimes the combined weight of a very wealthy and powerful federal government is all we have separating the mostly civil society we have now to one where we are constantly being bilked by what amounts to mobsters.
I'll give you an example. The urine screening industry. Many players in that industry set up labs and then proceeded to give doctors, hospitals and clinics kickbacks for approving 'enhanced' urine tests for thousands of dollars rather than the dozens of dollars they used to cost.
The other players (insurance companies, honest competitors, the government) are slow to realize what's happening. Within a few years these unscrupulous companies have amassed a massive war chest.
Whistle blowers appear. They are sued into submission. Competitors complain. They are sued into submission. Insurance companies start to sue. They are sued in return. State level politicians are brought in as investors or otherwise paid so they can ride the gravy train. This gives insurance companies pause. In the mean time the owners and officers of these companies are still bilking all of us to the tune of hundreds of millions, maybe even billions of dollars.
Only the combined weight of the federal government with essentially all the time and money in the world, which has just now amassed enough evidence to go after some of the worst offenders, pose a threat to these people. Anything else is a mere nuisance.
Sometimes it is very, very good to have a counterweight to the power that can be bought.
Currently Amazon pay very little corporation tax in many of the countries they operate in which gives them an unfair tax advange against local competition. This allows them to set lower prices and trade more efficently..
In Amazon's case it would seem like closing some tax loop holes to get them to pay their share would help level the playing field and potentially increase competition between Amazon and regional stores. This can only be a good thing.
The one worry though would be how changing the tax system would affect smaller tech companies. Companies which serve multiple countries with low staff could be caught out by increased tax or just technical / accounting costs if you suddenly need to track and file taxes for every country you have customers in.
From the way I understand it, this is a way to get large companies to pay the same amount of tax as smaller companies.
Never understood why many Americans don't see paying tax as the ultimate act of patriotism, paying for the country they claim to love. They love the country, but resent paying for it. How does that work? Are they the ultimate freetards?
Certainly some companies pay far more and far less than their fair share. I'd wager the tech companies who generally have little in the way of physical presence where they earn revenue, and have towns and cities competing for the chance to host their offices and data centers, probably pay very little relatively.
That logic makes no sense. (If it makes sense to you, please elaborate. How many employees and how many FTEs does one need before this special exemption kicks in, and why that level?)
Now, by "company" I assume you mean "corporation." Corporations form for various reasons, the biggest being liability. Without it, shareholders could be sued individually.
This protection is worth something to the shareholders. I think it's perfectly reasonable that the state, which is the authority that grants companies the right to exist, should be able to extract something from the company - taxes and fees, for example - in order that the company may continue.
Do you think that corporations should exist without paying any fees to the state? If so, why should they get liability protection for free?
If the tax rate is too high, then people could switch from the corporate form of company to a sole proprietorship. A sole proprietor can have employees, and thus "provide jobs for tax payers", even though the business itself is not taxed separately from the proprietor's income.
Now, obviously there's a large set of trade-offs, and the example I gave - a switch to sole proprietorship - is too blunt. My point is that the idea that "provide jobs" necessarily implies "should not be taxed" is so simplistic that it more indicates a lack of understanding of why there are companies in the first place.