6 ms·

The article identifies the problem, but the conclusion appears to be that we should win the race to the bottom by going straight down. If the USA adopts Irelan

by Pxtl 11y ago

The article identifies the problem, but the conclusion appears to be that we should win the race to the bottom by going straight down. If the USA adopts Ireland's tax code, what happens when another country goes even lower?

malchow 11y ago
It isn't a race to the bottom. The U.S. can have a 0% business tax rate and still have plenty of tax receipts.
austerity 11y ago
At some point other factors like ease of contract enforcement, infrastructure, etc. become more important than shaving off a few more percents from the taxes. So in the end it boils down to which government is able to provide better services for your buck which is how it should be. If only physical persons could relocate to a better place with the same ease corporations do now the governments would suck so much less.
- cuckcuckspruce 11y ago
  >If only physical persons could relocate to a better place with the same ease corporations do now the governments would suck so much less. If physical persons could relocate to a different country with the same ease as corporations then the instability of their tax bases combined with the difficulty of ensuring compliance with their taxing regime might very well spell the end of nation states.
- wrong_variable 11y ago
  Global GDP would double if labour was allowed the same freedom of movement as capital. But the human condition is such that I do not think it's not going to happen anytime soon :(
  - eli_gottlieb 11y ago
    >Global GDP would double if labour was allowed the same freedom of movement as capital. Really? And would global average wages double, or would the profit margins on ever-cheaper labor do all the growing?
    - wrong_variable 11y ago
      Assuming inequality is constant - then yes. Your purchasing power would double, you could afford twice as much food, apple would produce twice as many ipads, etc.
      - eli_gottlieb 11y ago
        >Assuming inequality is constant - then yes. Variables rarely remain constant in the real world in the way that they do in ceteris paribus thought-experiments.
- rayiner 11y ago
  That creates a really significant free-rider problem. In your hypothetical, companies have a strong incentive to start in countries that have strong infrastructure and services (safety nets to reduce risk for founders and early employees, higher-education to ensure a supply of educated workers, etc), then move to a low-tax jurisdiction once they are successful. Imagine if investors in startups couldn't take equity, but were limited to taking a percentage of current profits. That would create a huge disincentive to be an early-stage investor, and a huge incentive to be an investor that could come in with the cheapest rates at the last round of investment for a company that already had established growth and revenues. In the alternate, consider the hypothetical of tax rate auctions at the time of birth. I.e. what tax rate would people bid in order to be born and try to become successful in the U.S. instead of somewhere else?
  - austerity 11y ago
    While that's true, holding everyone by force is the most primitive and inefficient (in terms of common good) solution I can think of. For example, the safety net is in fact an early stage investment so it would be logical if the government providing the safety net would take equity in exchange. In fact that's one of the reasons why safety nets aren't such a good idea. The government essentially becomes an angel fund that funds every single idea no matter how dumb. Can't imagine this bringing about an optimal outcome.
  - yummyfajitas 11y ago
    It doesn't create much of a free rider problem at all, actually. Most tax money is spent on wealth transfers to old people (and non-workers to a lesser extent) and the DoD. These are not particularly useful for startups. If a company headquartered in Singapore makes use of US labor (and implicitly our effective, but extremely overpriced schools), it pays a fair rate of taxation on it. It simply doesn't have to pay taxes to the US on profits from selling goods manufactured in the Philippines to citizens of Japan. That's ultimately the reason for moving corporate registration overseas, and that's the reason my next corporation will probably be headquartered in Singapore. Global taxation is insane; it's taxing US corporations for services that other governments have already provided and taxed them for.
- jcfrei 11y ago
  Removing restrictions on immigration aren't a silver bullet. The opening of labor markets in the EU has caused much lower social mobility than previously expected (ie. many Greeks stayed in Greece even though they could get much better jobs in Germany).
  - austerity 11y ago
    Is there anything I can read up on this? I hear the population of Baltics halved, sounds like a rather drastic effect. Although I didn't imply immigration restrictions are the only problem either- indeed the language and other cultural barriers as well as our tendency to form bonds that are painful to break all work against mobility.
    - jcfrei 11y ago
      This article has quite a few sources: http://www.migrationpolicy.org/article/free-movement-europe-past-and-present http://www.migrationpolicy.org/article/free-movement-europe-... And a more recent report: http://ec.europa.eu/social/BlobServlet?docId=11945&langId=en http://ec.europa.eu/social/BlobServlet?docId=11945&langId=en
Hermel 11y ago
Another solution is to move from taxing profits to taxing consumption, i.e. through VAT, and then enforce it even for virtual services. That way, Apple's US tax would for example be proportional its US sales, which sounds fair.
- Retric 11y ago
  That pushes people to buy goods and services overseas. AKA, why buy a US yacht and pay an extra 20%. The real solution IMO is to tax US companies for world wide profits and have punitive taxes on foreign companies to keep US companies from pretending to move offshore.
  - seanmcdirmid 11y ago
    You mean close the economy to foreign companies ala North Korea? I'm not sure that is a nice way to go, definitely not WTO friendly.
    - Retric 11y ago
      No, more like disqualify them for specific tax breaks, or slightly increase there tax rate ~1-5%. Don't forget China for example is very hard on foreign corporations, yet they are generally happy to jump though hoops for such a large market.
      - seanmcdirmid 11y ago
        Yes, they are, being a US citizen working in China I know that very personally. So if the US goes the China approach, we only welcome foreign companies that we can screw something from, like IP or expertise, and block the rest out (foreign social networking websites? create a great firewall). The US benefits GREATLY from its open market while China's semi closed market in turn hurts it a lot. Ya, foreign companies still operate there, but only with an expectation that it will open in the future, not given today's situation! Having a different tax rate for foreign companies would basically destroy the WTO, all those treaties that benefit the USA in lopsided ways go away, and we will just lose a lot of wealth in one swoop. All the other countries will retaliate of course, taking a significant chunk of global GDP that relates to trade down, almost probably causing a few wars and such.
Spooky23 11y ago
Personally, I don't think the income tax for corporate entities makes sense. The scale and complexity of these organizations makes compliance and enforcement ridiculously expensive and unfair. Most famously, General Electric has hundreds or low thousands of IRS employees on-site performing audit functions continuously. It's a waste of everyone's time. IMO, it makes more sense to apply excise taxes, consumption taxes or taxes on corporate treasury balances. Or not to tax them at all.
- someguydave 11y ago
  > Or not to tax them at all. Agreed. I challenge anyone who complained that Congress should not have 'default' back in 2013 (in other words, continue to issue debt forever) to explain why the tax rate ought to be nonzero? I mean, if people continue to purchase Federal bonds, why tax corporations (or anyone)? If you want to tax people and corporations to 'reduce inequality', consider your position on fairness...
  - wavefunction 11y ago
    Because corporations use _and require_ a disproportionate amount of government regulatory protection/oversight and bureaucracy, as well as government spending. For example, our navy is mighty and far-flung across the globe, and it's not because we're proud of our maritime traditions but because the force of the US Navy ensures stability for commerce. The average American benefits to a small degree from this international commerce, but the corporations (and by extension the wealthy who own the corporations) benefit far more. This is why we have progressive taxation schemes where the wealthy pay more, at more levels. Or they're supposed to, at least.
    - yummyfajitas 11y ago
      If this is true, lets just levy an international shipping tax on goods shipped under the protection of the US Navy. Anyone who doesn't pay their (purely voluntary) Navy tax will also be left to the pirates if that situation arises. This tax will then be added to the cost of shipped goods. If the wealthy are actually the people consuming those shipped goods, then they will in fact be the ones to pay. If you are wrong, and the primary beneficiaries of international trade are actually middle class consumers, then middle class consumers will pay.
lukasm 11y ago
reduce corporate tax by half and introduce revenue tax of 0.5% ?
rorykoehler 11y ago
If the USA adopted Ireland's tax code then companies would have to pay 12.5% on trading income. The reason Ireland is a good place for American companies is because of a loophole called the Double Irish. Basically Irish based companies pay tax where they are originally registered and in Delaware the code stipulates that taxes get paid where the revenue was generated. That means the US expects the companies to pay the tax in Ireland and the Irish expect the companies to pay the tax in the US. Therefore the potential tax payment ends up in no-mans land and never gets paid whilst remaining all perfectly legal.
- s_dev 11y ago
  Double Irish is virtually finished -- your information is outdated. Only a select number of companies can avail of it that had already done so and it's being phased out and will be completely gone by 2020.
  - rorykoehler 11y ago
    It is what brought all the big tech companies to Ireland in the first place but yes it is being phased out. The latest seems to be another loophole where companies register a subsidiary as tax resident in an actual 0% tax haven and then pay royalties to said subsidiary. This gives them zero profit and therefore zero taxable income but there is very little Ireland can do about without shooting itself in the foot (such as taxing revenue and ensuring Apple et al close up shop and take their business elsewhere). If they decide to be tax resident in Ireland the 12.5% corporation tax is hardly a 'tax haven' but it's still better than most. Another big draw is the amount of money the Irish government puts up to attract FDI through their Industrial Development Authority (IDA).

by Pxtl 11y ago

malchow 11y ago

It isn't a race to the bottom. The U.S. can have a 0% business tax rate and still have plenty of tax receipts.

austerity 11y ago

At some point other factors like ease of contract enforcement, infrastructure, etc. become more important than shaving off a few more percents from the taxes. So in the end it boils down to which government is able to provide better services for your buck which is how it should be. If only physical persons could relocate to a better place with the same ease corporations do now the governments would suck so much less.

cuckcuckspruce 11y ago
>If only physical persons could relocate to a better place with the same ease corporations do now the governments would suck so much less. If physical persons could relocate to a different country with the same ease as corporations then the instability of their tax bases combined with the difficulty of ensuring compliance with their taxing regime might very well spell the end of nation states.
wrong_variable 11y ago
Global GDP would double if labour was allowed the same freedom of movement as capital. But the human condition is such that I do not think it's not going to happen anytime soon :(
- eli_gottlieb 11y ago
  >Global GDP would double if labour was allowed the same freedom of movement as capital. Really? And would global average wages double, or would the profit margins on ever-cheaper labor do all the growing?
  - wrong_variable 11y ago
    Assuming inequality is constant - then yes. Your purchasing power would double, you could afford twice as much food, apple would produce twice as many ipads, etc.
    - eli_gottlieb 11y ago
      >Assuming inequality is constant - then yes. Variables rarely remain constant in the real world in the way that they do in ceteris paribus thought-experiments.
rayiner 11y ago
That creates a really significant free-rider problem. In your hypothetical, companies have a strong incentive to start in countries that have strong infrastructure and services (safety nets to reduce risk for founders and early employees, higher-education to ensure a supply of educated workers, etc), then move to a low-tax jurisdiction once they are successful. Imagine if investors in startups couldn't take equity, but were limited to taking a percentage of current profits. That would create a huge disincentive to be an early-stage investor, and a huge incentive to be an investor that could come in with the cheapest rates at the last round of investment for a company that already had established growth and revenues. In the alternate, consider the hypothetical of tax rate auctions at the time of birth. I.e. what tax rate would people bid in order to be born and try to become successful in the U.S. instead of somewhere else?
- austerity 11y ago
  While that's true, holding everyone by force is the most primitive and inefficient (in terms of common good) solution I can think of. For example, the safety net is in fact an early stage investment so it would be logical if the government providing the safety net would take equity in exchange. In fact that's one of the reasons why safety nets aren't such a good idea. The government essentially becomes an angel fund that funds every single idea no matter how dumb. Can't imagine this bringing about an optimal outcome.
- yummyfajitas 11y ago
  It doesn't create much of a free rider problem at all, actually. Most tax money is spent on wealth transfers to old people (and non-workers to a lesser extent) and the DoD. These are not particularly useful for startups. If a company headquartered in Singapore makes use of US labor (and implicitly our effective, but extremely overpriced schools), it pays a fair rate of taxation on it. It simply doesn't have to pay taxes to the US on profits from selling goods manufactured in the Philippines to citizens of Japan. That's ultimately the reason for moving corporate registration overseas, and that's the reason my next corporation will probably be headquartered in Singapore. Global taxation is insane; it's taxing US corporations for services that other governments have already provided and taxed them for.
jcfrei 11y ago
Removing restrictions on immigration aren't a silver bullet. The opening of labor markets in the EU has caused much lower social mobility than previously expected (ie. many Greeks stayed in Greece even though they could get much better jobs in Germany).
- austerity 11y ago
  Is there anything I can read up on this? I hear the population of Baltics halved, sounds like a rather drastic effect. Although I didn't imply immigration restrictions are the only problem either- indeed the language and other cultural barriers as well as our tendency to form bonds that are painful to break all work against mobility.
  - jcfrei 11y ago
    This article has quite a few sources: http://www.migrationpolicy.org/article/free-movement-europe-past-and-present http://www.migrationpolicy.org/article/free-movement-europe-... And a more recent report: http://ec.europa.eu/social/BlobServlet?docId=11945&langId=en http://ec.europa.eu/social/BlobServlet?docId=11945&langId=en

Hermel 11y ago

Another solution is to move from taxing profits to taxing consumption, i.e. through VAT, and then enforce it even for virtual services. That way, Apple's US tax would for example be proportional its US sales, which sounds fair.

Retric 11y ago
That pushes people to buy goods and services overseas. AKA, why buy a US yacht and pay an extra 20%. The real solution IMO is to tax US companies for world wide profits and have punitive taxes on foreign companies to keep US companies from pretending to move offshore.
- seanmcdirmid 11y ago
  You mean close the economy to foreign companies ala North Korea? I'm not sure that is a nice way to go, definitely not WTO friendly.
  - Retric 11y ago
    No, more like disqualify them for specific tax breaks, or slightly increase there tax rate ~1-5%. Don't forget China for example is very hard on foreign corporations, yet they are generally happy to jump though hoops for such a large market.
    - seanmcdirmid 11y ago
      Yes, they are, being a US citizen working in China I know that very personally. So if the US goes the China approach, we only welcome foreign companies that we can screw something from, like IP or expertise, and block the rest out (foreign social networking websites? create a great firewall). The US benefits GREATLY from its open market while China's semi closed market in turn hurts it a lot. Ya, foreign companies still operate there, but only with an expectation that it will open in the future, not given today's situation! Having a different tax rate for foreign companies would basically destroy the WTO, all those treaties that benefit the USA in lopsided ways go away, and we will just lose a lot of wealth in one swoop. All the other countries will retaliate of course, taking a significant chunk of global GDP that relates to trade down, almost probably causing a few wars and such.

Spooky23 11y ago

Personally, I don't think the income tax for corporate entities makes sense. The scale and complexity of these organizations makes compliance and enforcement ridiculously expensive and unfair. Most famously, General Electric has hundreds or low thousands of IRS employees on-site performing audit functions continuously. It's a waste of everyone's time. IMO, it makes more sense to apply excise taxes, consumption taxes or taxes on corporate treasury balances. Or not to tax them at all.

someguydave 11y ago
> Or not to tax them at all. Agreed. I challenge anyone who complained that Congress should not have 'default' back in 2013 (in other words, continue to issue debt forever) to explain why the tax rate ought to be nonzero? I mean, if people continue to purchase Federal bonds, why tax corporations (or anyone)? If you want to tax people and corporations to 'reduce inequality', consider your position on fairness...
- wavefunction 11y ago
  Because corporations use _and require_ a disproportionate amount of government regulatory protection/oversight and bureaucracy, as well as government spending. For example, our navy is mighty and far-flung across the globe, and it's not because we're proud of our maritime traditions but because the force of the US Navy ensures stability for commerce. The average American benefits to a small degree from this international commerce, but the corporations (and by extension the wealthy who own the corporations) benefit far more. This is why we have progressive taxation schemes where the wealthy pay more, at more levels. Or they're supposed to, at least.
  - yummyfajitas 11y ago
    If this is true, lets just levy an international shipping tax on goods shipped under the protection of the US Navy. Anyone who doesn't pay their (purely voluntary) Navy tax will also be left to the pirates if that situation arises. This tax will then be added to the cost of shipped goods. If the wealthy are actually the people consuming those shipped goods, then they will in fact be the ones to pay. If you are wrong, and the primary beneficiaries of international trade are actually middle class consumers, then middle class consumers will pay.

lukasm 11y ago

reduce corporate tax by half and introduce revenue tax of 0.5% ?

rorykoehler 11y ago

If the USA adopted Ireland's tax code then companies would have to pay 12.5% on trading income. The reason Ireland is a good place for American companies is because of a loophole called the Double Irish. Basically Irish based companies pay tax where they are originally registered and in Delaware the code stipulates that taxes get paid where the revenue was generated. That means the US expects the companies to pay the tax in Ireland and the Irish expect the companies to pay the tax in the US. Therefore the potential tax payment ends up in no-mans land and never gets paid whilst remaining all perfectly legal.

s_dev 11y ago
Double Irish is virtually finished -- your information is outdated. Only a select number of companies can avail of it that had already done so and it's being phased out and will be completely gone by 2020.
- rorykoehler 11y ago
  It is what brought all the big tech companies to Ireland in the first place but yes it is being phased out. The latest seems to be another loophole where companies register a subsidiary as tax resident in an actual 0% tax haven and then pay royalties to said subsidiary. This gives them zero profit and therefore zero taxable income but there is very little Ireland can do about without shooting itself in the foot (such as taxing revenue and ensuring Apple et al close up shop and take their business elsewhere). If they decide to be tax resident in Ireland the 12.5% corporation tax is hardly a 'tax haven' but it's still better than most. Another big draw is the amount of money the Irish government puts up to attract FDI through their Industrial Development Authority (IDA).