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The big problem is really the changes made to the US tax code during the Clinton era and continued by Bush and Obama. In particular, the ability of US companies

The big problem is really the changes made to the US tax code during the Clinton era and continued by Bush and Obama. In particular, the ability of US companies to defer taxation on profits made abroad until they are repatriated. Effectively, these profits sit in limbo since they aren't taxable by the country in which they are 'made' (e.g Ireland) because they belong to a US company. Companies then apply pressure on politicians to announce tax amnesties that enable them to repatriate the profits with negligible tax. Blaming all of the above on other countries by casting them as tax havens is a complete charade. The US could fix this problem today on its own if it wanted to. It just needs to get its house in order and e.g. get rid of the deferral rules. The best article I've read on the subject was here: http://www.rollingstone.com/politics/news/the-biggest-tax-scam-ever-20140827 http://www.rollingstone.com/politics/news/the-biggest-tax-sc... Edit: Another good article on this is here: http://www.irisheconomy.ie/index.php/2016/01/22/upsetting-the-applecart/#more-18193 http://www.irisheconomy.ie/index.php/2016/01/22/upsetting-th... It's a little bit more technical as it's written by an Irish economist for an audience of economists, but it's interesting in that it gives a good overview of the situation from an Irish perspective.

3pt14159 11y ago
My understanding was that they do pay tax in the country that the profits are earned (unless of course the country has a 0% corporate tax rate), but that they don't pay tax in the parent company until they repatriate. If that is the case then I'm fine with it. I'm obviously not fine with tax holidays / amnesties; but I consider that a different matter.
- justincormack 11y ago
  Well they do in theory, in practise of course they don't, and the end recipient country is usually Bermuda or somewhere, via other tax evasion schemes.
- deleted 11y ago
  [deleted]
- tomp 11y ago
  Because of different service and intellectual property agreements between different subsidiaries of the company, the subsidiaries almost never generate substancial (accounting) profit. IMO, that's perfectly fair. E.g. Apple isn't generating profit in the UK; it's generating sales in the UK (which are taxed as all sales are), but most of its profit was generated in the US (design, research, strategy, innovation, ...). I think it's a huge problem that the US doesn't force companies to pay tax on profits.
  - 3pt14159 11y ago
    That isn't exactly profit. As long as things are sold at realistic prices (ie, bulk iPhones are sold to the subsidiary at the same price they would be sold to a domestic buyer) then it should all be fine. It generally works out for multinationals headquartered in Canada, but granted there are far fewer tax loopholes here.
s_dev 11y ago
Ireland is regularly called a tax haven and comes under heavy scrutiny. It seems politically convenient for many of the bigger countries to point the finger rather than introduce their own reforms. Oddly often by places like the UK who happily operates the Channel Islands, Isle of Man and Jersey in the same manner. Irelands advertised rate is actually quite close to its effective rate which most other countries don't do. Belgium, where the official rate stands at 34% but this report said companies were handing over 6.5% on their profits. The truth is though if everywhere is partially a tax haven then no where is. http://www.pwc.com/gx/en/paying-taxes/pdf/pwc-paying-taxes-2015-high-resolution.pdf http://www.pwc.com/gx/en/paying-taxes/pdf/pwc-paying-taxes-2...
- TheOtherHobbes 11y ago
  The Channel Islands and IoM are Crown Dependencies and not technically part of the main UK economy. They live in a sweet constitutional loophole which gives them the right to set their own tax policies. Inevitably they're very different to those set by the British parliament for the mainland. The British monarchy, which effectively administers them directly, through a small bureaucracy, apparently has no problem with this. Some of the population might have a problem with it, but it's never been allowed to become a political issue. Much of the real - but unofficial - value of the UK economy comes from tax avoidance. This partly explains why there's so much condescension here for manufacturing, software engineering, and start-ups: real entrepreneurs work in investment management, market trading, high-level deal-making and negotiation, and tax strategy. They don't play with computers - that's something kids and engineers do.
sschueller 11y ago
Yet individuals with a US passport living in another country and not doing any commerce in the US are required to file and pay taxes in the US. The US is the only country (there may be one other small African nation) that taxes it's citizens abroad. Giving up your citizenship is also no simple. The cost has gone form $300 to over $2400 and you need to pay taxes that are due 10 years back. The reason for giving up citizenship may also not be because of taxes.
- gcb0 11y ago
  it's been a long time that corporations have more rights than proper citizens in the us. the aclu or some org used to have in the 90s several "challenges" for people that could apply corporate benefits to individuals in court. i don't think any prize for claimed ever. but I'm not recalling the correct program name to be sure
- todd8 11y ago
  All unrealized capital gains are also taxed upon giving up citizenship. Furthermore, one still pays U.S. Estate taxes on what one has left upon death, no matter how many years in the past one gave up his or her citizenship. Currently, Federal estate tax is 40% (there is also state estate tax up to 20%). You also are not allowed to spend too much time back in the US once you have relinquished citizenship without triggering US income taxes again.
  - sschueller 11y ago
    How is it possible for the US to collect estate tax on a non-US citizen? Doesn't that go against international law? Once you are no longer a citizen that country has zero right to ask for anything.
seanmcdirmid 11y ago
Increasingly it isn't Ireland, but China or some other big economy where the money is made with their own incompatible taxation systems (you can deduct "foreign taxes paid" but not necessarily other cost of doing business fees that exist in lieu of taxes). Effective double taxation is definitely possible when one tries to tax worldwide income, leading to a competitive disadvantage for American companies compared to their non-American competitors (e.g. IBM vs. SAP). So the US government introduces these loopholes to even the playing field, which are easily gamed and lead to abuses.

3pt14159 11y ago

My understanding was that they do pay tax in the country that the profits are earned (unless of course the country has a 0% corporate tax rate), but that they don't pay tax in the parent company until they repatriate. If that is the case then I'm fine with it. I'm obviously not fine with tax holidays / amnesties; but I consider that a different matter.

justincormack 11y ago
Well they do in theory, in practise of course they don't, and the end recipient country is usually Bermuda or somewhere, via other tax evasion schemes.
deleted 11y ago
[deleted]
tomp 11y ago
Because of different service and intellectual property agreements between different subsidiaries of the company, the subsidiaries almost never generate substancial (accounting) profit. IMO, that's perfectly fair. E.g. Apple isn't generating profit in the UK; it's generating sales in the UK (which are taxed as all sales are), but most of its profit was generated in the US (design, research, strategy, innovation, ...). I think it's a huge problem that the US doesn't force companies to pay tax on profits.
- 3pt14159 11y ago
  That isn't exactly profit. As long as things are sold at realistic prices (ie, bulk iPhones are sold to the subsidiary at the same price they would be sold to a domestic buyer) then it should all be fine. It generally works out for multinationals headquartered in Canada, but granted there are far fewer tax loopholes here.

s_dev 11y ago

Ireland is regularly called a tax haven and comes under heavy scrutiny. It seems politically convenient for many of the bigger countries to point the finger rather than introduce their own reforms. Oddly often by places like the UK who happily operates the Channel Islands, Isle of Man and Jersey in the same manner. Irelands advertised rate is actually quite close to its effective rate which most other countries don't do. Belgium, where the official rate stands at 34% but this report said companies were handing over 6.5% on their profits. The truth is though if everywhere is partially a tax haven then no where is. http://www.pwc.com/gx/en/paying-taxes/pdf/pwc-paying-taxes-2015-high-resolution.pdf http://www.pwc.com/gx/en/paying-taxes/pdf/pwc-paying-taxes-2...

TheOtherHobbes 11y ago
The Channel Islands and IoM are Crown Dependencies and not technically part of the main UK economy. They live in a sweet constitutional loophole which gives them the right to set their own tax policies. Inevitably they're very different to those set by the British parliament for the mainland. The British monarchy, which effectively administers them directly, through a small bureaucracy, apparently has no problem with this. Some of the population might have a problem with it, but it's never been allowed to become a political issue. Much of the real - but unofficial - value of the UK economy comes from tax avoidance. This partly explains why there's so much condescension here for manufacturing, software engineering, and start-ups: real entrepreneurs work in investment management, market trading, high-level deal-making and negotiation, and tax strategy. They don't play with computers - that's something kids and engineers do.

sschueller 11y ago

Yet individuals with a US passport living in another country and not doing any commerce in the US are required to file and pay taxes in the US. The US is the only country (there may be one other small African nation) that taxes it's citizens abroad. Giving up your citizenship is also no simple. The cost has gone form $300 to over $2400 and you need to pay taxes that are due 10 years back. The reason for giving up citizenship may also not be because of taxes.

gcb0 11y ago
it's been a long time that corporations have more rights than proper citizens in the us. the aclu or some org used to have in the 90s several "challenges" for people that could apply corporate benefits to individuals in court. i don't think any prize for claimed ever. but I'm not recalling the correct program name to be sure
todd8 11y ago
All unrealized capital gains are also taxed upon giving up citizenship. Furthermore, one still pays U.S. Estate taxes on what one has left upon death, no matter how many years in the past one gave up his or her citizenship. Currently, Federal estate tax is 40% (there is also state estate tax up to 20%). You also are not allowed to spend too much time back in the US once you have relinquished citizenship without triggering US income taxes again.
- sschueller 11y ago
  How is it possible for the US to collect estate tax on a non-US citizen? Doesn't that go against international law? Once you are no longer a citizen that country has zero right to ask for anything.

seanmcdirmid 11y ago

Increasingly it isn't Ireland, but China or some other big economy where the money is made with their own incompatible taxation systems (you can deduct "foreign taxes paid" but not necessarily other cost of doing business fees that exist in lieu of taxes). Effective double taxation is definitely possible when one tries to tax worldwide income, leading to a competitive disadvantage for American companies compared to their non-American competitors (e.g. IBM vs. SAP). So the US government introduces these loopholes to even the playing field, which are easily gamed and lead to abuses.