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Here's something interesting: The US has the second highest corporate tax rates of all OECD countries, whereas most EU countries have much higher personal incom

Here's something interesting: The US has the second highest corporate tax rates of all OECD countries, whereas most EU countries have much higher personal income taxes. Now this might be misleading. My roommate is a corporate/tax law student and he was dumbfounded by this. He pointed out that the effective tax rate might be quite different. In any case it's not what you expect. >https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

dragonwriter 10y ago
Tax rates are pretty meaningless to compare because of differences in credits, deductions, and methods of calculating tax base. And, for that matter, different sets of taxes affecting the same entity with different names.
- sandstrom 10y ago
  In the US especially (and also a large extent in Europe) companies bribe/lobby themselves to favorable laws, so in many cases the effective tax-rate is much lower. For example, Apple pays an effective tax-rate around 15% (US 'official' corporate tax is at 35%). Apart from tax-payers loosing out on revenue it also distorts competition, since smaller firms cannot lobby and evade taxes to the extent larger firms can, leading to lower ROE and thus less investment.
  - rayiner 10y ago
    While your points are true, the third does not follow from the first two. Favored industries do get tax breaks, though more for garnering targeted votes than lobbying. That's why Exxon pays 15% and WalMart pays 30%. The tech industry, including Apple, largely does not benefit from targeted tax breaks. They lay low taxes because they deal in IP and have international operations, which allows them to easily shift taxes to lower-tax jurisdictions. It's easy to look at Wal-Mart's supply chain, which involves widgets, and see where costs were incurred and profits made. Much less so with Apple. And those tax rules tech companies take advantage of are not loopholes or tax breaks. They're reasonable and sometimes intrinsically necessary tax rules that can be arbitraged in an international system (often with the explicit aid of legislatures in countries like Ireland).
    - uola 10y ago
      > And those tax rules tech companies take advantage of are not loopholes or tax breaks. "The regulations, however, had significant unintended consequences and opened the door to a host of tax avoidance schemes. Under Subpart F, passive income paid from one separate legal entity to another separate legal entity – even if they were both within the same corporate structure – was immediately taxable. However, with the implementation of the check-the-box regulations a U.S. MNC could set up a CFC subsidiary in a tax haven and direct it to receive passive income such as interest, dividend, or royalty payments from a lower tiered related CFC without incurring Subpart F income. [...] On March 26, 1998, Treasury and IRS then proposed regulations to close the loophole opened by the check-the-box rule." Page 12 http://www.hsgac.senate.gov/download/?id=7B9717AF-592F-48BE-815B-FD8D38A71663 http://www.hsgac.senate.gov/download/?id=7B9717AF-592F-48BE-...
    - sandstrom 10y ago
      I agree that Apple has international operatings allowing them to shift taxes to lower-tax jurisdictions. That's partly how they evade paying taxes. One trick is to park it abroad and lobby for tax-amnesty (a horrible name btw): - http://www.bloomberg.com/news/articles/2016-01-03/jokowi-seeks-2016-kick-off-for-tax-amnesty-plan-seen-as-flawed http://www.bloomberg.com/news/articles/2016-01-03/jokowi-see... - http://archive.fortune.com/2011/02/16/news/companies/repatriation_lobby.fortune/index.htm http://archive.fortune.com/2011/02/16/news/companies/repatri... Another one is to use the money parked abroad (i.e. not yet taxed) to buy expensive things and then write down most of the asset a year or two later. --- "[they] are not loopholes or tax breaks. They're reasonable and sometimes intrinsically necessary tax rules that can be arbitraged in an international system" Sounds exactly like tax-evasion to me! :) --- Also, to be clear, I love capitalism and happen to think that 35% corporate tax is a bit too high (~25 feels reasonable). What I don't like is larger firms having lower rates (unfair) and many countries loosing out on tax revenue with a few 'tax havens' getting loads of tax-revenue while producing nothing of value -- Luxembourg, Lichtenstein, British Virgin Islands, Ireland (to some extent) etc.
      - adrianratnapala 10y ago
        No. That's tax avoidance. Evasion is when you actually don't pay taxes that you legally owe, e.g. by hiding your income. There is some idea that people and companies have a moral duty not to organise their affairs in a tax efficient way. But the laws they lobby for are just what create the distortions.
- WillPostForFood 10y ago
  That's true, but the bigger issue with corporate taxes in the US is that large multinationals funnel their income to low tax countries. And that's [partially driven by the very high rate.
wavefunction 10y ago
The US has one of the lowest _effective_ tax rates for corporations which is the rate they actually pay at.
- sanoli 10y ago
  I didn't know that. I always thought it very unfair that individuals have a much higher tax percentage to pay than corporations, and somehow I tought the US wasn't like that.
  - adrianratnapala 10y ago
    Why is that unfair? Perhaps the fairest system would remove corporate taxes entirely and recoup it from income tax increases. That way rich shareholders will pay at the maximum tax rate, while ordinary savers who's mutual fund happens to invest in a corportation pay at a lower rate. There could be practical reasons against such a scheme, Maybe it would be easier to game than the current system. But the point is, fairness consists in distributing the tax burden among people -- abstractions like "corporation" are neither here nor there.
objectivistbrit 10y ago
Denmark also has a less regulated financial system than the US. The idea of the US, when compared to Europe as representing extreme laissez-faire capitalism, is not an accurate reflection of reality. They're all variants of state-regulated semi-free markets.
- deleted 10y ago
  [deleted]
afterburner 10y ago
The official rate means nothing, the effective rate is everything. One way to get that is to look at tax revenue as percentage of GDP: https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven... For OECD countries only: http://ctj.org/ctjreports/2013/04/the_us_continues_to_be_one_of_the_least_taxed_of_the_developed_countries.php http://ctj.org/ctjreports/2013/04/the_us_continues_to_be_one...
- tjl 10y ago
  The problem with that statistic is that it lumps all taxes together.
  - xapata 10y ago
    That's the whole point. One metric to measure how much the government takes. Otherwise it's quite difficult to pick through the various methods of taxation.
AndrewDucker 10y ago
More usefully - total tax as a percentage of GDP: https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven... The USA is a fair way down.

dragonwriter 10y ago

Tax rates are pretty meaningless to compare because of differences in credits, deductions, and methods of calculating tax base. And, for that matter, different sets of taxes affecting the same entity with different names.

sandstrom 10y ago
In the US especially (and also a large extent in Europe) companies bribe/lobby themselves to favorable laws, so in many cases the effective tax-rate is much lower. For example, Apple pays an effective tax-rate around 15% (US 'official' corporate tax is at 35%). Apart from tax-payers loosing out on revenue it also distorts competition, since smaller firms cannot lobby and evade taxes to the extent larger firms can, leading to lower ROE and thus less investment.
- rayiner 10y ago
  While your points are true, the third does not follow from the first two. Favored industries do get tax breaks, though more for garnering targeted votes than lobbying. That's why Exxon pays 15% and WalMart pays 30%. The tech industry, including Apple, largely does not benefit from targeted tax breaks. They lay low taxes because they deal in IP and have international operations, which allows them to easily shift taxes to lower-tax jurisdictions. It's easy to look at Wal-Mart's supply chain, which involves widgets, and see where costs were incurred and profits made. Much less so with Apple. And those tax rules tech companies take advantage of are not loopholes or tax breaks. They're reasonable and sometimes intrinsically necessary tax rules that can be arbitraged in an international system (often with the explicit aid of legislatures in countries like Ireland).
  - uola 10y ago
    > And those tax rules tech companies take advantage of are not loopholes or tax breaks. "The regulations, however, had significant unintended consequences and opened the door to a host of tax avoidance schemes. Under Subpart F, passive income paid from one separate legal entity to another separate legal entity – even if they were both within the same corporate structure – was immediately taxable. However, with the implementation of the check-the-box regulations a U.S. MNC could set up a CFC subsidiary in a tax haven and direct it to receive passive income such as interest, dividend, or royalty payments from a lower tiered related CFC without incurring Subpart F income. [...] On March 26, 1998, Treasury and IRS then proposed regulations to close the loophole opened by the check-the-box rule." Page 12 http://www.hsgac.senate.gov/download/?id=7B9717AF-592F-48BE-815B-FD8D38A71663 http://www.hsgac.senate.gov/download/?id=7B9717AF-592F-48BE-...
  - sandstrom 10y ago
    I agree that Apple has international operatings allowing them to shift taxes to lower-tax jurisdictions. That's partly how they evade paying taxes. One trick is to park it abroad and lobby for tax-amnesty (a horrible name btw): - http://www.bloomberg.com/news/articles/2016-01-03/jokowi-seeks-2016-kick-off-for-tax-amnesty-plan-seen-as-flawed http://www.bloomberg.com/news/articles/2016-01-03/jokowi-see... - http://archive.fortune.com/2011/02/16/news/companies/repatriation_lobby.fortune/index.htm http://archive.fortune.com/2011/02/16/news/companies/repatri... Another one is to use the money parked abroad (i.e. not yet taxed) to buy expensive things and then write down most of the asset a year or two later. --- "[they] are not loopholes or tax breaks. They're reasonable and sometimes intrinsically necessary tax rules that can be arbitraged in an international system" Sounds exactly like tax-evasion to me! :) --- Also, to be clear, I love capitalism and happen to think that 35% corporate tax is a bit too high (~25 feels reasonable). What I don't like is larger firms having lower rates (unfair) and many countries loosing out on tax revenue with a few 'tax havens' getting loads of tax-revenue while producing nothing of value -- Luxembourg, Lichtenstein, British Virgin Islands, Ireland (to some extent) etc.
    - adrianratnapala 10y ago
      No. That's tax avoidance. Evasion is when you actually don't pay taxes that you legally owe, e.g. by hiding your income. There is some idea that people and companies have a moral duty not to organise their affairs in a tax efficient way. But the laws they lobby for are just what create the distortions.
WillPostForFood 10y ago
That's true, but the bigger issue with corporate taxes in the US is that large multinationals funnel their income to low tax countries. And that's [partially driven by the very high rate.

wavefunction 10y ago

The US has one of the lowest _effective_ tax rates for corporations which is the rate they actually pay at.

sanoli 10y ago
I didn't know that. I always thought it very unfair that individuals have a much higher tax percentage to pay than corporations, and somehow I tought the US wasn't like that.
- adrianratnapala 10y ago
  Why is that unfair? Perhaps the fairest system would remove corporate taxes entirely and recoup it from income tax increases. That way rich shareholders will pay at the maximum tax rate, while ordinary savers who's mutual fund happens to invest in a corportation pay at a lower rate. There could be practical reasons against such a scheme, Maybe it would be easier to game than the current system. But the point is, fairness consists in distributing the tax burden among people -- abstractions like "corporation" are neither here nor there.

objectivistbrit 10y ago

Denmark also has a less regulated financial system than the US. The idea of the US, when compared to Europe as representing extreme laissez-faire capitalism, is not an accurate reflection of reality. They're all variants of state-regulated semi-free markets.

deleted 10y ago
[deleted]

afterburner 10y ago

The official rate means nothing, the effective rate is everything. One way to get that is to look at tax revenue as percentage of GDP: https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven... For OECD countries only: http://ctj.org/ctjreports/2013/04/the_us_continues_to_be_one_of_the_least_taxed_of_the_developed_countries.php http://ctj.org/ctjreports/2013/04/the_us_continues_to_be_one...

tjl 10y ago
The problem with that statistic is that it lumps all taxes together.
- xapata 10y ago
  That's the whole point. One metric to measure how much the government takes. Otherwise it's quite difficult to pick through the various methods of taxation.

AndrewDucker 10y ago

More usefully - total tax as a percentage of GDP: https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven... The USA is a fair way down.