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Think of it this way: it's not that the larger companies are breaking the laws or simply not paying taxes that they owe - they're just being more innovative in

Think of it this way: it's not that the larger companies are breaking the laws or simply not paying taxes that they owe - they're just being more innovative in how they approach those things. In a global economy, when there's pressure to pay lower wages by outsourcing labor, pay lower taxes by organizing some or all of the company abroad, or exploit loopholes in domestic laws for greater efficiency, that's just what you're going to do (given enough expertise and resources). It's laughable to think a country could solve any of those things through stricter legislation; that will simply encourage those companies to move more of their operations to jurisdictions with more advantageous laws/taxes/labor/etc. So how do you "level the playing field"? One way would be bringing those advantages to smaller companies through businesses that exploit those same loopholes / tax strategies, providing them as services to companies who otherwise couldn't afford doing it themselves (i.e., exploiting legal loopholes as-a-service, international tax strategies as-a-service, etc). Or, you embrace the global economy, specialize in what your country can do most efficiently (hint: it's not manufacturing anymore in the US), and make it advantageous for companies to keep operating domestically. You lower taxes for everyone, so even the companies with few resources can enjoy the eased financial burden of taxes that normally only the big guys could avoid. In short, you compete globally rather than stick your head in the sand pretending that your country is somehow isolated from the rest of the world and you can fix everything through legislation.

autokad 9y ago
so if if someone takes performance enhancing drugs that has not yet been discovered isn't cheating, they are being innovative. treat it like the olympics. if an athlete that takes a performance enhancing drug that has yet to be prohibited, they still loose their medals and cannot compete.
- curiousgeorgio 9y ago
  Except this game isn't governed by just one body. It's a global economy, so even if your own country "strips your medals", you just move to the country that won't do that.
  - Clubber 9y ago
    >you just move to the country that won't do that. The US leverage is limiting access to US markets for companies that do that.
    - curiousgeorgio 9y ago
      Well, the problem is "companies that do that" is a matter of legal interpretation, and companies will find loopholes in that definition as well. If you get too restrictive, that can also have some pretty serious political consequences, so there's not as much leverage as one might think.
  - falcolas 9y ago
    And face the possibility of being banned from doing business with that one body, or the country that body governs. As bad as China is to foreign companies, they're still bashing away at the doors to be let in. Imagine any of GAFA being blocked from doing business in the US.
charlesdm 9y ago
That's essentially what is happening when people talk about inversions. You have multinationals getting around a design flaw in the US tax system, by acquiring a foreign entity and going abroad.
- refurb 9y ago
  And those design flaws are being addressed. Google can no longer do the "dutch sandwich" and "double irish" after 2020. Of course those companies will just search out another legal alternative to avoid paying taxes. And that is well within their rights.
  - charlesdm 9y ago
    Frankly, it doesn't matter. Tax avoidance is as old as man himself. There will always be another way. Often set up and operating costs are a major driver for tax strategies, and for a company the size of Google, this doesn't matter.
Synaesthesia 9y ago
You’re not mentioning the outsize influence that corporations have on government which leads to them permitting these loopholes. It can be fixed by legislation. In 1952 corporate tax in the US was 33% of total revenue. Today it’s less than 9%.
- curiousgeorgio 9y ago
  So, the same people who are already heavily influenced by corporations are somehow going to wave a magic wand to limit the influence of those who are influencing them? Not sure I believe that will happen (at least, not as long as free speech is still a thing). I don't doubt that it could happen - at least in theory - but in my opinion, we're already too far down that rabbit hole.
  - Synaesthesia 9y ago
    No they won’t do it by themselves, they will only do it under pressure from the population. I’m also pessimistic but that doesn’t mean we should give up. There’s nothing about this that’s writ in stone.
  - Top19 9y ago
    The United States typically goes through cycles of corporate vs government control. This also mirrors the cycle of state vs federal control. Arthur Schlesinger Jr, who won two Pulitzer prizes, wrote extensively about this. I know it’s hard to believe, but the next 15 years will see a dramatic rise of government power and higher corporate taxes. This will happen very suddenly with one party taking complete control of all the branches of government along with having a dominant ideology at their back. Doesn’t really matter if Republicans or Democrats are in control, we can see the progressives on the left like Sherrod Brown, and populists like Steve Bannon on the right (who has spoken highly of Senator Brown), advocating shockingly similar proposals.
- charlesdm 9y ago
  Corporate taxes abroad were also often higher than the US rate at the time. Now they are much lower. If you sell X in, say, the UK -- as a company you often have the option: book the profit in the UK, or in the US. There's not much laws can do to change that, that is just the way having the flexibility to structure your business in whatever way you prefer works. If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again.
marcosdumay 9y ago
> hint: it's not manufacturing anymore in the US I highly doubt that is true. I mean, there are only 3 basic economics sectors, and you just stroke an entire one out of the question. It is way more likely that the reality is more nuanced, and the US can not efficiently manufacture some things, while keeping the lead on some other things.

autokad 9y ago

so if if someone takes performance enhancing drugs that has not yet been discovered isn't cheating, they are being innovative. treat it like the olympics. if an athlete that takes a performance enhancing drug that has yet to be prohibited, they still loose their medals and cannot compete.

curiousgeorgio 9y ago
Except this game isn't governed by just one body. It's a global economy, so even if your own country "strips your medals", you just move to the country that won't do that.
- Clubber 9y ago
  >you just move to the country that won't do that. The US leverage is limiting access to US markets for companies that do that.
  - curiousgeorgio 9y ago
    Well, the problem is "companies that do that" is a matter of legal interpretation, and companies will find loopholes in that definition as well. If you get too restrictive, that can also have some pretty serious political consequences, so there's not as much leverage as one might think.
- falcolas 9y ago
  And face the possibility of being banned from doing business with that one body, or the country that body governs. As bad as China is to foreign companies, they're still bashing away at the doors to be let in. Imagine any of GAFA being blocked from doing business in the US.

charlesdm 9y ago

That's essentially what is happening when people talk about inversions. You have multinationals getting around a design flaw in the US tax system, by acquiring a foreign entity and going abroad.

refurb 9y ago
And those design flaws are being addressed. Google can no longer do the "dutch sandwich" and "double irish" after 2020. Of course those companies will just search out another legal alternative to avoid paying taxes. And that is well within their rights.
- charlesdm 9y ago
  Frankly, it doesn't matter. Tax avoidance is as old as man himself. There will always be another way. Often set up and operating costs are a major driver for tax strategies, and for a company the size of Google, this doesn't matter.

Synaesthesia 9y ago

You’re not mentioning the outsize influence that corporations have on government which leads to them permitting these loopholes. It can be fixed by legislation. In 1952 corporate tax in the US was 33% of total revenue. Today it’s less than 9%.

curiousgeorgio 9y ago
So, the same people who are already heavily influenced by corporations are somehow going to wave a magic wand to limit the influence of those who are influencing them? Not sure I believe that will happen (at least, not as long as free speech is still a thing). I don't doubt that it could happen - at least in theory - but in my opinion, we're already too far down that rabbit hole.
- Synaesthesia 9y ago
  No they won’t do it by themselves, they will only do it under pressure from the population. I’m also pessimistic but that doesn’t mean we should give up. There’s nothing about this that’s writ in stone.
- Top19 9y ago
  The United States typically goes through cycles of corporate vs government control. This also mirrors the cycle of state vs federal control. Arthur Schlesinger Jr, who won two Pulitzer prizes, wrote extensively about this. I know it’s hard to believe, but the next 15 years will see a dramatic rise of government power and higher corporate taxes. This will happen very suddenly with one party taking complete control of all the branches of government along with having a dominant ideology at their back. Doesn’t really matter if Republicans or Democrats are in control, we can see the progressives on the left like Sherrod Brown, and populists like Steve Bannon on the right (who has spoken highly of Senator Brown), advocating shockingly similar proposals.
charlesdm 9y ago
Corporate taxes abroad were also often higher than the US rate at the time. Now they are much lower. If you sell X in, say, the UK -- as a company you often have the option: book the profit in the UK, or in the US. There's not much laws can do to change that, that is just the way having the flexibility to structure your business in whatever way you prefer works. If you were to reduce the US corporate tax rate to 10%, a lot more profit would be booked in the US again.

marcosdumay 9y ago

> hint: it's not manufacturing anymore in the US I highly doubt that is true. I mean, there are only 3 basic economics sectors, and you just stroke an entire one out of the question. It is way more likely that the reality is more nuanced, and the US can not efficiently manufacture some things, while keeping the lead on some other things.