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It's always a race to the bottom. Smaller countries (e.g. Ireland, Luxembourg, Malta, Cyprus) need a less broader tax base to cover their outgoings and thus wil

It's always a race to the bottom. Smaller countries (e.g. Ireland, Luxembourg, Malta, Cyprus) need a less broader tax base to cover their outgoings and thus will always be able to offer a low tax base. As a (larger) country, you can decide not to participate, but you'd be pricing yourself out of the market. Imo, it's smarter to tax shareholders more, and corporations less. Corporations are generally productive and having the statutory seat of a multinational company in your country leads to an increase of tax revenue, because 1) people will have jobs, 2) those people will pay income tax, sales tax, will spend at (mainly local) businesses whose shareholders will be taxed, etc. Dividend and capital gain taxes are generally also harder to avoid for the wealthy. At best you can defer them, so you'll always have to pay some tax if you want to spend $1-2-5m a year. Corporate taxes and income taxes are (very) easy to avoid. I wonder how much it would cost to completely eliminate corporate taxes but increase dividend and capital gain taxes to say, 35-40%. Now, that said, I don't think this will ever happen. People in power love their tax breaks too much.

KGIII 9y ago
Capital gains are taxed at the same level as income tax, except when they are long-term investments, meaning longer than a year. The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Take that away and I have no incentive to invest in stability but have every reason to disrupt the market and take advantage of the swings. I'm not sure you want that.
- charlesdm 9y ago
  As capital holders we will always have an incentive to invest. It's a way to let our money work for us, without having to put in time. Also don't forget companies wouldn't get taxed; the companies you hold would not have to pay corporate tax, so there would be more $$'s available to distribute to shareholders. You wouldn't actually be receiving less money after tax. > The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Since most equities are held by tax exempt entities (whether that is domestic or abroad, e.g. pension funds or hedge funds in a tax haven), this argument doesn't make sense. The stock price of AAPL or YELP is not going to tank because an individual investors sells (barring perhaps the CEO). The tax rate is lower generally to account for inflation. But not all countries have sliding capital gains tax rates. The UK has a 28% rate, most capital gains are exempt in Belgium and the Netherlands (but the latter has a small wealth tax), France just introduced a 30% rate, etc.

KGIII 9y ago

Capital gains are taxed at the same level as income tax, except when they are long-term investments, meaning longer than a year. The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Take that away and I have no incentive to invest in stability but have every reason to disrupt the market and take advantage of the swings. I'm not sure you want that.

charlesdm 9y ago
As capital holders we will always have an incentive to invest. It's a way to let our money work for us, without having to put in time. Also don't forget companies wouldn't get taxed; the companies you hold would not have to pay corporate tax, so there would be more $$'s available to distribute to shareholders. You wouldn't actually be receiving less money after tax. > The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability. Since most equities are held by tax exempt entities (whether that is domestic or abroad, e.g. pension funds or hedge funds in a tax haven), this argument doesn't make sense. The stock price of AAPL or YELP is not going to tank because an individual investors sells (barring perhaps the CEO). The tax rate is lower generally to account for inflation. But not all countries have sliding capital gains tax rates. The UK has a 28% rate, most capital gains are exempt in Belgium and the Netherlands (but the latter has a small wealth tax), France just introduced a 30% rate, etc.