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> If you make it clear there will never be a tax holiday, but that you will instead keep adjusting the rules to go after earnings withheld abroad, at some point

> If you make it clear there will never be a tax holiday, but that you will instead keep adjusting the rules to go after earnings withheld abroad, at some point the rational choice for them will be to bite the bullet and repatriate the income. Another rational choice is to relocate the company, a la Burger King's move to Canada [1,2]. Then the government can counter with tariffs [3,4]. It's a balancing act, though. [1] "Tax inversion", Wikipedia. https://en.wikipedia.org/wiki/Tax_inversion https://en.wikipedia.org/wiki/Tax_inversion [2] "Let's Abolish The Corporate Income Tax", John C. Goodman, Forbes, Aug 26, 2014. https://www.forbes.com/sites/johngoodman/2014/08/26/lets-abolish-the-corporate-income-tax/#397ac4682793 https://www.forbes.com/sites/johngoodman/2014/08/26/lets-abo... [3] "Trump takes aim at Obama's ban on tax inversions", Larry Light, Moneywatch, April 21, 2017. https://www.cbsnews.com/news/trump-taxes-corporate-transfer-overseas/ https://www.cbsnews.com/news/trump-taxes-corporate-transfer-... [4] "Trump to keep Obama rule curbing corporate tax inversion deals", Reuters, October 4, 2017. https://www.reuters.com/article/us-usa-tax-inversions/trump-to-keep-obama-rule-curbing-corporate-tax-inversion-deals-idUSKBN1C92RQ https://www.reuters.com/article/us-usa-tax-inversions/trump-...

toomuchtodo 9y ago
> It's a balancing act, though. At the end of the day, there is no way you as a corporation can entirely subvert a nation state. I find it odd even that rational individuals think its possible against an adversary (typically with effectively unlimited resources) that can tariff you, dissolve your organization, and even jail you.
- landryraccoon 9y ago
  It's not corporation against nation state, it's nation state against nation state. I'm pretty sure China would be quite happy if the US punishes Apple. That means that their protectionist policy towards Huawei will be even more effective. It is difficult for me to imagine other nations either not rolling out the red carpet to bring Apple over, or giving virtually tax free giveaways to their own companies to gain smartphone supremacy.
  - crdoconnor 9y ago
    >I'm pretty sure China would be quite happy if the US punishes Apple. That means that their protectionist policy towards Huawei will be even more effective. If the US put onerous taxes on the purchase of Apple phones that might be true. If the US instead just collects a larger share of Apple's profits then Apple is going to go on exactly as before and just not deliver quite as much cash to its shareholders.
    - mattnewton 9y ago
      Taxing the phone or the company’s margins should have the same effect, right? They’re both costs on apple’s revenue. Barring maybe some enforcement issue or something it makes no difference how you collect it, Apple will pass some of it off to their customers and eat another percentage based on whatever the new cost/demand curve looks like to them.
      - crdoconnor 9y ago
        >Taxing the phone or the company’s margins should have the same effect, right? Wrong >They’re both costs on apple’s revenue. Hardly. Make zero profit and you pay zero tax on that profit.
        mattnewton 9y ago
        My argument is that since apple can move the price, if you tax the company they increase the cost of the phone as much as makes sense and eat the rest. If you tax the phone, they leave as much as the increase on the cost to the end user as makes sense and lower the price beyond that, eating it. In neither case are profits or demand going to zero.
        crdoconnor 9y ago
        >if you tax the company they increase the cost of the phone Raising your prices in response to not making as much profit as you desired is not often a winning move in business.
- alasdair_ 9y ago
  >At the end of the day, there is no way you as a corporation can entirely subvert a nation state. There are countless examples of this happening, from the East India Company (who essentially ruled India for a century) to the United Fruit Company to present-day Shell Oil.
  - toomuchtodo 9y ago
    Can you provide an example present day of a company successfully subverting the US government? To my knowledge, they're even pursuing companies successfully outside of their jurisdiction (Kim Dotcom/MEGA).
    - gaius 9y ago
      Halliburton?
    - hinkley 9y ago
      So many that there’s a term for it: Regulatory capture.
    - deleted 9y ago
      [deleted]
  - davidgay 9y ago
    The relevant link for the "East India Company" would appear to be: https://en.wikipedia.org/wiki/East_India_Company#Regulating_Acts_of_Parliament https://en.wikipedia.org/wiki/East_India_Company#Regulating_... The first sentence there ends with "this clearly established Parliament's sovereignty and ultimate control over the company". So not a very convincing example of company independence over its host nation. [Influence and control over another, relatively weak country is clearly a separate issue, but that's not always clearly separable from the host country's influence]
- valuearb 9y ago
  Samsung subverts the tax laws of the US every day, forcing repatriation would just give our foreign competitors even bigger advantages.
- osteele 9y ago
  It's a balancing act, not (just) an arms race. As a government, raise corporate taxes too high, and corporations leave and/or overseas corporations outcompete them and/or new corporations form overseas instead of domestically. Raise tariffs too high, and domestic consumer choice and quality decrease, and consumer purchasing power decreases. These aren't consequences that dissolving your domestic corporations or jailing their managers address.
  - crdoconnor 9y ago
    >As a government, raise corporate taxes too high, and corporations leave Only when there's almost no cost to leaving, which in itself is a tax loophole. If you declare that residency is about where you do the most business and has nothing to do with which letterbox has the word "headquarters" on it then their reaction would be limited to tantrums in Wall Street Journal op eds. >or overseas corporations outcompete them That's not how corporation tax works. It's paid on profits and does not affect the competitiveness of the firm.
    - osteele 9y ago
      >>As a government, raise corporate taxes too high, and corporations leave >Only when there's almost no cost to leaving, which in itself is a tax loophole. If you declare that residency is about where you do the most business and has nothing to do with which letterbox has the word "headquarters" on it then their reaction would be limited to tantrums in Wall Street Journal op eds Or to the other two arms of the disjunction in the text that you elided. >>or overseas corporations outcompete them >That's not how corporation tax works. It's paid on profits and does not affect the competitiveness of the firm. It has to come from somewhere. It can come from owners, workers, or consumers. If it came from consumers (higher price or lower quality for products and services) this would affect the competitiveness in a straightforward way. [1] and [2] claim that it instead comes from owners and workers, with considerable uncertainty about the ratio between those. If it comes from owners, it increases the corporation's cost of capital – but only to the extent that investment is global. If it comes from workers, it decreases the ability for the corporation to compete for labor – but only to the extent that labor is global. So you're correct that it does not affect competitiveness in a sufficiently non-global economy. [1] "Who Pays the Corporate Income Tax", Bruce Bartlett, New York Times, Feb 19, 2013. https://economix.blogs.nytimes.com/2013/02/19/who-pays-the-corporate-income-tax/?_r=0 https://economix.blogs.nytimes.com/2013/02/19/who-pays-the-c... [2] "Who Ultimately Pays the Corporate Income Tax?", Uwe E. Reinhardt (Economics @ Princeton), New York Times, July 23, 2010. https://economix.blogs.nytimes.com/2010/07/23/who-ultimately-pays-the-corporate-income-tax/ https://economix.blogs.nytimes.com/2010/07/23/who-ultimately...
- white-flame 9y ago
  Large corporations simply have the ability to shop around to figure out which tax/legal jurisdiction they want to incorporate under, and which instruments they choose to represent their incomes, expenses, and holdings. If things like tariffs are implemented, then the cost/benefit situation changes and shopping around resumes. A smaller company or individual often doesn't practically have that scale of flexibility & research to pull off the same changes, though technically they do. But even in your personal purchasing, because you might shop around and even negotiate prices with sellers to get a good deal, does that make you an adversary of the economy? No, it makes you part of the economic structure, like the various corporate implements are part of various jurisdictions' tax structures, and the governments benefit from their presence in various ways, not just directly through taxes. That's what all the negotiations are based on. Of course, I'm speaking of options that are legal, and it gets arguable (and sometimes flagrant) how some corporate actions get interpreted in that sense.

toomuchtodo 9y ago

> It's a balancing act, though. At the end of the day, there is no way you as a corporation can entirely subvert a nation state. I find it odd even that rational individuals think its possible against an adversary (typically with effectively unlimited resources) that can tariff you, dissolve your organization, and even jail you.

landryraccoon 9y ago
It's not corporation against nation state, it's nation state against nation state. I'm pretty sure China would be quite happy if the US punishes Apple. That means that their protectionist policy towards Huawei will be even more effective. It is difficult for me to imagine other nations either not rolling out the red carpet to bring Apple over, or giving virtually tax free giveaways to their own companies to gain smartphone supremacy.
- crdoconnor 9y ago
  >I'm pretty sure China would be quite happy if the US punishes Apple. That means that their protectionist policy towards Huawei will be even more effective. If the US put onerous taxes on the purchase of Apple phones that might be true. If the US instead just collects a larger share of Apple's profits then Apple is going to go on exactly as before and just not deliver quite as much cash to its shareholders.
  - mattnewton 9y ago
    Taxing the phone or the company’s margins should have the same effect, right? They’re both costs on apple’s revenue. Barring maybe some enforcement issue or something it makes no difference how you collect it, Apple will pass some of it off to their customers and eat another percentage based on whatever the new cost/demand curve looks like to them.
    - crdoconnor 9y ago
      >Taxing the phone or the company’s margins should have the same effect, right? Wrong >They’re both costs on apple’s revenue. Hardly. Make zero profit and you pay zero tax on that profit.
      - mattnewton 9y ago
        My argument is that since apple can move the price, if you tax the company they increase the cost of the phone as much as makes sense and eat the rest. If you tax the phone, they leave as much as the increase on the cost to the end user as makes sense and lower the price beyond that, eating it. In neither case are profits or demand going to zero.
        crdoconnor 9y ago
        >if you tax the company they increase the cost of the phone Raising your prices in response to not making as much profit as you desired is not often a winning move in business.
alasdair_ 9y ago
>At the end of the day, there is no way you as a corporation can entirely subvert a nation state. There are countless examples of this happening, from the East India Company (who essentially ruled India for a century) to the United Fruit Company to present-day Shell Oil.
- toomuchtodo 9y ago
  Can you provide an example present day of a company successfully subverting the US government? To my knowledge, they're even pursuing companies successfully outside of their jurisdiction (Kim Dotcom/MEGA).
  - gaius 9y ago
    Halliburton?
  - hinkley 9y ago
    So many that there’s a term for it: Regulatory capture.
  - deleted 9y ago
    [deleted]
- davidgay 9y ago
  The relevant link for the "East India Company" would appear to be: https://en.wikipedia.org/wiki/East_India_Company#Regulating_Acts_of_Parliament https://en.wikipedia.org/wiki/East_India_Company#Regulating_... The first sentence there ends with "this clearly established Parliament's sovereignty and ultimate control over the company". So not a very convincing example of company independence over its host nation. [Influence and control over another, relatively weak country is clearly a separate issue, but that's not always clearly separable from the host country's influence]
valuearb 9y ago
Samsung subverts the tax laws of the US every day, forcing repatriation would just give our foreign competitors even bigger advantages.
osteele 9y ago
It's a balancing act, not (just) an arms race. As a government, raise corporate taxes too high, and corporations leave and/or overseas corporations outcompete them and/or new corporations form overseas instead of domestically. Raise tariffs too high, and domestic consumer choice and quality decrease, and consumer purchasing power decreases. These aren't consequences that dissolving your domestic corporations or jailing their managers address.
- crdoconnor 9y ago
  >As a government, raise corporate taxes too high, and corporations leave Only when there's almost no cost to leaving, which in itself is a tax loophole. If you declare that residency is about where you do the most business and has nothing to do with which letterbox has the word "headquarters" on it then their reaction would be limited to tantrums in Wall Street Journal op eds. >or overseas corporations outcompete them That's not how corporation tax works. It's paid on profits and does not affect the competitiveness of the firm.
  - osteele 9y ago
    >>As a government, raise corporate taxes too high, and corporations leave >Only when there's almost no cost to leaving, which in itself is a tax loophole. If you declare that residency is about where you do the most business and has nothing to do with which letterbox has the word "headquarters" on it then their reaction would be limited to tantrums in Wall Street Journal op eds Or to the other two arms of the disjunction in the text that you elided. >>or overseas corporations outcompete them >That's not how corporation tax works. It's paid on profits and does not affect the competitiveness of the firm. It has to come from somewhere. It can come from owners, workers, or consumers. If it came from consumers (higher price or lower quality for products and services) this would affect the competitiveness in a straightforward way. [1] and [2] claim that it instead comes from owners and workers, with considerable uncertainty about the ratio between those. If it comes from owners, it increases the corporation's cost of capital – but only to the extent that investment is global. If it comes from workers, it decreases the ability for the corporation to compete for labor – but only to the extent that labor is global. So you're correct that it does not affect competitiveness in a sufficiently non-global economy. [1] "Who Pays the Corporate Income Tax", Bruce Bartlett, New York Times, Feb 19, 2013. https://economix.blogs.nytimes.com/2013/02/19/who-pays-the-corporate-income-tax/?_r=0 https://economix.blogs.nytimes.com/2013/02/19/who-pays-the-c... [2] "Who Ultimately Pays the Corporate Income Tax?", Uwe E. Reinhardt (Economics @ Princeton), New York Times, July 23, 2010. https://economix.blogs.nytimes.com/2010/07/23/who-ultimately-pays-the-corporate-income-tax/ https://economix.blogs.nytimes.com/2010/07/23/who-ultimately...
white-flame 9y ago
Large corporations simply have the ability to shop around to figure out which tax/legal jurisdiction they want to incorporate under, and which instruments they choose to represent their incomes, expenses, and holdings. If things like tariffs are implemented, then the cost/benefit situation changes and shopping around resumes. A smaller company or individual often doesn't practically have that scale of flexibility & research to pull off the same changes, though technically they do. But even in your personal purchasing, because you might shop around and even negotiate prices with sellers to get a good deal, does that make you an adversary of the economy? No, it makes you part of the economic structure, like the various corporate implements are part of various jurisdictions' tax structures, and the governments benefit from their presence in various ways, not just directly through taxes. That's what all the negotiations are based on. Of course, I'm speaking of options that are legal, and it gets arguable (and sometimes flagrant) how some corporate actions get interpreted in that sense.