5 ms·

Wouldn't it be much simpler to just require companies to pay taxes in the country their product or service is sold, as a percentage of said product or service?

• UncleEntity 9y ago
  Isn't that what the VAT is for? Honestly asking because US states fall all over themselves to give tax breaks to companies all the time. Hell, even individual cities compete with each other using tax breaks to attract employers. I couldn't even imagine the federal government stepping in and forcing a state to collect more in taxes "to encourage competition".
  • nikanj 9y ago
    VAT only applies to consumers, not businesses. To be fair, that seems to be where our corporate tax system is headed anyway: zero rating for the companies, and consumers pay all the taxes.
    • jnordwick 9y ago
      Corporations don't pay taxes in any meanings sense anyways. Individuals always pay for taxes. Owners (lower profits), employees (lower wages and fewer jobs), and consumers (high prices and fewer products) all split the tax burden imposed on a firm.
  • cc81 9y ago
    The federal government steps in and collects taxes from the corporations directly instead, right?
    • UncleEntity 9y ago
      Ah, ok, that explains all the squabbling -- the countries collect the taxes and then pay into the EU superstate. One country doesn't want another to have a comparative advantage so they sue each other in the EU courts to force them to collect "their fair share" from the evil tax-dodging corporations. Theater of the absurd if you ask me but who am I to judge...
      • cc81 9y ago
        To get access to the huge US market a corporation must pay federal tax. A huge Chinese corporation is not able to to tell the states that if someone lets them avoid federal tax then the US headquarters will be built in their state. This is advantageous for all states. The EU does not have something like that but they are able to say that while members can set their own tax code they cannot give preferential treatment to specific companies partly to avoid the scenario above. This forces them at least to pay the correct taxes in the little country they set up in in order to get access to the large countries.
• vidarh 9y ago
  That's largely how VAT (value added tax) works in theory: A company collects VAT on what they sell, and counter that with VAT on what they buy, so that they effectively pay a tax on the "value added". The problem with all of these things is that when you can pick and choose jurisdictions, then playing them up against each other becomes easy: Sell said phone for 690 from a low tax jurisdiction to the Italian company, and the "value added" on that 700 sale is 10. This is one of the tricks they also use to avoid income taxes: Shift the revenue to a low tax country by applying trickery in terms of how subsidiaries shift products and revenue between themselves. But this example also shows why you can't just tax people on the total value rather than the added value unless the tax is set very low: For the majority of companies that don't control the whole value chain, the margin between the import price and the price the product is sold on to retailers at might very well genuinely be <10%. Any such tax on the total retail value that makes a dent in the Apple's of the world is likely to bankrupt large numbers of local companies. If you were to apply such a tax at every step in the value chain, it'd very quickly become a big problem. And while it might seem "easy" to instead e.g. put such a tax only on final products sold to end users in some product categories, it'd lead to a massive complexity in trying to create rules that are not trivially easy to evade with small changes to the way the products are sold. In other words: The idea is good, but creating rules that are possible to enforce and not full of loopholes is where these thins tends to fall apart.
  • kgwgk 9y ago
    > Sell said phone for 690 from a low tax jurisdiction to the Italian company, and the "value added" on that 700 sale is 10. You're still paying the VAT on the 690 on the "low tax" country (and the lowest standard VAT rate in the EU is 17%).
    • vidarh 9y ago
      Yes, but the retailer is not, as the retailer will get any VAT paid on the 690 refunded (or in most jurisdictions will simply pay the difference).
      • kgwgk 9y ago