8 ms·

I got one am very pleased to see the EU doing good work against tax havens. It's no wonder the British press hate the EU so much... the proprietors, in general,

I got one am very pleased to see the EU doing good work against tax havens. It's no wonder the British press hate the EU so much... the proprietors, in general, have an interesting record when it comes to paying tax

Brotkrumen 9y ago
The british press hates other tax havens because they themselves try to be one. There are tons of PLCs established just for tax purposes.
- adventured 9y ago
  It's certainly a competition. It's why Ireland (12.5%) and the UK (19%; 17% in 2020) have two of the lowest corporate income tax rates on the planet. It worked extremely well for Ireland, I've seen little evidence that it has worked for the UK so far. The UK's economy is net the same size it was in 2005, before adjusting for inflation, despite growing their population by about 10%. Ireland's economy by contrast is nearly 50% larger than it was in 2005.
  - NotSammyHagar 9y ago
    But to be more accurate, we have to account for when the weaker eu countries were all hurting (pigs). I think Ireland's economy crashed in 2008 and so they have made a great recovery. I guess 2005 is adequately before that :-) I was thinking you were comparing nadir and peak or something.
    - qubex 9y ago
      PIIGS (don't forget Italy: we didn't actually blow up, but we've been bringing up the rear ever since).
  - gsnedders 9y ago
    They aren't actually quite so low, though, because unlike many countries there aren't nearly as many deductions and tax credits available. Presently, the UK has an effective tax rate of 18.6%, compared with, e.g. France which has a statutory tax rate of 33.33% but an effective tax rate of 11.2%. I believe the UK has one of the highest effective tax rates in the EU.
NotSammyHagar 9y ago
But this race to the bottom for tax rates is clearly bad. Luxembourg could next make their rate 1%. Then Eire could come back with 0.5%. There's no good that comes of this - even the countries with the low rates are hurting their ability to raise enough money from tax. It only works in the short term when you have companies that cheat and book revenue from outside into that country. It's wrong and I would strongly support both (1) trying to stop the low rates, and (2) book money in other countries than you earn it. It's all just a bs tax dodge.
- SamReidHughes 9y ago
  The EU governments could just stop taxing corporate income entirely, and only tax personal income, sales, and property. There's no reason in principle why corporations must be income taxed.
  - nitwit005 9y ago
    And then everyone stops being an employee to become a tax free one person contracting company, with car, home office, and anything else they can think of, considered business expenses.
    - gsnedders 9y ago
      If they get personal benefit from the car, that's taxable income. If they get personal benefit from the home, that's taxable income.
      - nitwit005 9y ago
        Sure, but unless you have tax inspectors following the entire population around and security cameras in their home, you're never going to be able to enforce that, as demonstrated by people already doing this sort of scheme. It's easier to just disincentivize it in the first place.
  - qubex 9y ago
    This is clearly a reductio ad absurdum, but mainline (indebted, null- or negative pro-capita economic growth) European countries will never slash the corporate tax rate down much further because they cannot afford it. Neoliberal rhetoric aside (keep in mind I'm a pretty orthodox and conservative macro-economist of the monetarist bent) trickle-down economics is clearly inaccurate and the fiscal multiplier is apparently greater than one. There's plenty of distortion in the tax systems of these states already (speaking of my native Italy, far too much bias on taxing income of firms and physical people as opposed to taxing consumption, because the latter is difficult to track because of the sizeable shadow economy, whereas the formers are supposedly easier to asses and monetise), the last thing they want is to suddenly end up relying on untested revenue streams. It's just too radical. Indeed there's a way of seeing this in terms of member states acting as a kind of fiscal cartel, and a couple of the states acting as the perennial defectors of Prisoner's Dilemma fame (cue Luxembourg and a couple others that shall go similarly unnamed). Really, the presence of these fiscal regimes within the EU community is a disgrace. On the other hand, keep in mind that Luxembourg is actually acting in an institutionally legitimate manner, presenting a case to the relevant EU authority instead of strutting its stuff unilaterally. They are going out there and testing the case, and there's a high probability that they will lose and set a strong precedent in their disfavour.
woodpanel 9y ago
To add context to the article: The EU "doing good work" as you say is not the news here. The real news here is that one of the EU's core but minor member states is attempting to refuse that "good work". It shows how fragile the EU has become. Pushing the envelope for their own gains at the cost of delegitimizing EU institutions has become a sport among EU nations. But Luxemburg best exemplifies those countries that seemed immune to this, because Luxemburg best exemplifies a nation that would lose everything if the EU disintegrates. Even they are now doing it
- alexasmyths 9y ago
  "Pushing the envelope for their own gains at the cost of delegitimizing EU institutions" Why does the EU exist, if not 'for the gain of the member states'? Do you see the psychological paradox of Federalization? A better argument is that if there is such contention, then maybe some of those EU level institutions should not exist. And remember, the head of the commission is JC Junker, the very architect of Luxembourgs special tax schemes. The job of the EU+Lux is to make the tax laws clear, not screw things up for business who by and large - just pay the taxes they are owed, but at the minimum possible rate.
  - woodpanel 9y ago
    "Do you see the psychological paradox of Federalization?" No, it is exactly what I am talking about ;-) I just wanted to point out, that for Luxemburg to join the rounds EU-de-legitimizers is a whole new ball game. Just an example: LUX politicians were pushing for the EU to make "Letzebuergisch" an official language of its own, while linguistically its just a variety of German (not even a dialect). Although that attempt failed (because science), the audacity gives a hint of how much Luxemburg gained from the EU so far. It shows how much incompetence and disarray is present in the European political leadership at the moment, if even Luxemburg is starting to delegitimizing EU institutions.
    - alexasmyths 9y ago
      It's perfectly reasonable for nation states to challenge the EU institutions, because the 'legitimacy' of EU institutions is not arbitrary - it depends on the support of member states! If an EU institution is challenged by most members - it should absolutely be 'de-legitimized' and closed down! This is the problem with the pro-Federalist psychology - added to the reality of 'bureaucracies that can only grow' - we 'assume' that a given EU entity should have supremacy, and not be 'undermined'? Why not? Who gave that EU organ power in the first place, and why does it have it? I don't really support Lux's attempts to continue their low-tax status, but maybe they have a point. As far as the Lux language - I think your argument is a stretch. Surely you know there are a zillion languages in the EU, each close to some other language. Having Luxembourgish 'recognized' doesn't necessarily carry them any favour or economic advantage, so I don't see how it's super relevant. I see what you are trying to get at - I just don't think that specific case is a good example.
alexasmyths 9y ago
"I got one am very pleased to see the EU doing good work against tax havens. It's no wonder the British press hate the EU so much." Oh please! Jean-Claude Junker - the #1 man in the EU - was the architect of Luxembourg's tax-avoidance schemes. Your statement very difficult to comprehend. The UK is a regular taxed entity. It is NOT a haven really in any way. Meanwhile: Luxembourg, Monaco, Lichenstein, Isle of Man and a few others are broadly tax havens, and Ireland is a huge haven in specific corporate circumstances. Not only is the EU rife with tax havens - but they are also duplicitous in their application of the law. The EU's grab of billions from Amazon, Google and Apple is theft of private property. The EU is acting like Venzuela or a banana republic. Re-interpreting the law retrocatively 25 years??? These 'big corps' will do everything possible within the law to lower their taxes - but they obey the law and pay their taxes. If the EU, in 1980 had said 'here are the rules' - then big corps would comply. But the EU deciding one day that 'oh, this tax law, which we have actively accepted for 25 years as meaning 'this' - now means 'that'. Retroactively. This is what tin-pot dictators like Putin do when they wish to nationalize specific industries - and it's scary to any business person and bad for business. The EU's job should be to make sure there is relative tax harmony, that the rules are clear, and then that people follow those rules. Not to change them willy nilly and grab billions because of socialist populist sentiment. If they want to change how things are - change the tax laws. that's it.
- riffraff 9y ago
  the EU is not changing any rule, they are enforcing one of the original ones: a state must not make special cases for companies. The principle is fundamental because otherwise everybody would play favourites with their own "national champions". The case against Luxembourg is not that taxes there are low, it's that they are low _for amazon_. What Luxembourg says is not "this is a new rule" but "we have not played favourites".
  - weddpros 9y ago
    Let's talk about Total (french oil company) which didn't pay ANY taxes in France until recently. BTW, it was the most prosperous company in France at that time. Only when the media investigated did they start to pay some corporate taxes. There was way less hatred against Total than against any american companies as we see today. Do you know that France distributes so many subsidies to french companies (110B€), that's way more than the total corporate taxes it collects (36B€). And Total is still the clear winner in the tax cut race in France ;-)

Brotkrumen 9y ago

The british press hates other tax havens because they themselves try to be one. There are tons of PLCs established just for tax purposes.

adventured 9y ago
It's certainly a competition. It's why Ireland (12.5%) and the UK (19%; 17% in 2020) have two of the lowest corporate income tax rates on the planet. It worked extremely well for Ireland, I've seen little evidence that it has worked for the UK so far. The UK's economy is net the same size it was in 2005, before adjusting for inflation, despite growing their population by about 10%. Ireland's economy by contrast is nearly 50% larger than it was in 2005.
- NotSammyHagar 9y ago
  But to be more accurate, we have to account for when the weaker eu countries were all hurting (pigs). I think Ireland's economy crashed in 2008 and so they have made a great recovery. I guess 2005 is adequately before that :-) I was thinking you were comparing nadir and peak or something.
  - qubex 9y ago
    PIIGS (don't forget Italy: we didn't actually blow up, but we've been bringing up the rear ever since).
- gsnedders 9y ago
  They aren't actually quite so low, though, because unlike many countries there aren't nearly as many deductions and tax credits available. Presently, the UK has an effective tax rate of 18.6%, compared with, e.g. France which has a statutory tax rate of 33.33% but an effective tax rate of 11.2%. I believe the UK has one of the highest effective tax rates in the EU.

NotSammyHagar 9y ago

But this race to the bottom for tax rates is clearly bad. Luxembourg could next make their rate 1%. Then Eire could come back with 0.5%. There's no good that comes of this - even the countries with the low rates are hurting their ability to raise enough money from tax. It only works in the short term when you have companies that cheat and book revenue from outside into that country. It's wrong and I would strongly support both (1) trying to stop the low rates, and (2) book money in other countries than you earn it. It's all just a bs tax dodge.

SamReidHughes 9y ago
The EU governments could just stop taxing corporate income entirely, and only tax personal income, sales, and property. There's no reason in principle why corporations must be income taxed.
- nitwit005 9y ago
  And then everyone stops being an employee to become a tax free one person contracting company, with car, home office, and anything else they can think of, considered business expenses.
  - gsnedders 9y ago
    If they get personal benefit from the car, that's taxable income. If they get personal benefit from the home, that's taxable income.
    - nitwit005 9y ago
      Sure, but unless you have tax inspectors following the entire population around and security cameras in their home, you're never going to be able to enforce that, as demonstrated by people already doing this sort of scheme. It's easier to just disincentivize it in the first place.
- qubex 9y ago
  This is clearly a reductio ad absurdum, but mainline (indebted, null- or negative pro-capita economic growth) European countries will never slash the corporate tax rate down much further because they cannot afford it. Neoliberal rhetoric aside (keep in mind I'm a pretty orthodox and conservative macro-economist of the monetarist bent) trickle-down economics is clearly inaccurate and the fiscal multiplier is apparently greater than one. There's plenty of distortion in the tax systems of these states already (speaking of my native Italy, far too much bias on taxing income of firms and physical people as opposed to taxing consumption, because the latter is difficult to track because of the sizeable shadow economy, whereas the formers are supposedly easier to asses and monetise), the last thing they want is to suddenly end up relying on untested revenue streams. It's just too radical. Indeed there's a way of seeing this in terms of member states acting as a kind of fiscal cartel, and a couple of the states acting as the perennial defectors of Prisoner's Dilemma fame (cue Luxembourg and a couple others that shall go similarly unnamed). Really, the presence of these fiscal regimes within the EU community is a disgrace. On the other hand, keep in mind that Luxembourg is actually acting in an institutionally legitimate manner, presenting a case to the relevant EU authority instead of strutting its stuff unilaterally. They are going out there and testing the case, and there's a high probability that they will lose and set a strong precedent in their disfavour.

woodpanel 9y ago

To add context to the article: The EU "doing good work" as you say is not the news here. The real news here is that one of the EU's core but minor member states is attempting to refuse that "good work". It shows how fragile the EU has become. Pushing the envelope for their own gains at the cost of delegitimizing EU institutions has become a sport among EU nations. But Luxemburg best exemplifies those countries that seemed immune to this, because Luxemburg best exemplifies a nation that would lose everything if the EU disintegrates. Even they are now doing it

alexasmyths 9y ago
"Pushing the envelope for their own gains at the cost of delegitimizing EU institutions" Why does the EU exist, if not 'for the gain of the member states'? Do you see the psychological paradox of Federalization? A better argument is that if there is such contention, then maybe some of those EU level institutions should not exist. And remember, the head of the commission is JC Junker, the very architect of Luxembourgs special tax schemes. The job of the EU+Lux is to make the tax laws clear, not screw things up for business who by and large - just pay the taxes they are owed, but at the minimum possible rate.
- woodpanel 9y ago
  "Do you see the psychological paradox of Federalization?" No, it is exactly what I am talking about ;-) I just wanted to point out, that for Luxemburg to join the rounds EU-de-legitimizers is a whole new ball game. Just an example: LUX politicians were pushing for the EU to make "Letzebuergisch" an official language of its own, while linguistically its just a variety of German (not even a dialect). Although that attempt failed (because science), the audacity gives a hint of how much Luxemburg gained from the EU so far. It shows how much incompetence and disarray is present in the European political leadership at the moment, if even Luxemburg is starting to delegitimizing EU institutions.
  - alexasmyths 9y ago
    It's perfectly reasonable for nation states to challenge the EU institutions, because the 'legitimacy' of EU institutions is not arbitrary - it depends on the support of member states! If an EU institution is challenged by most members - it should absolutely be 'de-legitimized' and closed down! This is the problem with the pro-Federalist psychology - added to the reality of 'bureaucracies that can only grow' - we 'assume' that a given EU entity should have supremacy, and not be 'undermined'? Why not? Who gave that EU organ power in the first place, and why does it have it? I don't really support Lux's attempts to continue their low-tax status, but maybe they have a point. As far as the Lux language - I think your argument is a stretch. Surely you know there are a zillion languages in the EU, each close to some other language. Having Luxembourgish 'recognized' doesn't necessarily carry them any favour or economic advantage, so I don't see how it's super relevant. I see what you are trying to get at - I just don't think that specific case is a good example.

alexasmyths 9y ago

"I got one am very pleased to see the EU doing good work against tax havens. It's no wonder the British press hate the EU so much." Oh please! Jean-Claude Junker - the #1 man in the EU - was the architect of Luxembourg's tax-avoidance schemes. Your statement very difficult to comprehend. The UK is a regular taxed entity. It is NOT a haven really in any way. Meanwhile: Luxembourg, Monaco, Lichenstein, Isle of Man and a few others are broadly tax havens, and Ireland is a huge haven in specific corporate circumstances. Not only is the EU rife with tax havens - but they are also duplicitous in their application of the law. The EU's grab of billions from Amazon, Google and Apple is theft of private property. The EU is acting like Venzuela or a banana republic. Re-interpreting the law retrocatively 25 years??? These 'big corps' will do everything possible within the law to lower their taxes - but they obey the law and pay their taxes. If the EU, in 1980 had said 'here are the rules' - then big corps would comply. But the EU deciding one day that 'oh, this tax law, which we have actively accepted for 25 years as meaning 'this' - now means 'that'. Retroactively. This is what tin-pot dictators like Putin do when they wish to nationalize specific industries - and it's scary to any business person and bad for business. The EU's job should be to make sure there is relative tax harmony, that the rules are clear, and then that people follow those rules. Not to change them willy nilly and grab billions because of socialist populist sentiment. If they want to change how things are - change the tax laws. that's it.

riffraff 9y ago
the EU is not changing any rule, they are enforcing one of the original ones: a state must not make special cases for companies. The principle is fundamental because otherwise everybody would play favourites with their own "national champions". The case against Luxembourg is not that taxes there are low, it's that they are low _for amazon_. What Luxembourg says is not "this is a new rule" but "we have not played favourites".
- weddpros 9y ago
  Let's talk about Total (french oil company) which didn't pay ANY taxes in France until recently. BTW, it was the most prosperous company in France at that time. Only when the media investigated did they start to pay some corporate taxes. There was way less hatred against Total than against any american companies as we see today. Do you know that France distributes so many subsidies to french companies (110B€), that's way more than the total corporate taxes it collects (36B€). And Total is still the clear winner in the tax cut race in France ;-)