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The country of Ireland has done much the same on a grand scale, much to their own benefit. I agree it does seem crazy but if these businesses bring about a net

by dazc 8y ago

The country of Ireland has done much the same on a grand scale, much to their own benefit. I agree it does seem crazy but if these businesses bring about a net benefit to where they are located it can't be all bad? I'm not familiar with the US tax system but in the UK, and much of Europe, the system is lagging behind the real world of business by a measure of decades.

pekko 8y ago
And, thankfully, EU has regulations against such schemes. We can have international treaties and organisations to prevent cases of tradegy of commons. For example, EU forces Ireland to collect taxes from Apple, because it deemed such rebates to be illegal state aid. See https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
- asdfasgasdgasdg 8y ago
  They did not force them to raise their tax rate though, so it is still highly beneficial to Apple to be in Ireland compared to, say, France. What member countries really should do is similar to the revenue tax that was recently proposed. But not exactly, because that's a pretty blunt tool. Instead, the calculation should go something like this. # Exclude payments to/from subsidiaries. global_revenue = all external revenue global_expenses = all external non-tax costs global_profit = global_revenue - global_expenses global_tax = this_country_tax_rate * global_profit country_tax = this_country_revenue / global_revenue * global_tax The goal being to remove the benefit of tax avoiding schemes like Ireland. It doesn't matter how you move the money around, you'll pay taxes to this country based on how much money you make here. Require the company to estimate and pay this tax quarterly, and provide reasonable fines for underpayment. Granted the first two lines might be difficult to compute, so you would only do this for companies big enough to be worth going through the trouble for. Disclaimer: not a tax policy expert. Would love to be corrected. Please poke holes.
  - matt4077 8y ago
    While their rates are low, the issue was about additional, individual deals that lead to effective tax rates around .5% (instead of the official 12.5%, I believe). I think the EU has done a pretty good job to find a balance here: when Ireland joined the EU in the 70s, it was among the poorest countries west of Moscow and north of Morocco. It became one of the largest recipients of net transfers over the next 30 years, but everyone knew that their chances of catching up required some economic competitiveness, and that it would take decades to pull even in terms of "Features" (infrastructure, local market etc) Low taxes were therefore the only viable path to attract investments. That scenario is explicitly accepted even among those advocating for coordinated taxation. In the case of Ireland, everything actually worked out extremely well: Speaking something almost resembling the english language, and having the strength of character to make peace with the English, Ireland established world-class universities and a rather remarkable knowledge economy in just one generation.
    - atq2119 8y ago
      > Speaking something almost resembling the english language, Dude... not cool.
    - asdfasgasdgasdg 8y ago
      Sure. But are these subsidies still needed? In any case, my proposal was more along the lines of an approach to unilaterally prevent companies from benefiting from off-shoring tax schemes, under the assumption you want to do that. The thing I want holes poked in is the scheme itself, since I'm taking as given that some people want to institute a scheme with this goal.
- briandear 8y ago
  Why should the EU care? It seems like these rules exist in order to effectively subsidize more expensive governments. If France did what Ireland did, France would collapse under its own weight, so the EU uses these rules to protect less competitive member countries. So the EU pushes things like minimum tax rates rather than alternatively pushing maximum tax rates. If an EU country proposed a 50% corporate tax, the EU would be ok with that, but if a member proposed a 2% taxe, the EU would lose their mind.
xtiansimon 8y ago
> if these businesses bring about a net benefit to where they are located it can't be all bad? The Foxconn deal in Wisconsin has been criticized for being a bad deal for several important reasons, - Wisconsin competed and surpassed the tax incentive offers from Michigan and Ohio making for a tight margin, - I've heard claims Foxconn has a reputation for making promises and then scaling back their plans. It's looking like this has happened. Foxconn change their factory plans from 'Generation 10.5 facility' to 'Generation 6 facility', - Foxconn has promised to hire 13,000 employees at the plant. Scaled back plans might reduce those numbers to 3,000, - Foxconn says not enough qualified engineers in Wisconsin, and may employ Chinese Engineers at the plant. - Foxconn project went ahead without an environmental impact statement and will use over 5 million gallons of water per day from Lake Michigan, When people vote with their paycheck, a tax incentive deal is certainly a political win. At least for this Foxconn deal, it remains to be proven if the deal is a net long term improvement for workers in Wisconsin. Wisconsin has suffered underemployment in a depressed employment environment. Even with these downsides, maybe it's the deal that Wisconsin needs. And really, what's the impact to me if Wisconsin residents suffer from negative environmental impacts from this plant--I don't live there. https://www.jsonline.com/story/money/business/2018/08/23/foxconn-now-wont-say-build-type-factory-named-contracts/1072306002/ https://www.jsonline.com/story/money/business/2018/08/23/fox... https://www.jsonline.com/story/news/politics/2018/04/25/dnr-approves-diverting-lake-michigan-water-wisconsins-foxconn-plant/551542002/ https://www.jsonline.com/story/news/politics/2018/04/25/dnr-... https://www.businessinsider.com/why-foxconns-wisconsin-factory-is-terrible-deal-2018-11 https://www.businessinsider.com/why-foxconns-wisconsin-facto... https://www.theguardian.com/cities/2018/jul/02/its-a-huge-subsidy-the-48bn-gamble-to-lure-foxconn-to-america https://www.theguardian.com/cities/2018/jul/02/its-a-huge-su... https://www.jsonline.com/story/opinion/contributors/2018/06/25/foxconn-plant-poised-become-leading-polluter-wisconsin/721353002/ https://www.jsonline.com/story/opinion/contributors/2018/06/... https://www.forbes.com/sites/stuartanderson/2018/11/06/why-foxconn-is-considering-engineers-from-china/#4ec3d65c478f https://www.forbes.com/sites/stuartanderson/2018/11/06/why-f...
- tigershark 8y ago
  How on earth is possible to use more than 20M litres of water a day for a manufacturing plant? O_o
bunderbunder 8y ago
I could see this being more effective for a country than it is for municipalities within a country, simply because it's more difficult for them to leave once they're established. This is an extreme case, but I had a previous employer, a large multinational conglomerate, that moved my particular product team's home office twice in six years. Both moves were motivated by tax incentive. The cities would place conditions on how many jobs they had to "create" in order to get their perks, and they would "create" those jobs by relocating people from some other office in a town that was no longer giving them tax breaks.

by dazc 8y ago

pekko 8y ago

And, thankfully, EU has regulations against such schemes. We can have international treaties and organisations to prevent cases of tradegy of commons. For example, EU forces Ireland to collect taxes from Apple, because it deemed such rebates to be illegal state aid. See https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...

asdfasgasdgasdg 8y ago
They did not force them to raise their tax rate though, so it is still highly beneficial to Apple to be in Ireland compared to, say, France. What member countries really should do is similar to the revenue tax that was recently proposed. But not exactly, because that's a pretty blunt tool. Instead, the calculation should go something like this. # Exclude payments to/from subsidiaries. global_revenue = all external revenue global_expenses = all external non-tax costs global_profit = global_revenue - global_expenses global_tax = this_country_tax_rate * global_profit country_tax = this_country_revenue / global_revenue * global_tax The goal being to remove the benefit of tax avoiding schemes like Ireland. It doesn't matter how you move the money around, you'll pay taxes to this country based on how much money you make here. Require the company to estimate and pay this tax quarterly, and provide reasonable fines for underpayment. Granted the first two lines might be difficult to compute, so you would only do this for companies big enough to be worth going through the trouble for. Disclaimer: not a tax policy expert. Would love to be corrected. Please poke holes.
- matt4077 8y ago
  While their rates are low, the issue was about additional, individual deals that lead to effective tax rates around .5% (instead of the official 12.5%, I believe). I think the EU has done a pretty good job to find a balance here: when Ireland joined the EU in the 70s, it was among the poorest countries west of Moscow and north of Morocco. It became one of the largest recipients of net transfers over the next 30 years, but everyone knew that their chances of catching up required some economic competitiveness, and that it would take decades to pull even in terms of "Features" (infrastructure, local market etc) Low taxes were therefore the only viable path to attract investments. That scenario is explicitly accepted even among those advocating for coordinated taxation. In the case of Ireland, everything actually worked out extremely well: Speaking something almost resembling the english language, and having the strength of character to make peace with the English, Ireland established world-class universities and a rather remarkable knowledge economy in just one generation.
  - atq2119 8y ago
    > Speaking something almost resembling the english language, Dude... not cool.
  - asdfasgasdgasdg 8y ago
    Sure. But are these subsidies still needed? In any case, my proposal was more along the lines of an approach to unilaterally prevent companies from benefiting from off-shoring tax schemes, under the assumption you want to do that. The thing I want holes poked in is the scheme itself, since I'm taking as given that some people want to institute a scheme with this goal.
briandear 8y ago
Why should the EU care? It seems like these rules exist in order to effectively subsidize more expensive governments. If France did what Ireland did, France would collapse under its own weight, so the EU uses these rules to protect less competitive member countries. So the EU pushes things like minimum tax rates rather than alternatively pushing maximum tax rates. If an EU country proposed a 50% corporate tax, the EU would be ok with that, but if a member proposed a 2% taxe, the EU would lose their mind.

xtiansimon 8y ago

> if these businesses bring about a net benefit to where they are located it can't be all bad? The Foxconn deal in Wisconsin has been criticized for being a bad deal for several important reasons, - Wisconsin competed and surpassed the tax incentive offers from Michigan and Ohio making for a tight margin, - I've heard claims Foxconn has a reputation for making promises and then scaling back their plans. It's looking like this has happened. Foxconn change their factory plans from 'Generation 10.5 facility' to 'Generation 6 facility', - Foxconn has promised to hire 13,000 employees at the plant. Scaled back plans might reduce those numbers to 3,000, - Foxconn says not enough qualified engineers in Wisconsin, and may employ Chinese Engineers at the plant. - Foxconn project went ahead without an environmental impact statement and will use over 5 million gallons of water per day from Lake Michigan, When people vote with their paycheck, a tax incentive deal is certainly a political win. At least for this Foxconn deal, it remains to be proven if the deal is a net long term improvement for workers in Wisconsin. Wisconsin has suffered underemployment in a depressed employment environment. Even with these downsides, maybe it's the deal that Wisconsin needs. And really, what's the impact to me if Wisconsin residents suffer from negative environmental impacts from this plant--I don't live there. https://www.jsonline.com/story/money/business/2018/08/23/foxconn-now-wont-say-build-type-factory-named-contracts/1072306002/ https://www.jsonline.com/story/money/business/2018/08/23/fox... https://www.jsonline.com/story/news/politics/2018/04/25/dnr-approves-diverting-lake-michigan-water-wisconsins-foxconn-plant/551542002/ https://www.jsonline.com/story/news/politics/2018/04/25/dnr-... https://www.businessinsider.com/why-foxconns-wisconsin-factory-is-terrible-deal-2018-11 https://www.businessinsider.com/why-foxconns-wisconsin-facto... https://www.theguardian.com/cities/2018/jul/02/its-a-huge-subsidy-the-48bn-gamble-to-lure-foxconn-to-america https://www.theguardian.com/cities/2018/jul/02/its-a-huge-su... https://www.jsonline.com/story/opinion/contributors/2018/06/25/foxconn-plant-poised-become-leading-polluter-wisconsin/721353002/ https://www.jsonline.com/story/opinion/contributors/2018/06/... https://www.forbes.com/sites/stuartanderson/2018/11/06/why-foxconn-is-considering-engineers-from-china/#4ec3d65c478f https://www.forbes.com/sites/stuartanderson/2018/11/06/why-f...

tigershark 8y ago
How on earth is possible to use more than 20M litres of water a day for a manufacturing plant? O_o

bunderbunder 8y ago

I could see this being more effective for a country than it is for municipalities within a country, simply because it's more difficult for them to leave once they're established. This is an extreme case, but I had a previous employer, a large multinational conglomerate, that moved my particular product team's home office twice in six years. Both moves were motivated by tax incentive. The cities would place conditions on how many jobs they had to "create" in order to get their perks, and they would "create" those jobs by relocating people from some other office in a town that was no longer giving them tax breaks.