3 ms·

And then we add the calls to set a minimum corporate tax rate to the mix and realize that the EU does this because Germany and France don't want businesses to g

And then we add the calls to set a minimum corporate tax rate to the mix and realize that the EU does this because Germany and France don't want businesses to go to Ireland instead of them.

pjc50 8y ago
Restrictions on state aid date from the treaty of Rome 1957 (https://www.nao.org.uk/decision-support-toolkit/annexes/annex-c-eu-restrictions-on-state-aid/ https://www.nao.org.uk/decision-support-toolkit/annexes/anne... ), and Ireland joined the EU in 1973. It's not about targeting Ireland, it's about creating a genuinely level playing field while ending trade wars.
- Mirioron 8y ago
  I see. I did not know that! Although, I would still argue my point because Ireland is just a recent example. Businesses naturally go to where there are other businesses. You have to somehow offer them a better deal for them to go elsewhere. If you can't do that then you get an urbanization-like situation for businesses, except they prefer bigger and richer cities over smaller cities.
  - pjc50 8y ago
    The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither of them had offered a deal they would both be better off. Classic prisoner's dilemma stuff. There is a tendency for industry to congregate, but better ways need to be developed to deal with that than taxpayer bribery. Within countries, Germany is substantially better at doing this ("Mittelstand") than, say, the UK. And let's not forget that Germany wasn't always the strong country, they used to be "the sick man of Europe": https://www.ft.com/content/bd4c856e-6de7-11e7-b9c7-15af748b60d0 https://www.ft.com/content/bd4c856e-6de7-11e7-b9c7-15af748b6...
    - Mirioron 8y ago
      >The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither of them had offered a deal they would both be better off. Classic prisoner's dilemma stuff. It's not a classic prisoner's dilemma, because you can play this game multiple times. It's an iterated prisoner's dilemma which can have a different outcome. Furthermore, you're talking about this as though the government making the most amount of taxes is the most optimal scenario. There are plenty of economists that disagree with this notion, because this cost is passed on to the consumer and thus consumers are worse off. In practice we don't actually see this happen either. In fact, this is how countries like Ireland managed to climb out of poverty. >There is a tendency for industry to congregate, but better ways need to be developed to deal with that than taxpayer bribery. Then I'd be happy to hear proposals that have a chance of working, but mostly what I see is countries like Germany happily taking advantage of the euro and brain drain, but they complain when other vignettes countries get some of the foreign businesses instead of them. I don't think there are better solutions that work without the government regulating absolutely everything. >Mittelstand Please explain a bit more how this avoids companies from congregating in certain areas.
eigenvector 8y ago
Actually it's fine if businesses actually move to Ireland. The problem is not a guy running a machine shop in Antwerp moving it to Dublin. It's Apple claiming they should only pay Irish taxes on the profits of selling an iPhone developed in California, manufactured in China and sold in Italy because they have opened an office full of accountants in Ireland.
- Mirioron 8y ago
  It's fine from your perspective, but put yourself in the shoes of politicians. It's their job to advocate for the best outcome for their constituents, which means that they would like all of the jobs to come to their constituents. >It's Apple claiming they should only pay Irish taxes on the profits of selling an iPhone developed in California, manufactured in China and sold in Italy because they have opened an office full of accountants in Ireland. They're already paying various amounts of taxes in all of those regions. VAT is paid where the person buys the product, for example. Income taxes are paid where the workers are.
  - skh 8y ago
    Apple includes the VAT in the selling price of its products. Therefore it isn't correct to view it as Apple paying the VAT. The purchaser pays the VAT. Apple just collects it and passes that payment along to the taxing authority. Apple also doesn't pay the income tax of its employees. What Apple pays its employees are expenses and and therefore are deducted from its income. Apple pays tax on profits and not on its business expenses.
    - leetcrew 8y ago
      it's somewhat pointless to look at who pays taxes at the surface level. depending on market power, the actual burden of the tax can shift dramatically between buyer and seller. it has almost nothing to do with who officially pays the tax. see https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence
      - 8y ago
makomk 8y ago
Yup, and then the moment German and French industries needed some help we started gettting talk about exempting them from state aid and anti-monopoly rules.

And then we add the calls to set a minimum corporate tax rate to the mix and realize that the EU does this because Germany and France don't want businesses to go to Ireland instead of them.

pjc50 8y ago

Restrictions on state aid date from the treaty of Rome 1957 (https://www.nao.org.uk/decision-support-toolkit/annexes/annex-c-eu-restrictions-on-state-aid/ https://www.nao.org.uk/decision-support-toolkit/annexes/anne... ), and Ireland joined the EU in 1973. It's not about targeting Ireland, it's about creating a genuinely level playing field while ending trade wars.

Mirioron 8y ago
I see. I did not know that! Although, I would still argue my point because Ireland is just a recent example. Businesses naturally go to where there are other businesses. You have to somehow offer them a better deal for them to go elsewhere. If you can't do that then you get an urbanization-like situation for businesses, except they prefer bigger and richer cities over smaller cities.
- pjc50 8y ago
  The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither of them had offered a deal they would both be better off. Classic prisoner's dilemma stuff. There is a tendency for industry to congregate, but better ways need to be developed to deal with that than taxpayer bribery. Within countries, Germany is substantially better at doing this ("Mittelstand") than, say, the UK. And let's not forget that Germany wasn't always the strong country, they used to be "the sick man of Europe": https://www.ft.com/content/bd4c856e-6de7-11e7-b9c7-15af748b60d0 https://www.ft.com/content/bd4c856e-6de7-11e7-b9c7-15af748b6...
  - Mirioron 8y ago
    >The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither of them had offered a deal they would both be better off. Classic prisoner's dilemma stuff. It's not a classic prisoner's dilemma, because you can play this game multiple times. It's an iterated prisoner's dilemma which can have a different outcome. Furthermore, you're talking about this as though the government making the most amount of taxes is the most optimal scenario. There are plenty of economists that disagree with this notion, because this cost is passed on to the consumer and thus consumers are worse off. In practice we don't actually see this happen either. In fact, this is how countries like Ireland managed to climb out of poverty. >There is a tendency for industry to congregate, but better ways need to be developed to deal with that than taxpayer bribery. Then I'd be happy to hear proposals that have a chance of working, but mostly what I see is countries like Germany happily taking advantage of the euro and brain drain, but they complain when other vignettes countries get some of the foreign businesses instead of them. I don't think there are better solutions that work without the government regulating absolutely everything. >Mittelstand Please explain a bit more how this avoids companies from congregating in certain areas.

eigenvector 8y ago

Actually it's fine if businesses actually move to Ireland. The problem is not a guy running a machine shop in Antwerp moving it to Dublin. It's Apple claiming they should only pay Irish taxes on the profits of selling an iPhone developed in California, manufactured in China and sold in Italy because they have opened an office full of accountants in Ireland.

Mirioron 8y ago
It's fine from your perspective, but put yourself in the shoes of politicians. It's their job to advocate for the best outcome for their constituents, which means that they would like all of the jobs to come to their constituents. >It's Apple claiming they should only pay Irish taxes on the profits of selling an iPhone developed in California, manufactured in China and sold in Italy because they have opened an office full of accountants in Ireland. They're already paying various amounts of taxes in all of those regions. VAT is paid where the person buys the product, for example. Income taxes are paid where the workers are.
- skh 8y ago
  Apple includes the VAT in the selling price of its products. Therefore it isn't correct to view it as Apple paying the VAT. The purchaser pays the VAT. Apple just collects it and passes that payment along to the taxing authority. Apple also doesn't pay the income tax of its employees. What Apple pays its employees are expenses and and therefore are deducted from its income. Apple pays tax on profits and not on its business expenses.
  - leetcrew 8y ago
    it's somewhat pointless to look at who pays taxes at the surface level. depending on market power, the actual burden of the tax can shift dramatically between buyer and seller. it has almost nothing to do with who officially pays the tax. see https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence
    - 8y ago

makomk 8y ago

Yup, and then the moment German and French industries needed some help we started gettting talk about exempting them from state aid and anti-monopoly rules.