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Could the US simply impose a tax on all corporate profits, including international profits, for any company with any sort of nexus or business activity in the U

Could the US simply impose a tax on all corporate profits, including international profits, for any company with any sort of nexus or business activity in the US? US citizens are basically already treated this way as individuals. I imagine it would allow the rate to be drastically lower since the tax base would be so much larger. And while megacorps would obviously grumble, it would still be a profitable decision to pay the tax and remain in the US market given how lucrative it is. It would end all these country-to-country shell games once and for all, and would also provide some natural advantage to smaller homegrown companies that haven't gone international yet.

iguy 7y ago
If I understand right, US citizens only owe income tax if what they already paid is less than the US rate. (Edit: "IRS Form 1116. If your income was taxed by a foreign country, you can subtract that tax from your US tax") If something similar were applied to the tax on corporate profits, then it would not change much, as the US rate (21% I think) is pretty low by world standards. But there are exceptions, like Ireland (6-12%, IIRC). But isn't the Irish company a different entity anyway? How far down the chain of ownership / authorized-importer-relationship would such a rule go?
- danenania 7y ago
  "If I understand right, US citizens only owe income tax if what they already paid is less than the US rate." I'm not an expert, but my understanding is that unless there's a tax treaty specifying otherwise (which we do have with many countries), all personal income over the "foreign earned income exclusion" (roughly 100k) is subject to income tax just like US-derived income would be. (Edit: just saw your edit about Form 1116... thanks, I didn't know about this. But I guess my point still applies in that, tax credit aside, you are still considered to be under the authority of the IRS even if your life and all your income are elsewhere.) "If something similar were applied to the tax on corporate profits, then it would not change much, as the US rate (21% I think) is pretty low by world standards. But there are exceptions, like Ireland (6-12%, IIRC)." Right, but if we taxed all international profits, it could probably be very low (maybe < 5%?) while still generating as much or more revenue, since there would be no way to avoid it. And it would be a naturally progressive tax since it would by definition hit multinationals the hardest. "But isn't the Irish company a different entity anyway? How far down the chain of ownership / authorized-importer-relationship would such a rule go?" My thinking is that perhaps we should end this silly game of international subsidiaries being treated like separate entities for tax purposes and just tax the aggregated profits of the parent entity, regardless of where in the world or under what subsidiary they are realized.
  - iguy 7y ago
    I'm not sure it's so easy. If you own 51% of a company, which owns a slice of a company, which does business in America, does this grant uncle same the right to collect 5% of your profits? Sounds pretty imperial. Here's another idea though: Arrange things so that the taxes owed depend on the goods sold, not on any ownership structure. Don't sell goods in the US? No problem. Sell mostly in the US? Who cares about your office in the Bahamas. This probably means abolishing the tax on corporate profits, as where these occurred seems to be basically an accounting fiction. Which is fine, we also don't tax windows anymore.
    - danenania 7y ago
      It's definitely imperial, but it's kind of fundamentally an imperial problem to have companies taking advantage of your world-leading economy, then moving all the profits elsewhere to avoid contributing to the society that made all their success possible. Extradition is also imperial, but without it you effectively offer impunity to anyone who can get out of the country before they're caught. We don't offer this type of criminal impunity, so why are we offering tax impunity to the wealthiest and most powerful entities in the world? The VAT idea is interesting and sounds a lot better than what we have now, but still seems like it could be subject to shell games in terms of what gets spent where. Wouldn't it also be extremely complex from a reporting perspective?
      - iguy 7y ago
        But not just your economy, I'm sure China feels the same way, as will the EU once they see what you raise... I think the recent reductions in the US tax are moves in this direction, which is good. And what else to tax, lots of countries administer VAT, it's not so difficult, and seems quite hard to dodge. But there are lots of other taxes, too. Income tax + 401k starts to sound like a consumption tax, too, only paid on what you spend right now, like VAT. We can adjust that however we like. And before the profits in Ireland can be turned into a bigger yacht for any owner, they have to be paid as dividends (or by selling shares) by some real person who lives somewhere, and we can tax that.
    - 7y ago
rtkwe 7y ago
The issue is Facebook Ireland or Apple Sales International are separate entities from Apple or Facebook US so on paper the profits are happening in completely different companies like Honda buying a car part from another company. So how do you effectively tax that just by saying we also tax overseas profits as well. To do that we'd have to define and pierce all sorts of corporate veils about true owners, decide what the threshold is for being legitimately a separate business and not just an international subsidiary.

iguy 7y ago

If I understand right, US citizens only owe income tax if what they already paid is less than the US rate. (Edit: "IRS Form 1116. If your income was taxed by a foreign country, you can subtract that tax from your US tax") If something similar were applied to the tax on corporate profits, then it would not change much, as the US rate (21% I think) is pretty low by world standards. But there are exceptions, like Ireland (6-12%, IIRC). But isn't the Irish company a different entity anyway? How far down the chain of ownership / authorized-importer-relationship would such a rule go?

danenania 7y ago
"If I understand right, US citizens only owe income tax if what they already paid is less than the US rate." I'm not an expert, but my understanding is that unless there's a tax treaty specifying otherwise (which we do have with many countries), all personal income over the "foreign earned income exclusion" (roughly 100k) is subject to income tax just like US-derived income would be. (Edit: just saw your edit about Form 1116... thanks, I didn't know about this. But I guess my point still applies in that, tax credit aside, you are still considered to be under the authority of the IRS even if your life and all your income are elsewhere.) "If something similar were applied to the tax on corporate profits, then it would not change much, as the US rate (21% I think) is pretty low by world standards. But there are exceptions, like Ireland (6-12%, IIRC)." Right, but if we taxed all international profits, it could probably be very low (maybe < 5%?) while still generating as much or more revenue, since there would be no way to avoid it. And it would be a naturally progressive tax since it would by definition hit multinationals the hardest. "But isn't the Irish company a different entity anyway? How far down the chain of ownership / authorized-importer-relationship would such a rule go?" My thinking is that perhaps we should end this silly game of international subsidiaries being treated like separate entities for tax purposes and just tax the aggregated profits of the parent entity, regardless of where in the world or under what subsidiary they are realized.
- iguy 7y ago
  I'm not sure it's so easy. If you own 51% of a company, which owns a slice of a company, which does business in America, does this grant uncle same the right to collect 5% of your profits? Sounds pretty imperial. Here's another idea though: Arrange things so that the taxes owed depend on the goods sold, not on any ownership structure. Don't sell goods in the US? No problem. Sell mostly in the US? Who cares about your office in the Bahamas. This probably means abolishing the tax on corporate profits, as where these occurred seems to be basically an accounting fiction. Which is fine, we also don't tax windows anymore.
  - danenania 7y ago
    It's definitely imperial, but it's kind of fundamentally an imperial problem to have companies taking advantage of your world-leading economy, then moving all the profits elsewhere to avoid contributing to the society that made all their success possible. Extradition is also imperial, but without it you effectively offer impunity to anyone who can get out of the country before they're caught. We don't offer this type of criminal impunity, so why are we offering tax impunity to the wealthiest and most powerful entities in the world? The VAT idea is interesting and sounds a lot better than what we have now, but still seems like it could be subject to shell games in terms of what gets spent where. Wouldn't it also be extremely complex from a reporting perspective?
    - iguy 7y ago
      But not just your economy, I'm sure China feels the same way, as will the EU once they see what you raise... I think the recent reductions in the US tax are moves in this direction, which is good. And what else to tax, lots of countries administer VAT, it's not so difficult, and seems quite hard to dodge. But there are lots of other taxes, too. Income tax + 401k starts to sound like a consumption tax, too, only paid on what you spend right now, like VAT. We can adjust that however we like. And before the profits in Ireland can be turned into a bigger yacht for any owner, they have to be paid as dividends (or by selling shares) by some real person who lives somewhere, and we can tax that.
  - 7y ago

rtkwe 7y ago

The issue is Facebook Ireland or Apple Sales International are separate entities from Apple or Facebook US so on paper the profits are happening in completely different companies like Honda buying a car part from another company. So how do you effectively tax that just by saying we also tax overseas profits as well. To do that we'd have to define and pierce all sorts of corporate veils about true owners, decide what the threshold is for being legitimately a separate business and not just an international subsidiary.