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Transfer pricing and tax havens are draining money out of the economies of most European countries, breaking the virtuous cycle where consumer spending also lea

by m12k 6y ago

Transfer pricing and tax havens are draining money out of the economies of most European countries, breaking the virtuous cycle where consumer spending also leads to salaries, taxes and more investment in the community, to keep the economy going - instead we have a shrinking middle class, as the fuel is drained from the engine. Ireland, Luxembourg and certain other countries are complicit in this. We clearly need better tax laws to combat this, but I'm glad the commission is trying to fight this to the extent they can within current laws, and I hope they win the case on appeal.

logicchains 6y ago
>Transfer pricing and tax havens are draining money out of the economies of most European countries, breaking the virtuous cycle where consumer spending also leads to salaries, taxes and more investment in the community, to keep the economy going - instead we have a shrinking middle class, as the fuel is drained from the engine. An alternative interpretation is that the high degree of taxes and regulations in Europe is preventing the growth of new companies there, resulting in fewer jobs, opportunities and investments. If Apple was a European company Europe would be getting a lot more taxes from it. In spite of Europe's larger population, in the past few decades it has produced way fewer new Fortune 500 companies than the US (and now also fewer than China).
- fladrif 6y ago
  What are the benefits of a fortune 500? Who are the beneficiaries? The main ones would be investors and management, including a subset of employees. Given the tax loopholes that are often taken advantage of, I would hardly say that the countries or cities they reside in are beneficiaries in as far as tax income, though they definitely have a hub effect of drawing people into the locations they are in. Whether that is beneficial for original inhabitants is debatable, given gentrification and increased inequality of those who the city warps around to serve, and those who serve them. On the other hand, Europe has lower inequality amongst citizens, and an argument could be made to say that this increases happiness. What they are missing out on wrt fortune 500's is creativity that creates new technologies that pushes boundaries and revolutionizes the world (perhaps an oversimplification of the argument). Though they may not be at the forefront of this, it would be inaccurate to say that they do not benefit from innovations occurring in the world. My argument is that they currently occupy the coveted position to benefit both from the inequality of other countries yet retain the benefits of a more equal society. Viewing the entire world as an unequal society, the winners would be the ones at the top of unequal countries, followed by the equal countries, with those at the bottom of unequal societies trailing. Ideally the entire world would all have equal societies, but in no situation would I think countries with equality strive for the benefits of those with unequality
  - yolomcsuperswag 6y ago
    > Who are the beneficiaries? Literally any entity they interact with. And F500's interact a lot with a lot of entities!
    - myspy 6y ago
      As long as there is shareholder before stakeholder, I don't see this as a good argument. Take Amazon. Employees in warehouses are low wage and hire and fire jobs. The CEO is getting richer and richer, not everyone is profiting as well as it could be. What Europe would need is to excel in computer science as well as design and engineering. The topic is pretty lacking here and would need a push. The result would be companies that could deliver experiences equal to the US or better. Take Facebook, a European version with the data protection laws here would be infinitely better.
      - chii 6y ago
        > Employees in warehouses are low wage and hire and fire jobs. The CEO is getting richer and richer, not everyone is profiting as well as it could be. same old argument that marx has - that capital ownership (and by extension, capitalism) is the cause for such inequality. I personally don't think all inequality is the same, and inequality is what drives people. There's a reason why communism, and their strive for equality, has so far failed as a form of governance, and as a form of market economy.
        6AA4FD 6y ago
        Does inequality drive you? Personally, I don't work because I want to enjoy more goods, services, or life stability than my friends or family. I work because I want to be able to afford my own health insurance and pay my own grocery bill. I don't think my interest in doing that is really a function of anyone else's insurance or economic status.
        jokethrowaway 6y ago
        > Does inequality drive you? Absolutely! If there is no inequality there is no profit for working more. If I can't earn more by working more then I'll just do the bare minimum and still receive my equal share. Luckily I never lived under a communist regime to witness it, but I've seen this happen in companies with middle managers who don't care: a few employees start working very little, a few more follow suits, motivated individuals complain, see that nothing happens and then start slacking as well.
- adventured 6y ago
  > In spite of Europe's larger population, in the past few decades it has produced way fewer new Fortune 500 companies than the US (and now also fewer than China). The situation is far more dire in the EU than even that would suggest. Spain and Italy (#3 and #4 largest economies in the EU) will spend the next 20 years just trying to get back to where they were in 2007, and will have lost a minimum of 30 years to net economic stagnation. That's the good scenario. Prior to the virus, France had seen zero net economic growth for 12 years. That's despite adding three million people to their population, which means the pie is shrinking for each French person. Germany had seen zero net economic growth for 11-12 years. With the virus hit they'll probably go a net 20 years with zero GDP per capita expansion. The same scenario is playing out across most of the EU's members. There's no growth to be found anywhere outside of the Baltics and Ireland (11m population combined), while social system costs continue to climb and demographics continue to age. You can see this erosion effect playing out for example in the collapse of EU spending on infrastructure (which has fallen below the US level as a share of GDP).
  - IAmEveryone 6y ago
    None of that is remotely true: https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim=country:DEU:FRA:ITA&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_kd_zg&scale_y=lin&ind_y=false&rdim=world&idim=country:DEU:FRA:ITA:USA:ESP&ifdim=world&hl=en_US&dl=en&ind=false https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&...
- blp 6y ago
  Yet happiness, productivity, and lifespan are all higher in Europe. Regulation is different, and in some areas less. Who are you optimizing for?
  - logicchains 6y ago
    Going by https://time.com/4621185/worker-productivity-countries/ https://time.com/4621185/worker-productivity-countries/, the US is more productive than most countries in Europe. Going by https://worldhappiness.report/ed/2017/ https://worldhappiness.report/ed/2017/ , figure 2.2, the US is happier than the majority of European countries. >Who are you optimizing for? I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this.
    - m12k 6y ago
      A quote from that World Happiness Report you just linked to: "Happiness has fallen in America The USA is a story of reduced happiness. In 2007 the USA ranked 3rd among the OECD countries; in 2016 it came 19th. The reasons are declining social support and increased corruption (chapter 7) and it is these same factors that explain why the Nordic countries do so much better." > I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this. You've bought into the propaganda propagated by the ultra rich via cable news and other outlets in order to justify their continued accrual of more and more of the world's wealth: That economic freedom is just freedom from taxes - it's not freedom from ever worrying about going bankrupt or becoming homeless if you get sick. That society works better when nobody cares about the well-being of their fellow citizens, that the freedom to care about nobody but yourself somehow makes us stronger as a society, not weaker. That publicly run institutions are always just 'bureacracies' and 'inefficient' - not the solid foundations upon which other parts of society and the market can rest, which many public institutions prove every day, by freeing citizens and companies that rely on them from having to pay for one or more layers of shareholder profits, freeing them to invest in other things instead. The talking points you are reiterating sound good on their surface, but in reality they are just that, talking points. The reality of what the world becomes when they are used as policy is being felt all around the world these days.
- m12k 6y ago
  The US experienced massive growth in the 50s and 60s while having very high tax rates. The US, until recently had a higher corporate tax rate than many European country - the latest US tax cuts brought it down to the same 21% that my native Denmark has. I'm sorry, but this 'deregulation and low taxes will fix everything' myth has been so thoroughly debunked by now that I'm sad to see it rearing its ugly head in an otherwise thoughtful and fact-based forum like HN. What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? If the middle class has no money to spend, it doesn't matter how cheap the goods are to produce. And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century.
  - logicchains 6y ago
    >The US experienced massive growth in the 50s and 60s while having very high tax rates. The effective rate actually paid by the top 1% was around 42%, which is not much higher than now: https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/. . The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage. >so thoroughly debunked by now Debunked where? Here's a random paper I found showing a strong correlation between economic freedom and GDP: https://mpra.ub.uni-muenchen.de/49220/ https://mpra.ub.uni-muenchen.de/49220/ . https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/efw-2019-chapter-1.pdf https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/e... also has a graph on page 18 showing a strong relationship between economic freedom and income per capita. >What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? Demand is a factor in short-term market dislocations, but demand cannot create long-term economic growth. Growth requires that some of the value created be saved and invested, in order to increase capital, and no amount of demand will compensate for a long-term fall in investment.
    - m12k 6y ago
      > The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage Ding-ding-ding - you hit the nail on the head! The US' competitive advantage and special position in the world, including all those fortune 500 companies, doesn't come from its special adherence to laissez-faire capitalism, it comes from other historic advantages. The supply-side trickle-down cult didn't start until the 70's and incidentally real median purchasing power in the US has been in decline ever since. > Debunked where? Here's a random paper I found Here's a very non-random book I found: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... Also, do I really need to remind you that correlation is not the same as causation?
- tw04 6y ago
  Globalization has broken the social contract. You've got countless companies that truly "form" in western countries with high standards of living - the founders and leaders all reside there. But then they offshore their profits to keep more for themselves, draining that western economy and creating an unsustainable funnel of money. The problem isn't taxes, the problem is founders who believe they are above the social contract. They want the benefits of a highly stable society with high taxes and high standards of living, but they don't want to pay their share of keeping that system alive.
  - m12k 6y ago
    The problem is exactly taxes and tax laws. These founders live in a society where if you structure your company one way, you pay 21% in corporate tax, and if you structure it another way you pay 0%, and both are legal - which one do you think they will choose? We need to make profit shifting illegal, but it currently isn't. We can't count on founders being 'ethical' enough to not play the game optimally, we need to change the rules of the game, so optimal play from them isn't bad for the rest of us.
    - nickpp 6y ago
      If you think the founders have an unfair advantage, why don’t you go ahead, become one and lead by example? The world needs more founders anyway. They are the ones who created the amazing wealth we are enjoying right now, not the politicians, bureaucrats, regulators or commissioners.
    - nodamage 6y ago
      In the case of Apple it's not really accurate to say they paid 0%. Instead, their taxes on overseas sales were deferred until they were repatriated into the US. Upon repatriation they paid $38 billion in taxes on $252 billion of income, or a tax rate of 15%.
- fluffy87 6y ago
  The main reason behind the lack of EU successful startups is that they can’t attract talent because they can’t pay employees in stock options which means that when one happens to succeed only few people get rich, instead of what happens in the US were most employees get rich and some of them go on to create beer startups. There is no such cycle in Europe, and it’s all because the lack of stock options. Without them, startups only offer very low pay with little to no reward, and good luck trying to attract the top talent startups actually need to succeed.
  - IgorPartola 6y ago
    Why can’t they offer actual stock instead at that point?
    - rfrey 6y ago
      Then employees would need to immediately pay tax on the stock based on the last valuation.
      - messe 6y ago
        I'm not sure about stock options, but RSUs are reasonably common in Ireland. Tax isn't paid on them until the vest date.
        smachiz 6y ago
        RSUs work because they're typically for already public companies. At vest, in the US, a percentage of shares are immediately sold to cover taxes. With illiquid stock - as in a startup - where there's no public market for it, and no one to sell it to, you can't really do that, and you're creating a tax problem for your employees. The company can pay those taxes on your behalf - but that's expensive when a startup is explicitly paying in stock because they need the cash to grow.
      - holoduke 6y ago
        most European countries use Sars (stock appriciation right) tax is collected at the very end. against a 50% tax cut though (in most EU countries)
- boudin 6y ago
  I'm not sure it's a bad thing... Most of the taxes aren't paid by big companies that can optimise everything at a world level but by the multitude of much smaller companies. If you would replace Apple, Google, or Amazon by a multitude of smaller companies, they would pay taxes.
- tsimionescu 6y ago
  Would the Irish loop hole not work or the company was European? Sure, maybe it would have been France and Ireland that would have gotten some of the profits instead of The US and Ireland, but the rest of the EU would still be SoL.
- cosmodisk 6y ago
  Europe isn't USA or China with very large single market. It is broken into small pieces,where each speaks different languages,have different cultural habbits,and different financial means. While I have no doubt that an average Californian does differ a bit from a Texan, ultimately they still share lots of things in common. A Romanian and Norwegian do differ much more.
- pietrovismara 6y ago
  Why have new tech corporations if they don't bring anything to the table except very few specialized jobs and no taxes, compared to the huge profit they make every year? What would Europe stand to get from having more Fortune 500 companies? It doesn't seem like it's helping in the US at all. On the other hand, Europe still has a much better lifestyle for people who are not rich. We must end the concept that nations are subject to the market and corporations whims. That's the narrative they are spreading, but they can't do without Europe's profits, so it's better we realize that as states we have more power over them than they'd like to admit.
traveler01 6y ago
Basically what we need is lowering taxes. You wouldn't have "tax havens" if you were taxing people fairly.
briandear 6y ago
Perhaps lowering taxes is the answer. Why pay sky-high French taxes when you could pay lower taxes in Ireland?
- m12k 6y ago
  Unless we want international trade to be a one-way process that slowly drains the middle class dry, and triggers the next recession when demand drops to zero, then it is probably better to make sure that whenever a company makes money by selling to consumers, enough money is re-circulated back into that country to maintain the purchasing power of those consumers. (That seems to be a core part of China's strategy, protecting their inner market from outsiders, and they're doing pretty well economically compared to most of the world)
  - joejerryronnie 6y ago
    The devil is in the details though. I’m sure a US capitalist and a French government bureaucrat have very different ideas as to what constitutes “enough money”.
    - m12k 6y ago
      If we fixed profit shifting, then the French bureaucrat could set a tax rate, and the US capitalist would be free to choose whether they wanted their company to do business in France, and thus the market would eventually find some equilibrium for us. Right now it doesn't matter what the French corporate tax rate is, because multinationals don't have to pay it.
      - nfsdjkghewyuh 6y ago
        Economic is not my area of expertise, so I don't think I'm understanding. Are you talking about (1) something like a sales tax, where all companies that sell to, in this example, French consumers have to pay a tax based on those sales, (2) only if they have a corporate presence in France do they pay some portion of the profits made in France, or (3) something completely different and I'm 100% lost. If it's (2) wouldn't that just incentivize businesses to sell to France but not employ French people, and if it's (1) wouldn't corporations just offload the cost of that tax onto consumers so that good are just more expensive in France?
linuxftw 6y ago
> We clearly need better tax laws to combat this Just lower your tax rate to match the most competitive jurisdictions, easy.
DeonPenny 6y ago
Honestly at first glance this seems right. But this argument has been made so much, in so many place, and ended in failure so frequently why don't we think of something different. Hopefully less dependent on government evolvement. The idea that you can vote or tax this problem away seems misguided at a certain point.
- m12k 6y ago
  I don't think anyone's really tried to solve this yet - can you reference any actual attempts? Also, if we need to fix a problem where companies are exploiting their access to a common resource (the purchasing power of the middle class in a given country) without paying to maintain that resource - how would we ever fix that without involving the only entity with the power and mandate to block the companies' access or charge them more for it, the government? I think the biggest hindrance here is that transfer pricing is a complicated issue, that most voters don't understand the mechanics of, so there's not been a lot of pressure on politicians to solve it. It's been much easier to just lay the blame on immigrants or whatever, than to actually attack the root cause of the issue.
anonymousDan 6y ago
There is zero chance they will win this on appeal. Vestager should be booted out of her job for this ridiculous waste of taxpayers money. I said at the time on here a few years ago that this was a power grab by the EU commission. The fundamental problem is the US allows its corporations to undercut local competition by 'deferring' their tax payments, then parking their cash offshore and applying political pressure for tax amnesties. One possible solution could be for the EU to apply some minimum tax level against which any US tax payments can be counted, but if there is a shortfall because of deferral tricks the delta gets paid at source.
secondcoming 6y ago
Apple has been in Ireland since the 1980's. A large fraction of an entire city (Cork) depend on it. It's not hard to imagine that Apple has contributed far more than $14bn to the community, and country, in that time. And it's not a figure-head office either, it has assembly lines. Countries aren't all identical. Ireland needs to be allowed tune its economic policies based on what it has to offer. It doesn't have the population of France, or the location of Germany. It has english speakers and a reasonably well educated workforce, two factors that aren't unique to it. A low corporation tax policy counts for a lot.
- m12k 6y ago
  I agree that countries should be free to set their corporate tax rate to whatever they want to attract investment. But corporations should not be able to just shift their profits to any country, but sadly, using loopholes in international tax law, they can currently do so freely [1]. This means Ireland is not just taxing companies for the economic activity that goes on within its borders, it is also preventing taxation of economic activities in all other European countries. Furthermore, in the case at hand, while Ireland is free to set their tax rate to something low, like 12.5%, it needs to apply this to all companies, not allow any of them to fiddle their way to only paying 0.005% like Apple did. The commission considers this illegal state aid to a company, and I'd tend to agree. It's unfair competion when a company only operating in Ireland needs to pay 12.5% in corporate tax, while an international company with a creative ownership structure involving the Cayman Islands can pay effectively 0%. [1] https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifting https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifti...
- solarkraft 6y ago
  > It's not hard to imagine that Apple has contributed far more than $14bn to the community, and country Even assuming that's the case (sounds far fetched to me), would that mean they now wouldn't have to pay a fair tax rate?
  - ksec 6y ago
    >pay a fair tax rate? They would, but you have to define "fair" first.
ransom1538 6y ago
How to setup a tax haven, in just a few steps!: 1) Create a successful company. 2) Create a new company in Ireland [$400 office and a phone]. 3) Transfer all revenue creating items to Ireland company - leave all cost centers in your host country [US, Germany, etc]. 4) Write on your blogs how you back social justice!
- talideon 6y ago
  Well, no. That's not how it works. That stuff only remotely works with US companies because its tax regime wasn't a territorial one. As of a few years ago, the US finally transitioned to a quasi-territorial tax regime, which plugged some of the holes, but not all of them. And you don't find German (or Japanese, Australian, &c.) multinationals doing this kind of thing because they have _proper_ territorial tax regimes. The US does not, and this kind of thing will continue to be a problem until the US finally does do what the rest of the world does regarding taxation. And it would be nice if they did the same regarding personal taxation.
ogre_codes 6y ago
> We clearly need better tax laws to combat this, but I'm glad the commission is trying to fight this to the extent they can within current laws, and I hope they win the case on appeal. I fully agree with the former, but—to an extent—disagree with the latter. The thing that bothers me about this lawsuit is the fact that it is in essence an after-the-fact tax increase. If they want to reform tax law, then it should be forward facing, not trying to reverse previous established policies. Particularly not for the length of time this covered. Globally, the US, EU, (UK now), Canada, etc, all need to get their ducks in a row and get taxation sorted out in a sane way.
- redisman 6y ago
  Yes and to shut down Cayman Islands and Cyprus while they're at it. It goes to show how incredibly corrupt the global elites are that they "can't" shut down money laundering by tiny island nations who would roll over in 5 seconds if told to by someone like the US. The truth is they love it because that's where they keep their money.
  - 6510 6y ago
    We clearly do all have officials who should be dealing with this. I wonder if they can be persecuted for treason.
    - TheOtherHobbes 6y ago
      That's going to be difficult to organise in a plutocracy. There are insane sums being spent in organised campaigns to limit the ability of governments to interfere with this ethic of systemic financial capture.
      - 6510 6y ago
        There might be a sweet spot where plutocracy is incompatible with kleptocracy. When you own a government you'd want some level of property maintenance. When you want to enrich yourself with public money you want as much of it as possible. The long vs the short game.
odiroot 6y ago
> instead we have a shrinking middle class, as the fuel is drained from the engine. And yet in recent years, the middle class is more and more blamed for the inequality and other big problems of the world. In multiple EU states, there's no mainstream parties representing the interests of the middle class. At the same time the truly rich are laughing on their way to the bank.
sideeffffect 6y ago
This problem has a rather profound solution: Common Consolidated Corporate Tax Base https://en.wikipedia.org/wiki/Common_Consolidated_Corporate_Tax_Base https://en.wikipedia.org/wiki/Common_Consolidated_Corporate_... Companies should have never been taxed based on a virtual, and fundamentally nonsensical, figure as the location of their headquarters. They should be taxed based on substantial things, like (the location of) capital, labour and sales. This is what CCCTB establishes. States are still free to set the tax rate as they wish. It's just that then the companies can't escape with the turnover money to another state, essentially robbing the state where the profit was generated. This is the most important tax legislation of this day. No other debate about taxes, like the rate itself, or harmonisation of the rates across states, makes sense before this gets implemented. The reason is that now the tax rate is evadable and only stifles local/small businesses who don't/can't cheat. Sadly, there are few states that are successfully blocking this: Netherlands, Ireland, Malta, etc. But I hope to see this one day.
- AceJohnny2 6y ago
  > Sadly, there are few states that are successfully blocking this: Netherlands, Ireland, Malta, etc. I.e the ones benefiting from the current regime, and to lose in the reformed one.
  - rapnie 6y ago
    I'm Dutch and ashamed we are in these lists. Regular folks in The Netherlands don't really benefit too. Can't find it now, but I read a study some time ago that without our current tax paradise regulations we'd be better off. I suspect these things are mostly kept in place by enterprises and people in higher positions who successfully lobby the politicians.
- ghostwriter 6y ago
  > essentially robbing the state where the profit was generated. It's a very interesting line of thinking when a company that produces new value and makes money by providing the value to the customers by voluntary transactions (and regardless their location) somehow is considered a robber of the state that produces nothing.
joejoeshabadoo5 6y ago
Can you point to any examples of higher taxes spurring economic growth?
lefty2 6y ago
> Ireland, Luxembourg and certain other countries are complicit in this Most people don't realise it's US tax law which allows US companies to defer paying taxes on foreign profits indefinitely. Without that law there' would be no loophole.

by m12k 6y ago

logicchains 6y ago

>Transfer pricing and tax havens are draining money out of the economies of most European countries, breaking the virtuous cycle where consumer spending also leads to salaries, taxes and more investment in the community, to keep the economy going - instead we have a shrinking middle class, as the fuel is drained from the engine. An alternative interpretation is that the high degree of taxes and regulations in Europe is preventing the growth of new companies there, resulting in fewer jobs, opportunities and investments. If Apple was a European company Europe would be getting a lot more taxes from it. In spite of Europe's larger population, in the past few decades it has produced way fewer new Fortune 500 companies than the US (and now also fewer than China).

fladrif 6y ago
What are the benefits of a fortune 500? Who are the beneficiaries? The main ones would be investors and management, including a subset of employees. Given the tax loopholes that are often taken advantage of, I would hardly say that the countries or cities they reside in are beneficiaries in as far as tax income, though they definitely have a hub effect of drawing people into the locations they are in. Whether that is beneficial for original inhabitants is debatable, given gentrification and increased inequality of those who the city warps around to serve, and those who serve them. On the other hand, Europe has lower inequality amongst citizens, and an argument could be made to say that this increases happiness. What they are missing out on wrt fortune 500's is creativity that creates new technologies that pushes boundaries and revolutionizes the world (perhaps an oversimplification of the argument). Though they may not be at the forefront of this, it would be inaccurate to say that they do not benefit from innovations occurring in the world. My argument is that they currently occupy the coveted position to benefit both from the inequality of other countries yet retain the benefits of a more equal society. Viewing the entire world as an unequal society, the winners would be the ones at the top of unequal countries, followed by the equal countries, with those at the bottom of unequal societies trailing. Ideally the entire world would all have equal societies, but in no situation would I think countries with equality strive for the benefits of those with unequality
- yolomcsuperswag 6y ago
  > Who are the beneficiaries? Literally any entity they interact with. And F500's interact a lot with a lot of entities!
  - myspy 6y ago
    As long as there is shareholder before stakeholder, I don't see this as a good argument. Take Amazon. Employees in warehouses are low wage and hire and fire jobs. The CEO is getting richer and richer, not everyone is profiting as well as it could be. What Europe would need is to excel in computer science as well as design and engineering. The topic is pretty lacking here and would need a push. The result would be companies that could deliver experiences equal to the US or better. Take Facebook, a European version with the data protection laws here would be infinitely better.
    - chii 6y ago
      > Employees in warehouses are low wage and hire and fire jobs. The CEO is getting richer and richer, not everyone is profiting as well as it could be. same old argument that marx has - that capital ownership (and by extension, capitalism) is the cause for such inequality. I personally don't think all inequality is the same, and inequality is what drives people. There's a reason why communism, and their strive for equality, has so far failed as a form of governance, and as a form of market economy.
      - 6AA4FD 6y ago
        Does inequality drive you? Personally, I don't work because I want to enjoy more goods, services, or life stability than my friends or family. I work because I want to be able to afford my own health insurance and pay my own grocery bill. I don't think my interest in doing that is really a function of anyone else's insurance or economic status.
      - jokethrowaway 6y ago
        > Does inequality drive you? Absolutely! If there is no inequality there is no profit for working more. If I can't earn more by working more then I'll just do the bare minimum and still receive my equal share. Luckily I never lived under a communist regime to witness it, but I've seen this happen in companies with middle managers who don't care: a few employees start working very little, a few more follow suits, motivated individuals complain, see that nothing happens and then start slacking as well.
adventured 6y ago
> In spite of Europe's larger population, in the past few decades it has produced way fewer new Fortune 500 companies than the US (and now also fewer than China). The situation is far more dire in the EU than even that would suggest. Spain and Italy (#3 and #4 largest economies in the EU) will spend the next 20 years just trying to get back to where they were in 2007, and will have lost a minimum of 30 years to net economic stagnation. That's the good scenario. Prior to the virus, France had seen zero net economic growth for 12 years. That's despite adding three million people to their population, which means the pie is shrinking for each French person. Germany had seen zero net economic growth for 11-12 years. With the virus hit they'll probably go a net 20 years with zero GDP per capita expansion. The same scenario is playing out across most of the EU's members. There's no growth to be found anywhere outside of the Baltics and Ireland (11m population combined), while social system costs continue to climb and demographics continue to age. You can see this erosion effect playing out for example in the collapse of EU spending on infrastructure (which has fallen below the US level as a share of GDP).
- IAmEveryone 6y ago
  None of that is remotely true: https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim=country:DEU:FRA:ITA&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_kd_zg&scale_y=lin&ind_y=false&rdim=world&idim=country:DEU:FRA:ITA:USA:ESP&ifdim=world&hl=en_US&dl=en&ind=false https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&...
blp 6y ago
Yet happiness, productivity, and lifespan are all higher in Europe. Regulation is different, and in some areas less. Who are you optimizing for?
- logicchains 6y ago
  Going by https://time.com/4621185/worker-productivity-countries/ https://time.com/4621185/worker-productivity-countries/, the US is more productive than most countries in Europe. Going by https://worldhappiness.report/ed/2017/ https://worldhappiness.report/ed/2017/ , figure 2.2, the US is happier than the majority of European countries. >Who are you optimizing for? I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this.
  - m12k 6y ago
    A quote from that World Happiness Report you just linked to: "Happiness has fallen in America The USA is a story of reduced happiness. In 2007 the USA ranked 3rd among the OECD countries; in 2016 it came 19th. The reasons are declining social support and increased corruption (chapter 7) and it is these same factors that explain why the Nordic countries do so much better." > I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this. You've bought into the propaganda propagated by the ultra rich via cable news and other outlets in order to justify their continued accrual of more and more of the world's wealth: That economic freedom is just freedom from taxes - it's not freedom from ever worrying about going bankrupt or becoming homeless if you get sick. That society works better when nobody cares about the well-being of their fellow citizens, that the freedom to care about nobody but yourself somehow makes us stronger as a society, not weaker. That publicly run institutions are always just 'bureacracies' and 'inefficient' - not the solid foundations upon which other parts of society and the market can rest, which many public institutions prove every day, by freeing citizens and companies that rely on them from having to pay for one or more layers of shareholder profits, freeing them to invest in other things instead. The talking points you are reiterating sound good on their surface, but in reality they are just that, talking points. The reality of what the world becomes when they are used as policy is being felt all around the world these days.
m12k 6y ago
The US experienced massive growth in the 50s and 60s while having very high tax rates. The US, until recently had a higher corporate tax rate than many European country - the latest US tax cuts brought it down to the same 21% that my native Denmark has. I'm sorry, but this 'deregulation and low taxes will fix everything' myth has been so thoroughly debunked by now that I'm sad to see it rearing its ugly head in an otherwise thoughtful and fact-based forum like HN. What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? If the middle class has no money to spend, it doesn't matter how cheap the goods are to produce. And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century.
- logicchains 6y ago
  >The US experienced massive growth in the 50s and 60s while having very high tax rates. The effective rate actually paid by the top 1% was around 42%, which is not much higher than now: https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/. . The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage. >so thoroughly debunked by now Debunked where? Here's a random paper I found showing a strong correlation between economic freedom and GDP: https://mpra.ub.uni-muenchen.de/49220/ https://mpra.ub.uni-muenchen.de/49220/ . https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/efw-2019-chapter-1.pdf https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/e... also has a graph on page 18 showing a strong relationship between economic freedom and income per capita. >What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? Demand is a factor in short-term market dislocations, but demand cannot create long-term economic growth. Growth requires that some of the value created be saved and invested, in order to increase capital, and no amount of demand will compensate for a long-term fall in investment.
  - m12k 6y ago
    > The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage Ding-ding-ding - you hit the nail on the head! The US' competitive advantage and special position in the world, including all those fortune 500 companies, doesn't come from its special adherence to laissez-faire capitalism, it comes from other historic advantages. The supply-side trickle-down cult didn't start until the 70's and incidentally real median purchasing power in the US has been in decline ever since. > Debunked where? Here's a random paper I found Here's a very non-random book I found: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... Also, do I really need to remind you that correlation is not the same as causation?
tw04 6y ago
Globalization has broken the social contract. You've got countless companies that truly "form" in western countries with high standards of living - the founders and leaders all reside there. But then they offshore their profits to keep more for themselves, draining that western economy and creating an unsustainable funnel of money. The problem isn't taxes, the problem is founders who believe they are above the social contract. They want the benefits of a highly stable society with high taxes and high standards of living, but they don't want to pay their share of keeping that system alive.
- m12k 6y ago
  The problem is exactly taxes and tax laws. These founders live in a society where if you structure your company one way, you pay 21% in corporate tax, and if you structure it another way you pay 0%, and both are legal - which one do you think they will choose? We need to make profit shifting illegal, but it currently isn't. We can't count on founders being 'ethical' enough to not play the game optimally, we need to change the rules of the game, so optimal play from them isn't bad for the rest of us.
  - nickpp 6y ago
    If you think the founders have an unfair advantage, why don’t you go ahead, become one and lead by example? The world needs more founders anyway. They are the ones who created the amazing wealth we are enjoying right now, not the politicians, bureaucrats, regulators or commissioners.
  - nodamage 6y ago
    In the case of Apple it's not really accurate to say they paid 0%. Instead, their taxes on overseas sales were deferred until they were repatriated into the US. Upon repatriation they paid $38 billion in taxes on $252 billion of income, or a tax rate of 15%.
fluffy87 6y ago
The main reason behind the lack of EU successful startups is that they can’t attract talent because they can’t pay employees in stock options which means that when one happens to succeed only few people get rich, instead of what happens in the US were most employees get rich and some of them go on to create beer startups. There is no such cycle in Europe, and it’s all because the lack of stock options. Without them, startups only offer very low pay with little to no reward, and good luck trying to attract the top talent startups actually need to succeed.
- IgorPartola 6y ago
  Why can’t they offer actual stock instead at that point?
  - rfrey 6y ago
    Then employees would need to immediately pay tax on the stock based on the last valuation.
    - messe 6y ago
      I'm not sure about stock options, but RSUs are reasonably common in Ireland. Tax isn't paid on them until the vest date.
      - smachiz 6y ago
        RSUs work because they're typically for already public companies. At vest, in the US, a percentage of shares are immediately sold to cover taxes. With illiquid stock - as in a startup - where there's no public market for it, and no one to sell it to, you can't really do that, and you're creating a tax problem for your employees. The company can pay those taxes on your behalf - but that's expensive when a startup is explicitly paying in stock because they need the cash to grow.
    - holoduke 6y ago
      most European countries use Sars (stock appriciation right) tax is collected at the very end. against a 50% tax cut though (in most EU countries)
boudin 6y ago
I'm not sure it's a bad thing... Most of the taxes aren't paid by big companies that can optimise everything at a world level but by the multitude of much smaller companies. If you would replace Apple, Google, or Amazon by a multitude of smaller companies, they would pay taxes.
tsimionescu 6y ago
Would the Irish loop hole not work or the company was European? Sure, maybe it would have been France and Ireland that would have gotten some of the profits instead of The US and Ireland, but the rest of the EU would still be SoL.
cosmodisk 6y ago
Europe isn't USA or China with very large single market. It is broken into small pieces,where each speaks different languages,have different cultural habbits,and different financial means. While I have no doubt that an average Californian does differ a bit from a Texan, ultimately they still share lots of things in common. A Romanian and Norwegian do differ much more.
pietrovismara 6y ago
Why have new tech corporations if they don't bring anything to the table except very few specialized jobs and no taxes, compared to the huge profit they make every year? What would Europe stand to get from having more Fortune 500 companies? It doesn't seem like it's helping in the US at all. On the other hand, Europe still has a much better lifestyle for people who are not rich. We must end the concept that nations are subject to the market and corporations whims. That's the narrative they are spreading, but they can't do without Europe's profits, so it's better we realize that as states we have more power over them than they'd like to admit.

traveler01 6y ago

Basically what we need is lowering taxes. You wouldn't have "tax havens" if you were taxing people fairly.

briandear 6y ago

Perhaps lowering taxes is the answer. Why pay sky-high French taxes when you could pay lower taxes in Ireland?

m12k 6y ago
Unless we want international trade to be a one-way process that slowly drains the middle class dry, and triggers the next recession when demand drops to zero, then it is probably better to make sure that whenever a company makes money by selling to consumers, enough money is re-circulated back into that country to maintain the purchasing power of those consumers. (That seems to be a core part of China's strategy, protecting their inner market from outsiders, and they're doing pretty well economically compared to most of the world)
- joejerryronnie 6y ago
  The devil is in the details though. I’m sure a US capitalist and a French government bureaucrat have very different ideas as to what constitutes “enough money”.
  - m12k 6y ago
    If we fixed profit shifting, then the French bureaucrat could set a tax rate, and the US capitalist would be free to choose whether they wanted their company to do business in France, and thus the market would eventually find some equilibrium for us. Right now it doesn't matter what the French corporate tax rate is, because multinationals don't have to pay it.
    - nfsdjkghewyuh 6y ago
      Economic is not my area of expertise, so I don't think I'm understanding. Are you talking about (1) something like a sales tax, where all companies that sell to, in this example, French consumers have to pay a tax based on those sales, (2) only if they have a corporate presence in France do they pay some portion of the profits made in France, or (3) something completely different and I'm 100% lost. If it's (2) wouldn't that just incentivize businesses to sell to France but not employ French people, and if it's (1) wouldn't corporations just offload the cost of that tax onto consumers so that good are just more expensive in France?

linuxftw 6y ago

> We clearly need better tax laws to combat this Just lower your tax rate to match the most competitive jurisdictions, easy.

DeonPenny 6y ago

Honestly at first glance this seems right. But this argument has been made so much, in so many place, and ended in failure so frequently why don't we think of something different. Hopefully less dependent on government evolvement. The idea that you can vote or tax this problem away seems misguided at a certain point.

m12k 6y ago
I don't think anyone's really tried to solve this yet - can you reference any actual attempts? Also, if we need to fix a problem where companies are exploiting their access to a common resource (the purchasing power of the middle class in a given country) without paying to maintain that resource - how would we ever fix that without involving the only entity with the power and mandate to block the companies' access or charge them more for it, the government? I think the biggest hindrance here is that transfer pricing is a complicated issue, that most voters don't understand the mechanics of, so there's not been a lot of pressure on politicians to solve it. It's been much easier to just lay the blame on immigrants or whatever, than to actually attack the root cause of the issue.

anonymousDan 6y ago

There is zero chance they will win this on appeal. Vestager should be booted out of her job for this ridiculous waste of taxpayers money. I said at the time on here a few years ago that this was a power grab by the EU commission. The fundamental problem is the US allows its corporations to undercut local competition by 'deferring' their tax payments, then parking their cash offshore and applying political pressure for tax amnesties. One possible solution could be for the EU to apply some minimum tax level against which any US tax payments can be counted, but if there is a shortfall because of deferral tricks the delta gets paid at source.

secondcoming 6y ago

Apple has been in Ireland since the 1980's. A large fraction of an entire city (Cork) depend on it. It's not hard to imagine that Apple has contributed far more than $14bn to the community, and country, in that time. And it's not a figure-head office either, it has assembly lines. Countries aren't all identical. Ireland needs to be allowed tune its economic policies based on what it has to offer. It doesn't have the population of France, or the location of Germany. It has english speakers and a reasonably well educated workforce, two factors that aren't unique to it. A low corporation tax policy counts for a lot.

m12k 6y ago
I agree that countries should be free to set their corporate tax rate to whatever they want to attract investment. But corporations should not be able to just shift their profits to any country, but sadly, using loopholes in international tax law, they can currently do so freely [1]. This means Ireland is not just taxing companies for the economic activity that goes on within its borders, it is also preventing taxation of economic activities in all other European countries. Furthermore, in the case at hand, while Ireland is free to set their tax rate to something low, like 12.5%, it needs to apply this to all companies, not allow any of them to fiddle their way to only paying 0.005% like Apple did. The commission considers this illegal state aid to a company, and I'd tend to agree. It's unfair competion when a company only operating in Ireland needs to pay 12.5% in corporate tax, while an international company with a creative ownership structure involving the Cayman Islands can pay effectively 0%. [1] https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifting https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifti...
solarkraft 6y ago
> It's not hard to imagine that Apple has contributed far more than $14bn to the community, and country Even assuming that's the case (sounds far fetched to me), would that mean they now wouldn't have to pay a fair tax rate?
- ksec 6y ago
  >pay a fair tax rate? They would, but you have to define "fair" first.

ransom1538 6y ago

How to setup a tax haven, in just a few steps!: 1) Create a successful company. 2) Create a new company in Ireland [$400 office and a phone]. 3) Transfer all revenue creating items to Ireland company - leave all cost centers in your host country [US, Germany, etc]. 4) Write on your blogs how you back social justice!

talideon 6y ago
Well, no. That's not how it works. That stuff only remotely works with US companies because its tax regime wasn't a territorial one. As of a few years ago, the US finally transitioned to a quasi-territorial tax regime, which plugged some of the holes, but not all of them. And you don't find German (or Japanese, Australian, &c.) multinationals doing this kind of thing because they have _proper_ territorial tax regimes. The US does not, and this kind of thing will continue to be a problem until the US finally does do what the rest of the world does regarding taxation. And it would be nice if they did the same regarding personal taxation.

ogre_codes 6y ago

> We clearly need better tax laws to combat this, but I'm glad the commission is trying to fight this to the extent they can within current laws, and I hope they win the case on appeal. I fully agree with the former, but—to an extent—disagree with the latter. The thing that bothers me about this lawsuit is the fact that it is in essence an after-the-fact tax increase. If they want to reform tax law, then it should be forward facing, not trying to reverse previous established policies. Particularly not for the length of time this covered. Globally, the US, EU, (UK now), Canada, etc, all need to get their ducks in a row and get taxation sorted out in a sane way.

redisman 6y ago
Yes and to shut down Cayman Islands and Cyprus while they're at it. It goes to show how incredibly corrupt the global elites are that they "can't" shut down money laundering by tiny island nations who would roll over in 5 seconds if told to by someone like the US. The truth is they love it because that's where they keep their money.
- 6510 6y ago
  We clearly do all have officials who should be dealing with this. I wonder if they can be persecuted for treason.
  - TheOtherHobbes 6y ago
    That's going to be difficult to organise in a plutocracy. There are insane sums being spent in organised campaigns to limit the ability of governments to interfere with this ethic of systemic financial capture.
    - 6510 6y ago
      There might be a sweet spot where plutocracy is incompatible with kleptocracy. When you own a government you'd want some level of property maintenance. When you want to enrich yourself with public money you want as much of it as possible. The long vs the short game.

odiroot 6y ago

> instead we have a shrinking middle class, as the fuel is drained from the engine. And yet in recent years, the middle class is more and more blamed for the inequality and other big problems of the world. In multiple EU states, there's no mainstream parties representing the interests of the middle class. At the same time the truly rich are laughing on their way to the bank.

sideeffffect 6y ago

This problem has a rather profound solution: Common Consolidated Corporate Tax Base https://en.wikipedia.org/wiki/Common_Consolidated_Corporate_Tax_Base https://en.wikipedia.org/wiki/Common_Consolidated_Corporate_... Companies should have never been taxed based on a virtual, and fundamentally nonsensical, figure as the location of their headquarters. They should be taxed based on substantial things, like (the location of) capital, labour and sales. This is what CCCTB establishes. States are still free to set the tax rate as they wish. It's just that then the companies can't escape with the turnover money to another state, essentially robbing the state where the profit was generated. This is the most important tax legislation of this day. No other debate about taxes, like the rate itself, or harmonisation of the rates across states, makes sense before this gets implemented. The reason is that now the tax rate is evadable and only stifles local/small businesses who don't/can't cheat. Sadly, there are few states that are successfully blocking this: Netherlands, Ireland, Malta, etc. But I hope to see this one day.

AceJohnny2 6y ago
> Sadly, there are few states that are successfully blocking this: Netherlands, Ireland, Malta, etc. I.e the ones benefiting from the current regime, and to lose in the reformed one.
- rapnie 6y ago
  I'm Dutch and ashamed we are in these lists. Regular folks in The Netherlands don't really benefit too. Can't find it now, but I read a study some time ago that without our current tax paradise regulations we'd be better off. I suspect these things are mostly kept in place by enterprises and people in higher positions who successfully lobby the politicians.
ghostwriter 6y ago
> essentially robbing the state where the profit was generated. It's a very interesting line of thinking when a company that produces new value and makes money by providing the value to the customers by voluntary transactions (and regardless their location) somehow is considered a robber of the state that produces nothing.

joejoeshabadoo5 6y ago

Can you point to any examples of higher taxes spurring economic growth?

lefty2 6y ago

> Ireland, Luxembourg and certain other countries are complicit in this Most people don't realise it's US tax law which allows US companies to defer paying taxes on foreign profits indefinitely. Without that law there' would be no loophole.