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The problem is that the current system for international taxation of trade among daughter companies was devised during a time when international trade consisted
by m12k 6y ago
The problem is that the current system for international taxation of trade among daughter companies was devised during a time when international trade consisted of things like bars of steel, for which there is a well-defined daily market price, so it's easy to audit and prevent companies from profit-shifting to avoid taxes. Today, daughter companies trade things like 'the Google search algorithm' and 'the Nestle brand' - IP, which by definition is unique, so no market price exists, so auditing it is impossible, making it a free-for-all for multinationals to get taxed wherever they want.
There are proposals for updated international taxation rules to prevent this issue - for example this one: https://en.wikipedia.org/wiki/Formulary_apportionment https://en.wikipedia.org/wiki/Formulary_apportionment The problem is to get the OECD to agree on updating this.
- iguy 6y agoThis sounds like a way to tax corporate profits in proportion to the amount of VAT, property tax, employment taxes, etc. already paid in each country. Wouldn't it be simpler just to tax those things? We already collect those taxes, and can set any rates we wish. Why not just abolish the the tax on corporate profits?
- zeroimpl 6y agoI don’t necessarily agree with your conclusion, but I do think it’s important to emphasize that Apple is collecting VAT across the EU and paying large quantities of money to all EU countries as a result. The amount of tax revenue generated by VAT will be an order of magnitude larger than income tax, since the former is on revenue and the latter is on profit.