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Yellen calls for a global minimum corporate tax rate
- anonymouswacker 6y agoThis definitely will not lead to a slippery slope or a global new world order.
- JumpCrisscross 6y ago> This definitely will not lead to a slippery slope or a global new world order Hate to break it to you, but there have been multi-lateral treaties before. Including those that deal with taxation.
- mushbino 6y agoYou mean it will lead to an organization where Nations are like, United or something along those lines?
- filoleg 6y agoYep, just like that, except the one that actually has the power to do something. Because afaik, UN exists to just broker peace and maintain a somewhat cordial relationship between its member states, but not much more than that. Especially considering that the permanent members (which include Russia and China, as well as the US and others) are given veto powers, and they aren't afraid to use them whenever convenient for them. P.S. I don't honestly believe in the whole "global new world order" conspiracy-tier of political discourse. My reply above was just meant to illustrate that something like UN is not what the person, who originally brought up "global new world order", had in mind.
- oblio 6y agoWhy would it lead to a new world order?
- legolas2412 6y agoNot that it's happening, but would it be a bad thing?
- fuzzer37 6y ago(((them)))
- dang 6y agoPlease don't do this here.
- anonymouswacker 6y agoI would prefer to have some level of control over how my corp(s) will be taxed at the local level where I have some semblance of control by voting for X political party. Letting tax rates be controlled by an even bigger, global quasi-government makes it less likely for me to have any agency. This is just further eroding the control of the individual and the sovereignty of nation states.
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- _trampeltier 6y agoAlready here: https://news.ycombinator.com/item?id=26698242 https://news.ycombinator.com/item?id=26698242
- petermcneeley 6y agoIn light of this announcement I propose a new economic prediction where max_tax = min_tax + epsilon. I call this new relation the Obviously Economic Relation.
- Causality1 6y agoIs there any treaty the entire globe has agreed on? Sure, overall corporate tax revenues would go up but not enough to make up for the money a small country stands to make by not signing and becoming a tax haven. This is just an excuse to not pass strong controls preventing local companies from moving their money overseas. Start taxing companies based on where their employees and executives live, not which mailbox they stuff money into.
- JumpCrisscross 6y ago> Is there any treaty the entire globe has agreed on? Charter of the United Nations [1], for one. At the point one is discussing non-signatories to it one is debating the definition of a country. That seems like a fair line at which to delineate the entire globe, more or less. [1] https://en.m.wikipedia.org/wiki/Member_states_of_the_United_Nations#Current_members https://en.m.wikipedia.org/wiki/Member_states_of_the_United_...
- dontreact 6y agoIf the U.S. and other large governments cared enough about this they could make it happen because they have more power (both economic and military).
- jimbob45 6y agoCopyright rules are darn near equal everywhere now with Trump’s trade deals, although, I don’t know that there was really any pushback on that.
- notahacker 6y agoThe vast majority of countries are WTO members. Arguably the WTO is both the rationale for a "minimum corporate tax" (if it wasn't for WTO rules, countries could introduce tariffs and other trade barriers specific to certain countries to deter registration in tax havens) and the most likely way such a thing would be realised (in practice it would probably be "you can set your rate below this, but if you do WTO members are free to set higher tariffs on your produce than other countries")
- dontreact 6y agoCoordination across nation states will be super important in order to stop runaway inequality that happens when you can easily shift capital around the world. The only way we will be able to close all of the complex tax loopholes that large corporations take advantage of is to coordinate tax rates across nations. https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut... How often have these loopholes come up and people say "don't get mad at the corporations, we need to change the rules" This is exactly the type of rule change we need to get this done. (I know this particular loophole is closed now, but there are new ones I haven't taken the time to learn about yet.)
- sgeisler 6y agoTax competition is what keeps governments in check. Taxes are just fees for services in the territory of the state (e.g. security, market access, infrastructure, …). If these services don't warrant paying the fee anymore people and companies should of course leave for better-run places! Nothing else will make governments become more competitive than voting with one's feet. We should really become less sentimental about countries, they are just crude constructs to provide services that need coordination which markets can't as easily provide. Choosing the best service provider is something good as it increases overall efficiency as only sufficiently efficient systems survive in the long run. Wanting a global minimum tax is like one mafia asking the others to increase their protection charges so their clients don't leave. Such collusion is frowned upon for good reasons in free markets as it leads to worse outcomes due to reduced competition. I'm hopeful that this idea will not work due to the profitability of breaking the deal and the big number of countries that exist. The US also shouldn't overestimate its importance which seems high but ever-declining.
- mschuster91 6y ago> Wanting a global minimum tax is like one mafia asking the others to increase their protection charges so their clients don't leave. No, it's to ensure that countries with extremely low operating costs thanks to few citizens and not a lot of space (Luxembourg, Switzerland, Ireland come to my mind) don't run price dumping on everyone else, allowing the rich elites to concentrate and extract profits while the countries that made that profit possible (by, for example, providing an educated workforce or a secure legal framework to solve conflicts) get nothing in return.
- tchalla 6y agoI mean, the countries that made profit possible can decide to block countries with low operating costs. We all know why that doesn't happen.
- mschuster91 6y agoNo they cannot, at least not the "tax havens" in the EU - we don't have a "kick out" mechanism, and tax rules are on a state level.
- ghgdynb1 6y agoHere’s how this gets broken: The more countries faithfully adhere to the global corporate minimum, the stronger the incentive becomes for a “cheating” country to lower its rate. The tax haven could even get around an “enforcer” or governing board. For instance, such a country might change what it considers to be “profit” so that you’re paying $2 on $100 of revenue, whereas in the neighboring country you’d be paying $6. Same nominal tax rate, different effective tax rates. There are even more ways to play this: “Sure, we tax you at the required 20%, but you can then direct how those funds are used to reduce costs you’d otherwise have to pay directly.” And this happens a ton— see the WTO and “effective” but not nominal tariffs. Whether or not we see such a harmonized tax rate emerge and even if we could find a way to have some governing body try to “enforce” it, you’ll still see countries lowering their effective tax rates to lure firms or bolster growth. I bet there’s a maximum sustainable effective corporate tax rate, but I have no idea what it is (and for all I know it could be zero or negative).
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- marcrosoft 6y agoHow about we stop spending trillions of dollars instead?
- LargeWu 6y agoWhere do you propose we make cuts?
- IG_Semmelweiss 6y agoYou dont need to propose cuts. Just freeze everything in place. Thats a big start
- marcrosoft 6y agoStart with not spending trillions on massive bills that use COVID as a scare tactic. Then move to cutting military by at least half and exit all foreign wars.
- mempko 6y agoThat would be great. Question is what do you do about the huge GDP contraction that will happen? If they (the gov) reduces spending then you and me will go bankrupt or go steeply into debt (it's an accounting identity). The better approach would be to redirect spending away from military and into say, debt relief, housing, and health care.
- sumedh 6y agoMilitary?
- hitpointdrew 6y agoYeah, and stop bombing the middle east, and close down some of the 800 (formal) military bases we have around the world. How about the Pentagon takes a 38% (450 bil) budget cut? Which isn't that drastic, it only takes us back a similar Pentagon Budget from 1997.
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- IG_Semmelweiss 6y agoMore options are always better than less. This is the reason why people hate the lack of choice in mobile OS, in App stores, etc. It would be great to understand why lack of choice in tax regimen is different, particularly from people that are of the opinion that FAANGs are monopolies that should be broken up
- gh-throw 6y agoLack of choice in tax regimen is entirely fine for corporations. They're creations of the state. We should bring them to heel, if they're finding ways to avoid what we're trying to get them to do. Don't like it, don't incorporate, and don't enjoy the state-given benefits thereof. I don't care a bit about increasing choices for corporations, unless doing so improves our ability to harness them to generate whatever we're trying to get out of them (economic growth, infrastructure development, taxes, whatever). I'd surely entertain arguments against this in those terms, though (i.e. "actually this will cause us to be less able to harness corporations to our benefit, for reasons X, Y, and Z")
- IG_Semmelweiss 6y agoI'd like to better understand what your repulsion is against corporations. What are the state-given benefits that they get, and other entities have no access to? what makes them worse than say an LLP or an LP?
- gh-throw 6y agoRepulsion? Where do you get that idea? Corporations wholly creations of the state. They have no meaning or existence absent it. We shouldn't empower our government to grant the privileges of incorporation unless it's in the polity's interest, surely? There's no repulsion. They're not bad. But we don't owe them anything whatsoever, either, and we shouldn't hesitate to ask what we think we can or should in return.
- CryptoPunk 6y ago
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- m101 6y agoCorporate taxes are the most blindingly stupid idea ever. People forget that the only way to level the playing field between Amazon and local shops is to cut taxes to 0 rather than layering on increasingly complex tax rules. Amazon thrives in the presence of corporate taxes. Corporate taxes also create huge incentive to offshore jobs to tax havens. Not to mention no corporate tax rates would mean no need for all sorts of expenses on legal and accountants for tax optimisation. In the UK I think we acknowledge they are a bad idea by having a plan to step them down over time to some low level (and potentially even 0 eventually). Covid derailed that plan.
- IG_Semmelweiss 6y agoThis is a nonstarter for precisely the reasons you state. With the stroke of a pen, you would eliminate a huge industry (tax attorneys, tax consultants, etc) You can bet they will not go down without a fierce fight This makes total sense. Except it cannot happen. Same as term limits. Incredible idea. Never going to happen.
- gh-throw 6y agoThere exist reasonable arguments against term limits for members of legislative bodies, which arguments hinge on term limits greatly increasing the power of lobbyists, by effectively lowering the average skill and expertise of lawmakers.
- oblio 6y agoHow much skill and expertise do you need, though? In most fields of activity after 2-3-5 years you should you should be a reasonable journeyman and after 10 you should have a decent mastery of your field. To me a term limit of 15-20 years should be more than enough.
- plebianRube 6y agoTry changing jobs as a software dev after 10 years. Every 'good' company will put you through 3-4 coding challenges, treating you like your fresh out of college.
- hctaw 6y agoWhy are corporate earnings the target for taxation? Are they just the easiest/least impactful to levy?
- game_the0ry 6y agoI have a crazy and unpopular idea - America drops the corporate income tax to 0%, full stop, across the board, no loopholes, no exceptions. (ducks from the rotten vegetables that are being thrown at me) Here me out... America offsets the revenue loss by increasing tax burden on (rich) individuals, not corporations [1]. Hopefully, that would bring offshore profits back and increase hiring, r&d spend, capex, etc etc positive feedback loop etc. More likely, corps use the profits to buy back stock and layoff people (which has happened in the past with tax holidays [2]), but hey, at least those profits don't just sit in a bank account in Ireland or the Cayman Islands. Here is a really crazy idea that won't work - Janet Yellen trying to compel the world to adopt a global tax rate standard, thinking that tax haven countries would comply for America's benefit. Yeah, not happening... the baby boomer generation really don't have any capability of second order thinking. [1] The irony is that republicans love to say corps are people. With that logic they should be taxed like people. Dumb. They are not people, they are institutions. Don't tax institutions, just tax people more. [2] https://en.wikipedia.org/wiki/Repatriation_tax_holiday https://en.wikipedia.org/wiki/Repatriation_tax_holiday
- gogopuppygogo 6y agoGreat in theory till you realize that a corporate entity could just shelter profits for individuals in basically perpetuity. Want a house? Have very profitable company get into real estate and buy a building/housing development/etc... and use some for corporate execs as R&D for future projects. Want a luxury vacation? Have company pay for trips or heck buy a boat/plane so the company can make it an executive retreat. Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? To pay for war. That is always the answer in the USA.
- tchalla 6y ago> Income taxes shouldn’t exist in my opinion. The government can already tax consumption. Why do they need to bilk citizens out of both ends? If you tax ONLY consumption, taxes will simply be passed on to the last mile which is consumers.
- nickysielicki 6y agoSo we were the global tax haven that undercut the rest of the developed world for the past 50 to 100 years, and now that we're drowning in debt and the government needs revenue, we're asking very nicely that nobody plays spoiler. Gotcha. Good luck with that.
- IG_Semmelweiss 6y agoThe US is the biggest tax haven in the world. Seems odd that people would be cool woth a global tax, when we let foreigners hide income in the US left and right
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- jl2718 6y ago> the Biden administration’s effort to help raise revenue in the United States This coming after a $2T pork stimulus with another $2T on the way. Obviously this has nothing to do with prudent financial management. Punishing evil capitalists? Maybe. Trying to prevent a mass exodus of investment from the US? Probably. I’m sure they tried to close loopholes regarding offshoring profits, but realized the corporations would just exit faster. This is desperation. It won’t work. Capital can’t be controlled and threatened the way that people can be. Capital will always go where it’s treated best.
- thysultan 6y ago>Yellen calls for others governments to all follow USA's tax code Yeah good luck with that
- akudha 6y agoIf I am a smaller, poorer country (especially poor in natural resources), why would I agree to this? If giving tax breaks can attract foreign companies to my shore, why would I not do it? Why should other countries make concessions for the American politicians (esp republicans) unwillingness to properly enforce the existing tax rules, make better tax code, increase funding for IRS etc? I don't think I understand her logic, can someone ELI5?
- oblio 6y ago> If I am a smaller, poorer country (especially poor in natural resources), why would I agree to this? Well, logically, you wouldn't. Until all sort of levers start turning and you start feeling pain. How do you think this kind of thing happened historically? See: Commodore Matthew Perry & co.
- ardit33 6y agoWhy would larger countries allow/trade with you then? If you are being used as a tax avoidance loophole heaven, larger countries can just cut off any trade with you. They don't own you squat, if you will try to undermine them, then can just cut you off. All they have to say: no business in my country, are allowed to do any business with little loophole country, and no trade will be allowed between our countries. Good luck little dip-shit country, you are on your own. Which will defeat the purpose of your small tax heaven strategy. Unless your little country is a full blown 'autarky' (which is impossible now days, unless you want to look like Cuba), you will have to play by the rules of the big boys.
- EdwinLarkin 6y agoFor the same reason why larger countries dont invade smaller countries in this day and age. It benefits both sides to have some diversity.
- ttt333 6y agoWhy don't we discuss corporate income taxes as effectively a fee for the legal and commercial advantages associated with being a corporate entity in the US? For example a C corporation can tap into highly liquid and well developed capital markets, limit and separate the owners and lenders to a business from management and associated liability beyond their initial investment, and thanks to certain legal decisions like Citizens United, corporations still seem to enjoy what seem to me more like personal rights such as freedom of speech, ability to participate in politics anonymously , and likely more I don't know about. With all the aforementioned advantages, is it any wonder that a huge proportion of firms above a certain size limit are C corporations despite the obvious downside to contend with of double taxation? [1] It seems like the relevant question is the value of those advantages to the tax rate legislated by congress, net of costs related to the right accounting, legal, and lobbying teams. [1]: https://fas.org/sgp/crs/misc/R44086.pdf https://fas.org/sgp/crs/misc/R44086.pdf (page 7 and 8)
- robbomacrae 6y agoWhy doesn't the US utilize the fact it has some of the richest, most sought-after customers in the world. If a company wants to do business in the US, just stipulate that they have to be paying a corporate rate of X% somewhere. If that X is 21% and they are only paying 12.5% then in order to do business in America they would need to pay the US the difference. Just like California can dictate emissions standards in vehicles across the rest of the states, the US has power to dictate standards across the world. No need to get everyone on board. Note: I'm not commenting on whether corporate tax is good/bad. I'm just asking if the US wants something done why not.. do it.. and restrict those that don't from doing business here? We do that already for corruption (see the FIFA case[0]) Same could apply to carbon tax. If they don't pay a carbon tax for their GLOBAL business dealings, pay it to the US or your not welcome. [0] https://en.wikipedia.org/wiki/2015_FIFA_corruption_case https://en.wikipedia.org/wiki/2015_FIFA_corruption_case
- cblconfederate 6y agoWill countries be also given a global minimum of nuclear weapons?
- tryonenow 6y agoThe proof that media discussion regarding taxation is purely, ideologically ideologically driven is the fact that, as in this article, the Laffer curve is almost never mentioned. Any discussion about tax rates without considering where we currently sit on the Laffer curve is an exercise in futility (or propaganda).
- timwaagh 6y agoEurope isn't going to be happy about getting targeted twice in a day by the us. First for charging a digital tax and now for having low corporate tax. I think this kind of thing will drive apart NATO if the level of hostility continues.
- harbertaxguy 6y agoHarberger tax
- CryptoPunk 6y agoWe should move toward phasing out all income taxes, and shifting the burden to taxes on natural resource usage. The latter are: * efficiently collected * dissuade waste of scarce resources * are impossible to evade * don't necessitate global mass-surveillance * don't violate private property rights * and don't disincentivize productivity https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax